ISPs in merger talks

February 2019
ISPs in merger talks

Some Internet Service Providers (ISPs) are in talks to merge their operations in order to strengthen their competitive position in an industry that is now dominated by the mobile network operators B&FT has learnt.

The decision by the ISPs to consolidate their operations has become necessary as a result of entry of the mobile network operators into the Internet service provision business, which has pushed many ISPs out of business.

However, it is not yet known which of the companies are close to having a deal as most of the 20 ISPs are in talks with one another to find ways of harmonising their capacities and capabilities to ward off threats by the mobile network operators.

The Secretary of the Ghana Internet Service Providers Association (GISPA), Eric Osiakwan who disclosed this to the B&FT in an interview in Accra, declined to provide details of the firms that are currently in the merger talks as he is not authorised to do so.

He said some of the negotiations have reached an advanced stage, which should result in a couple of mergers by the end of the year.

“Some of the members of GISPA are coming to the reality that it is time to consolidate their operations and build on each other’s strength. So, very soon, you may hear some consolidations in the marketplace,” he said.

Mr. Osiakwan, who is also the Coordinator of Ghana Connect — an advocacy group dedicated to the promotion of affordable broadband Internet access in the country — said business consolidations in the ISP industry are not happening as fast as members would have wished due to some market forces.

“Consolidations are more driven by market forces, and those factors must be at play before consolidations can happen. Companies don’t merge for merging’s sake. They merge because they have certain complementarities.”

Mobile network operators’ provision of Internet service has contributed largely to the demise of many ISPs, causing disaffection among pioneer Internet entrepreneurs who have accused the national telecom regulator and Government of failing to protect the business interests of local ISPs.

It has been suggested that due to the emergence of destructive technologies, it is time ISPs changed their business model and did business with the telecom network operators by offering services to them to guarantee their stay in business in the years ahead as the telcos shift their concentration from voice to data.

According to some entrepreneurs who have seen their business interest in the ISP market wane, anti-competitive practices exhibited by incumbent network operators as well as the inability of the ISPs to raise capital for investment in newer technologies have cut revenue flow to local ISPs — further impeding their ability to upgrade their technological infrastructure.

Mr. Osiakwan said the existing business operating environment has made the ISPs business a lot more challenging and many more firms in the Internet market will soon fold-up.

“The reality is that a lot of businesses fail in Ghana every day, and that is a testament to the sort of business environment that we have. Unfortunately, that is reality; and definitely some of the ISPs will go down by the end of the year. That is the nature of the game,” he said.

Ghana, which was the first country in sub-Saharan Africa to engage in the ISP business in 1993, has over the years witnessed the demise of pioneer Internet entrepreneurs — most of whom have moved to other, newer, technology-driven ventures. And those still in business have seen the profitability and sustainability of their businesses weaken year-on-year.

Currently, there are about 149 licenced ISPs in Ghana. However, only about 20 are in operation. And out of the number of ISPs in operation, less than 10 of them are fully-owned by Ghanaians.

Additionally, the topmost players in providing Internet access to homes are the biggest telephony firms in the country who serve both as wholesaler and retailer of international bandwidth.

More so, some of the telcos have gone past the playing-turf of ISPs to invest in Cyber Cafes throughout the country — a move ISPs have described as threatening, unfair and anti-competitive.

By Evans Boah-Mensah, BFT