In COM’s effort to achieve its strategic objectives, a number of factors outside and inside COM present major downside risks to the company. In this presentation, factors that have the potential to militate against the company’s competitive advantage are presented in two broad categories – factors in the general environment (i.e., the macro environment) which pose significant threats, and factors within the company which indicate weaknesses.

General External Environmental Factors – Threats

Since the board is focused on understanding the general external environmental factors that may negatively affect the strategic position of the company, the PESTEL model is used for the presentation with an emphasis on the threats arising from those factors.

Economic Factors

These factors collectively determine the general financial health of an economy or a country such as Ghana. The following are the major economic factors posing a threat to the strategic position of the company:

• Negative impact of COVID-19 on the economy: The COVID-19 pandemic has negatively impacted the general demand for goods and services in the economy. The impact of the pandemic on COM’s operations has been varied and mixed. While there has been a significant surge in demand for data due to more businesses operating from home, the demand for voice has been affected negatively as there has been a shift from voice to data. This will negatively affect the revenue stream from voice service.
• High Interest Rates: Interest rates remained relatively high despite the decline witnessed since the new government took office. The average interest rate is currently 21%. COM has a huge GH¢2.47 billion in bank loans and lease obligations with GH¢327 million in interest costs for the year 2020. The high-interest rate significantly erodes the operating profit of the company. Further reduction in the interest rate can allow the company to take new facilities to replace the expensive existing debt capital.

Political Factors

• Threat of e-waste tax imposition: The government is threatening to impose a tax on telecommunication operators to raise the necessary funds to deal with the electronic waste menace in the country. The government has identified mobile phones as one of the major contributing factors to the rising electronic waste. If the policy is translated into legislation, it will increase the taxes paid by telecommunication operators and will ultimately affect the value of COM, as more cash flow will be paid out to the government.

Social Factors

• SIM Box Fraud: This anti-social behavior involves unscrupulous individuals diverting or terminating incoming international calls as local calls. The rate charged for international incoming calls is higher than local calls, and terminating international calls as local calls results in a significant revenue loss to the telecommunication companies. Given that COM is the market leader, more of its international calls are affected, leading to a higher revenue loss compared to its competitors.
• Lower usage/patronage of mobile money services by women: An important social trend is the lower rate of mobile money use among women, who control most petty trades and businesses. This poses a significant threat to mobile money penetration and represents a loss of potential income from the mobile money segment of COM.
• High illiteracy rate among women: One of the contributing factors to the relatively low patronage of mobile money services by women is the high illiteracy rate, especially in digital skills. The lower rate of mobile money use by women has been attributed to their lower digital literacy skills and their fear of falling victim to fraud.

Technological Factors

• Mobile Money Fraud and Connectivity Issues: The factors affecting mobile money penetration include fraud associated with mobile money and poor mobile connectivity, especially in remote areas of Ghana. Even in Accra, the nation’s capital, there are network operators that experience poor network performance in certain suburbs. Such connectivity issues could affect the adoption and use of mobile money.

Legal Factors

• Regulation by National Communication Authority (NCA): COM has been cited by the National Communication Authority for breach of the rules regarding significant market power. The company contested the measures in court, but the case was unsuccessful. The NCA’s regulations represent a significant legal and regulatory risk to the company.

Conclusion

The strategic position of COM is influenced by several external and internal factors. Key threats include economic challenges like high interest rates, regulatory threats from the National Communication Authority, social challenges like SIM box fraud, and technological threats in terms of mobile money fraud and connectivity issues. The company must address these factors to secure its competitive position in the market.