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Interview with
Mr Ahmed Farroukh ,
Managing Director
July 29th 1999
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Could you begin by giving us a brief historical background on Spacefon and its activities in Ghana?
Spacefon is the GSM mobile service provider in Ghana. The company’s name is Scancom and it was authorized in 1994 to operate the GSM system. The management and the state of shareholders changed in 1996, and the system was lunched commercially in November 1996. Scancom Limited majority shareholding is owned by Investment Holding (Luxembourg) S.A. a holding company specialized in participation and investment in the Telecommunication field. Its subsidiaries operate in different parts of the world as International Carriers, Mobile Operators and Engineering Consultants that provide planning, installation and implementation services in the domain of telecommunication.
In 1996 Spacefon Network covered Greater Accra and Tema. In mid 1997 the coverage expanded to Kumasi, Obuasi and in 1999 Takoradi, Bibiani, Tarkwa and Cape Coast were added to Spacefon coverage map. The Group and Spacefon have a strategic alliance with, Ericsson, world’s number 1 provider of telecommunication solutions. All our equipment and network is supplied by Ericsson. We have introduced so many services for our clients and we are proud to introduce to Ghana state of the art technology, technology that you can find in the UK, France, Finland or Sweden. In 1999 we added the Ericsson R7 switch, even though the operation does not necessitate such high technology, our belief in Ghana and its potentials were the main drive behind such investment.
What are the advantages of having these high tech systems?
The advantages are many. It offers a lot of services to the clients. Definitely it is Y2K compliant, it can have intelligence network which can provide hundreds of services and you have to choose the kind of services that the market can adapt to. There are for example services such as; A customer can recharging a prepaid connection by sliding a credit card on the handset. Since credit cards are not that spread in Ghana it will be very limited to produce such service. Another service would be for example Group calling, where a defined group can call each other only, this is not to mention the SMS service, mobile internet and other services. The break in the technology of the GSM is becoming limitless. Each day you have a new product or solution. On the contrary the break in technology is becoming more expensive for our business in terms of the amount of capital investment needed to run them but the shareholders believe in Ghana and they are still committed to bringing new technology.
Is Investcom the only shareholder?
The majority shareholder is Investcom and holds an interest of about 90% and 2 other local Ghanaian partners share the 10% left.
What other parts of the country do you intend to cover apart from the current coverage?
Currently we are covering what is known as the industrial triangle in Ghana; Accra, Tema, Sekondi Takoradi, Tarkwa, Kumasi, Obuasi, Bibiani and we are definitely planning to cover more areas such as the Volta region, Sunyani and Tamale and we hope to do it before the end of this year.
What are the main problems that you are facing as a mobile operator?
Actually, we call them operational obstacles and not problems. We are mobile operator not national operators. Ghana Telecom and Westel are the two national operators. For a mobile company to be able to cover a big country like Ghana you need to depend on the infrastructure of the national operators, simply because it cuts capital expenditure and enable the service provider to cover more areas. In the same time the national operators recap part of their investment by leasing capacity and links. This is an excersie that is done all over the world. Unfortunately, the national operators in Ghana and mainly Ghana Telecom (Westel do not have an infrastructure covering Ghana, they are new) is under going an upgrade and expansion to their infrastructure. Capacity and links to remote areas are not available for us at the time being. This means that Spacefon needs to build its own network around the country, which involves significant capital investment. This is not economically visible in certain cases due to limited markets and is basically a delaying or expansion plan. More over, Ghana Telecom is upgrading its central switches. Currently, we are facing a big congestion on calling from GT network to Spacefon and this is due to insufficient number of E1 links between our two net works. This is hurting our business and our clients are complaining and the additional links are promised by GT to be available in November 1999. From our part we can not do anything, except waiting.
Are the national operators co-operating or not?
They are co-operating, but in the absence of a regulator and standardized interconnect agreements sometimes things becomes difficult.
Would you say the problems that you are facing are due to the expansion plans or are they more economical since you say it is not cost beneficial to expand if you don’t get the revenue?
It is actually a mixture of both. In our business you do not depend only on the number of subscribers. If you have 100,000 subscribers and they generate traffic of 1 million minutes or if you have 20,000 subscribers and they generate the same minutes you will definitely want the 20,000 and not the 100,000. So it is a combination of the both if you can decrease your capital expenditure through leasing links and capacity the economical factor becomes insignificant. For example to cover Tamale, it will take you at least 2 months to just finalize the rental agreement for the need site, and in order to put these sites together you need to bring the equipment and expertise to set it up. That will take at least 4 months, whereas if the links are ready from Ghana Telecom we only need to put our sites in Tamale and in one month we can hook it to our network. That is how you can cut on time and money.
I need to emphasize that the non-existence of such links is not cussed by Ghana Telecom, just it would have made our operation and expansion quicker since were are only licensed to operate GSM mobile service.
How long will it be till you get to cover the whole country?
This depends on our plans and on others. We’re requesting from Ghana Telecom to provide us with their future plans so that we can plan alongside it and see if they have capacity to lease to us. The other alternative is that we do our own network and this needs longer time and heavy capital expenditure. We already started in with the second option.
| Could you give us some facts and figures about Spacefon; number of subscribers, turnover last year, number of employees, your market share?
We have about 27,000 subscriber and that in three years is very good taking in consideration the introduction of the technology and getting people to know it. Our market share (Mobile Industry) is still vague but we know from the statistical reports that our share exceeds 50%. You cannot compare the fixed lines to the mobile even though the trend worldwide is shifting toward mobile. Currently we have 140 employees and it is increasing because for each 1000 subscriber you have to add 2 customer service employees, you have to create offices in all areas to make it easy for your clients. In Ghana there is still the lack of direct debit payments. In a years time I think that concept will be operated in the banks and this will cut down on a lot of overlapping in the work. When such facilities exist hopefully our clients will not have to always come to us in order to pay their bills and we will also not need cashiers and this will make it easy for them and us.
How many shops do you have?
We have 6 client service centers in Accra where clients can approach to pay their bills or to add or to delete any service. We do not mainly sell in these shops, it is just dedicated to service clients.
With regards to your pricing policy, we have realized personally that it is not cheap to phone from one Spacefon to another. What are you doing to make the prices more competitive?
The pricing issue depends on several factors. You need money to support your operations and with the level we are going on there will definitely be price cutting in the very near future once we have a clear vision of how the entire industry is going. It is not really a competitive issue because if you look around it is the same pricing for all the mobile companies. We are looking at our pricing because if we are going to expand we need to find out whether we are going to use our network or lease links from Ghana Telecom or Westel. It is very essential. It would be good to build our own network though it will not be easy financially, but we would like to cut down the prices and give packages to our clients.
Do you think you will attract more subscribers as well?
It will attract more subscribers and our existing ones can make more calls.
You have invested $35 million recently in expansion programs. Can you tell us exactly what it was?
Our total technical investment is $ 35 Million. Only the last phase was $12 million and it was for purely technical equipment.
Are you looking to going to other markets, maybe in West Africa as well?
Yes. We already have sister companies operating GSM mobile network in Guinea, and Benin.
Exactly what is it that your company needs to grow? Is it more technology, more capital, more partners, more investment?
What is needed for growing is the existence of a strong sound regulator of the industry of Telecom in Ghana. Once we have such regulator you can plan better to quantify the potential that we believe exists in Ghana. Once we are able to do that I believe we will be able to grow. Money is not the problem. On the other side we have the security stability in Ghana and all these factors encourage capital to come into the country. We know where we stand in the market. We are not market followers, we are market leaders and our objective is to set the standard for the mobile in the country. What we did in 2 years, it has taken others 9 years to do. Again we have restless efforts to perfect our customer services, technology and coverage.
How do you market yourself in Ghana?
Our market strategies were not very aggressive, now we market ourselves through the products and the services that we offer. The marketing means and tools in Ghana are not big. If we need to advertise there is only one massy read newspaper, the Graphic, and sometimes it is difficult to get a page in it but we depend on different market sectors that we have prepared. We are now attracting co-operate accounts which is very good and we go to individuals through different channels, we have distributors and agents.
On a more personal level what would you say has been your greatest achievement since you have been Managing Director of Spacefon?
I am here by choice. I used to be the financial controller of Investcom, the major shareholder of Spacefon. I came on a couple of missions in 1998 and I liked the country and the people very much so when the vacancy was there they said Ahmed is always speaking about Ghana, would you want that job in Ghana? I said yes and moved here in one week. It is a nice challenging market, we have a good level of awareness among the clients and it is very nice when we explain to people that their problem is from their handset and not our network and they get convinced and do not blame it on any one. On the other hand too it is very nice when people just stop you in the street and tell you they like your services and that you are doing fine for Ghana. Many people come and knock on your door to thank you for making their lives easier with your services. This really motivates and encourages you to go on and perfect your services.
As you may know, Forbes reaches more than 4 million readers, mostly businessmen. What is your final message to them?
The political and economical stability in Ghana makes it a good place for investment. I encourage potential investors to come and explore this market. I encourage the industrial giants not to see Ghana as a small market, but a place to base at. Ericsson, after their experience in Ghana, placed their West African office here. The people of Ghana are warm and friendly and officials try to do things to encourage more investment. Just checking with Ghana Investment Promotion Center will give them an idea about how the government encourages investment.
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© World INvestment NEws, 1999.
This is the electronic edition of the special country report on Ghana published in Forbes
December 13th 1999 Issue.
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GHANA
