The expansion of bandwidth, fibre optics and tower sharing is facilitating the roll-out of new initiatives

While in the past broadband uptake within Ghana was constrained by a limited national fixed-line network and high connectivity costs, access over the past half decade has dramatically improved with the landing of undersea fibre links and the introduction of wireless and 3G – and more recently 4G – technologies. The cables have made bandwidth speeds and prices far more attractive. By the end of 2013, the number of internet users in Ghana had reached over 2m, from only a handful at the turn of the century.

Despite the rapid rise, the overall internet penetration rate relative to the population still lags behind the likes of other West African frontier markets such as Senegal or Cape Verde, which opens significant potential for new investment. Infrastructural capacity, for example, needs to be expanded, particularly in terms of fibre optics in more remote parts of the country and additional last-mile connections. Furthermore, both government and corporates are expected to increase their spending on IT dramatically in the coming years, as initiatives such as service bundling and cash-lite programmes pick up momentum.

Under The Sea

The most recent submarine cable to have landed in Ghana is the African Coast to Europe (ACE), a $700m fibre-optic project that was launched in May 2013 and is expected to connect Ghana with 22 other countries. ACE, of which mobile operator Expresso is a shareholder, is set to complement Ghana’s four other submarine cables.

The first submarine cable, South Atlantic 3/West Africa Submarine Cable (SAT3/WASC) – owned by Telecom Namibia – began operations in 2001. The cable connects Portugal and Spain to South Africa. Nigeria’s Globacom backed Glo One then landed in 2009 from the UK and initially cost $800m.

This was followed by the MainOne submarine cable, owned by MainOne Cable Company Mauritius, in May 2010 at a cost of $240m and initially consisting of 7000 km of fibre optics linking Lisbon, Accra and Lagos. The $650m West African Cable System (WACS) reached Accra in May 2011 with connections to Europe and 11 other countries in Africa.

Collectively, the coming onstream of the five submarine cables has added considerable broadband capacity (providing access of 12.3 TB/second as of May 2013), and allowed the operators to expand their networks and range of services. According to Australian research firm BuddeComm, the cable landings have also helped reduce the market costs of bandwidth to a tenth of that seen in 2007.

Lucy Quist, managing director of Airtel, told OBG that although some of the main operators have each invested in their own cables, “there is still a lot of sharing going on as it makes commercial sense to sell excess bandwidth to one another”. ISPs: The availability of wholesale bandwidth has also helped support the launch of a wide range of internet service providers (ISPs). Leo Skarlatos, former CEO of network solutions provider K-Net, told OBG, “Since the five cables landed, it has become a buyer’s market as wholesale cost have gone down from $28,000 per MB to $4000 per MB in five years.”

Despite the ease in which an ISP can be established, of the roughly 50 licences issued by the National Communications Authority (NCA), according to Praveen Sadalage, managing director of ISP BusyInternet, only six to seven ISPs are aggressively active in the market. He said it will be increasingly difficult for more players to sustain themselves under current fiscal conditions.

ISPs have largely concentrated primarily on the corporate segment, where payments are more regular and customers less impacted by price fluctuations. Indeed, Sadalage told OBG that the residential market is “overly competitive and price sensitive, whereas corporates are willing to pay a premium for competence and better services as the internet is a requirement and must-have for their business”.

Jackson Gomashie, the IT manager for iBurst, a Ghanaian ISP, said that fixed-line ADSL connections are slowing. “The preference is to have internet on the go and connected to a single device,” he told OBG. “Commercial users are more prepared to invest in modems and equipment in exchange for more reliable service.”

Fibre

That Ghana lagged other markets when it came to the widespread installation of copper cabling is in some ways to its advantage, as now that submarine fibre cables have reached its shores, it can leapfrog directly to the laying of fibre-optic lines which are less prone to disruptions and transmit data faster.

Due to a scrap market for copper, fixed-line cables are often subject to theft and vandalism. According to the Ghana Chamber of Telecommunications, in the first half of 2013 there were 650 incidents of cable cuts, though the majority (around 70%) were caused by road construction. Recurring cuts can be costly, with repairs averaging around GHS17,000 ($6480).

“Cable cuts are a major constraining factor and the NCA, along with national security, are doing more to raise awareness on the impact of cable cuts to encourage communities themselves to crack down on this activity,” Chamber of Telecommunications CEO Kwaku Sakyi-Addo told OBG. Airtel’s Quist similarly feels that education among the contractor and construction community is key, calling for more public awareness campaigns as well as greater collaboration to prevent interference when new roads are built.

Excess Bandwidth Capacity

In addition to concerns over fibre line interruptions, the Chamber, according to Sakyi-Addo, is hoping to address the issue of excess fibre capacity going unused. BusyInternet’s Sadalage told OBG that he would like to see the government mandate operators to sell off their unused capacity to smaller ISPs, as this creates greater efficiencies and avoids unused fibre sitting idle.

As most of the fibre laid to date is concentrated in and around Accra in closer proximity to where the submarine cables have landed, the next stage for Ghana’s broadband deployment is to spread its fibre optic backbone to the rest of the country and improve last-mile connections. In January 2014 the government announced it would start laying 780 km of fibre-optic cable through the eastern corridor to serve communities around the route from Ho to Bakwu, with links to Tamale from Yendi.

It has not announced more details on the project, however. Expanded fibre infrastructure, along with the roll-out of WiMAX networks supported by long-term evolution technology should result in better connectivity for rural regions in future years.

Towers

Unsurprisingly, given the high cost and capital-intensive nature of telecoms and IT infrastructure in West Africa, international tower companies, including American Tower Corporation (ATC), Eaton Towers and Helios Towers, have a sizable presence in Ghana.

Throughout Africa there is a movement towards tower co-location as a cost savings measure that prevents duplication in capital expenditure, and Ghana is no different, with five of the six mobile operators having struck tower deals – in the form of either sharing or outsourcing – over the past few years. ISP Glo is the exception, using its own infrastructure.

The pace at which tower construction is set to continue has been hampered by a confluence of constraints. Over the past couple of years, for example, Ghana has slipped from third to 42nd place out of 45 countries ranked by the company in terms of the ease of doing business amongst African countries. While the ranking’s decline is related to the time and ease in which permits for building towers are awarded, it is also likely to do with the fact that the costs of building and managing a tower are mounting.

One major factor behind this cost pressure is the rapid depreciation of the cedi, as loans and equipment purchases are paid off in US dollars while earnings are in the local Ghanaian cedi.

“There is no galvanisation in Ghana so towers are imported,” Gareth Townley, managing director of Eaton Towers, told OBG. “At the same time, concrete and civil works are becoming more expensive, as is the cost of diesel which we have to purchase due to a shortage of electricity from the grid. We also have to pay for security to monitor the storage tanks against fuel theft.”

Government Drive

For IT service providers and vendors, the government constitutes a significant portion of the market, which is unsurprising given that it is also the country’s largest employer. That means that the rate and degree to which the public sector adapts and employs technology will have significant bearing on the growth of the sector in the short term.

The government is aggressively encouraging a push towards digital connectivity, among households and the public and private sectors. The managing director at Huawei, Russell Xu, told OBG, “The Ghanaian government has shown strong uptake of e-government initiatives and quality network infrastructure with latest technology such as LTE network, Date Center, One-Stop Service Center, and so on.” In recent years, it has rolled out a suite of e-government initiatives, and has piloted programmes to facilitate online payment for 10 government departments including the passport office, driver and vehicle licensing, and the births and death registry. It then intends to integrate the processing platform, titled the Ghana E-Payment Platform, into a broader National e-Services Portal.

For BusyInternet’s Sadalage, the move is warranted but given that less than 40% of the population actually uses the internet, and of those, many are not yet comfortable transacting online, he expects the uptake in activity to be modest initially. “Start by using government portals to communicate information. As a next step, you can then start gathering and collecting information,” Sadalage told OBG. “Only once people become more trusting and familiar interacting with online platforms can you then actually introduce e-transactions.”

Corporate Uptake

Similar to many emerging markets, there is a gulf in the degree to which large corporates and small enterprises perceive value in and are willing to spend on software solutions. In Ghana, the vast majority of registered companies are small and medium-sized enterprises (SMEs) and often lack the capital and resources to take full advantage of IT business solutions. “Blue chip companies have a proper understanding of the role of enterprise software. However, 60%-70% of Ghanaian organisations do not and are wary due to the perceived cost and negative past experiences in implementing software within their organisation,” Eric Kwame Asah-Addo, CEO of Bista Solutions, told OBG. “A lot of software usage is limited to basic accounting software.” For Tetteh Antonio, managing director of theSOFTtribe, economic conditions are placing a further damper on uptake, as “investment in software is a decision involving long-term implementation, and with structural changes in the economy and economic uncertainty, many companies have developed a ‘wait and see’ approach,” he explained.

Into The Cloud

However, one way this may change is with the expansion of cloud computing, which offers a cost-effective means for SMEs or start-ups in Ghana to access a full suite of IT solutions. Ghana also benefits – at least in its major cities like Accra and Tema – from the infrastructural capacity needed to support cloud computing, including fibre and 4G.

Outlook

With rising income levels, robust and, in some parts, even excess bandwidth capacity, and IT spend diversifying away from a large dependence on the public sector, Ghana’s IT sector is poised for expansion, presenting a broad range of opportunities for a wide scope of players to help facilitate this growth. “There is significant potential for business process outsourcing in Ghana, but it must prove its commercial viability by expanding local business before targeting foreign firms,” Amar Deep S Hari, CEO of IPMC, told OBG.

Wholesale bandwidth pricing alone is an indicator of the sector’s growth, dropping from $28,000 per MB to $4000 per MB in five years. As a result, the medium-term challenge is not one of provision, but adoption, with a need to encourage users to increase usage through roll-out of new initiatives and products.

While some upgrades and further last-mile connections are needed, particularly in the country’s north and more rural areas, the infrastructure required to adequately exploit the majority of IT solutions is, for the most part in place, especially in the larger urban areas.