News Desk Report
A careful study of the confidential report written by the eight member panel that evaluated the applications submitted by five companies to operate the Interconnect Clearing House (ICH) has revealed that the committee raised questions about the financial standing of Afriwave, but went ahead to recommend the award of the multi-million dollar contract to them.
Afriwave accounts were almost red and had relied heavily on the projected revenue to bolster its financial standings.
According to the bid information submitted to the committee, Afriwave projected GH¢ 1,057,162,820 as total income for the 10 years. It also anticipates making an average income of GH¢105,716,282.
The following is how the committee, headed by Mr. Albert E. Enninful summarized the financial standings of Afriwave.
Afriwave presented three (3) years financial statements (2011 to 2013). It depicts a steady decline in income over the period under consideration.
Return on assets for the three years was on the decline. 2013 posted a loss, resulting in a negative return on assets. Return on equity was exceptionally high, relatively due to low shareholders’ funds (Stated Capital and Retained Profit). Because 2013 result was negative, return on equity for 2013 was also negative.
Gross margins on the performance of the company were high, averaging 54.3% which was exceptionally high, however operating profit ranges from 14% in 2011 to negative (loss) in 2013. The performance was a reflection of trend in income dropping from GH¢1.5m in 2011 to GH¢0.4m in 2014.
The liquidity position of the company was not that strong. On the average, current assets were barely higher than the current liabilities. The working capital was not positive for all three years, 2013 was negative. The company however, did not operate an overdraft account in all the three years.
Projected Financial Statement
Afriwave Telecom presented only projected 10 years Cash flow. The assumptions underlying the projections were very positive because Afriwave said it was invoicing for some services.
Afriwave projected GH¢ 1,057,162,820 as total income for the 10 years.
The company anticipate making an average income of GH¢105,716,282. Afriwave proposed to source equipment from Huawei. The payment for the equipment was to be spread over the useful life of the license. Afriwave anticipates making an annual payment of GH¢23,148,148 to Huawei to cover the cost of equipment.
Huawei also presented its financials to support Afriwave’s application. Letter of support for access to financing for the project was submitted from Huawei. Afriwave seeks to finance the whole project with debt and supplied credit. Afriwave expects to make a profit of GH¢423,765,610 for the period of 10 years.
The company expects to make an average profit margin of 40% for the projected period.
Afriwave did not submit projected Balance Sheet and Profit and Loss Statement hence our inability to assess the projected financial statements in respect of projected return of equity, projected working capital etc.
The National Communication Authority (NCA) on 2nd December, 2014 invited applications for the grant of a license to establish, maintain and operate Clearing house Services for telecommunication services in Ghana.
The Clearing house is intended to provide a common and independent mechanism for routing; switching, billing and settlement of interconnect accounting traffic as well as other value added services for all the existing and future authorized operators in Ghana.
It shall have two main components: Interconnect Exchange and the Financial Clearinghouse for the provision of services. By 17th December 2014 (application deadline), a total of five (5) applications had been submitted to the NCA.
The Board of the NCA constituted an eight (8) member Application Evaluation Panel (AEP) under the Chairmanship of Mr. Albert E. Enninful to advice the Authority on the applicants’ technical, financial and management capacities to establish, operate and maintain a Clearing house facility, in accordance with the scope and conditions that have been spelt out in the request for application document.