Negotiations between Ghana government and the United Arab Emirates-based Kinz Telecom Group, over the sale of 66.34% stake in the second national fixed line operator, Western Telesystems Limited (WESTEL), is said to have broken down.

Two months ago, government began negotiations with the Kinz Telecom Group, prospective buyers of the majority stake in Westel.

However, according to a publication of the Business and Financial Times newspaper, negotiations took a different turn when the government team managed to up the price from US$95million to US$250million, and Kinz Telecom was required to pay up within 45 days.

Business, Kinz Telecom was also to pay US$25 million in penalty owed by WESTEL to the National Telecommunications Authority, (NCA), the industry regulator and additional US$13.5 million for the mobile licence to the NCA.

The newspaper report said after signing the shares purchase agreement on April 12, Kinz Telecom has been silent and as a result, the negotiations have been stalled.

The quotes government sources as saying that Kinz Telecom has failed to pay the money within the 45-day grace period provided under the agreement.

The paper says it also leant Kinz Telecom executives were insistent on establishing government’s commitment to providing funding as a minority shareholder of the business.

It is speculated that negotiations broke down largely as a result of the last-minute appreciation of the transaction fee.

The Business and Financial Times said it learnt from executives of Kinz Telecom that they had to change their business plan due to the sharp increase in the transaction price.

Originally they had estimated a five-year payback period, but that became unachievable in the face of the price appreciation.

Industry analysts told B&FT they were not surprised at the turn of events.

One analyst said; "I am not surprised at all because the transaction price was just too high especially for an industry which is saturated."

Another analyst asked; "why on earth must WESTEL be priced US$250million, and additional US$500 million investments be made? At what period can Kinz Telecom recoup such massive investment in an industry where avenues for profit making are almost zero?"

Kinz Telecom at the time of signing the agreement, was expected to fully own all international gateway licences, operate the CDMA technology, and finally have a 3G and WiMax licence, should it sort out its financial obligations within the 45-day stipulated payment period.



Source: Business & Financial Times