WESTEL FILES USD 60 MILLION EXPROPRIATION CLAIM

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