US embassy cable - 04ACCRA1980

C O N F I D E N T I A L ACCRA 001980 
 
SIPDIS 
 
E.O. 12958: DECL: 10/01/2009 
TAGS: ECPS, GH 
SUBJECT: WESTEL FILES USD 60 MILLION EXPROPRIATION CLAIM 
AGAINT THE GOVERNMENT OF GHANA 
 
REF: ACCRA 01237 
 
Classified By: EconChief Chris Landberg for Reason 1.5 (d) 
 
1.  (C) SUMMARAY: Western Wireless International (WWI) told 
post they filed on September 21 for international arbitration 
to settle subsidiary Westel's seven-year-old dispute with the 
GoG.  According to Westel's Managing Director Bill Taylor, 
WWI will not fund any further expansion in Ghana and is ready 
to pull out of the country completely if the situation does 
not improve.  Taylor also expressed fears that the GoG may 
retaliate by trying to undermine Westel's existing operation. 
 The GoG claims they will comply with their contractual 
obligation to arbitration.  Post will monitor the process. 
End Summary. 
 
2. (C) WWI is seeking USD 60 million in lost revenue and 
punitive damages, claiming that the GoG's failure to provide 
frequencies for Westel's wireless operations amount to de 
facto expropriation of WWI's investment.  Two years ago 
Westel agreed to pay an "uncontested amount" to the GoG of 
USD 25 million to settle all outstanding issues with the GoG, 
but the frequencies were not forthcoming, so the money was 
not paid.  The GoG claims the amount was actually a fine for 
Westel's failure to meet its contractual obligations to 
develop their network.  Furthermore, the GoG imposed an 
additional "spectrum fee" of USD 27.5 million late last year 
on the valuable 1800 and 1900 spectrum Westel insists it 
needs to be viable.  Westel argues that these fees have been 
imposed retroactively without the due process required by 
their contract.  Westel also claims the fees are arbitrary, 
since the five other wireless operators in Ghana have only 
been assessed USD 20 million each.  Communications Minister 
Kan-Dapaah told DCM and EconOff that none of the wireless 
operators had paid the spectrum fee yet, and that no specific 
enforcement system or plans currently existed if they 
refused.  The Minister said that since Westel has no 
established mobile service it couldn't expect to pay the same 
spectrum fees as those who do. 
 
3.  (C) Westel officials met unsuccessfully with President 
Kufuor earlier this year in a last-ditch attempt to reach an 
agreement (reftel).  In June, however, the GoG granted formal 
licenses to mobile operators that were, in Westel's opinion, 
squatting on frequencies that the GoG was contractually 
obliged to provide to Westel, effectively locking Westel out 
of the mobile market.  Even then, Westel felt its operation 
could be viable if the spectrum fee were dropped, but the GoG 
would not budge.  According to Bill Taylor, WWI will not 
provide any new resources for the operation in Ghana and is 
considering pulling out all together, thus abandoning the 
3000 land-based customers it already has.  This could 
inconvenience other foreign investors, such as Newmont Gold 
Mining's $450 million dollar Bram-Ahafo project.  According 
to Newmont's IT manager in Accra, Westel's service and 
equipment are the only viable option in Ghana for Newmont. 
State-owned Ghana Telecom (GT) does not provide comparable 
service, regardless of price. 
 
4.  (C) Bill Taylor fears the GoG could use GT to undermine 
Westel's existing operations.  To support this he cites a 
string of incidents in which GT has either delayed or simply 
not complied with GoG directives governing the integration of 
Westel's land-based systems.  Westel does, however, hold hope 
that a settlement can still be reached if the spectrum fee is 
rescinded. 
 
5. (C) Comment.  Although the facts in WWI's complaint are 
accurate, Westel also has some respnsibility for the current 
mess.  It partnered with a questionable parastatel company 
and inadequately documented spectrum in its initial 
agreement.  The problem was exacerbated when Westel agreed to 
pay the USD 25 million uncontested amount, which is 
universally seen as an admission of guilt.  Westel's 
agreement to pay without a written agreement on spectrum only 
compounded its problem.  Communications Minister Kan-Dapaah 
said he "would not stand in the way" if Westel wanted 
arbitration and added that the matter is now out of his 
hands.  Nevertheless, Post will watch to ensure the GoG lives 
up to its contractual obligation to participate fully in 
international arbitration. End Comment. 
LANIER