Telecom sector sluggish in 2013
Posted Wednesday, December 25 2013 at 02:00
Purchase. The major highlight was Airtel’s acquisition of Warid Telecom in April at an estimated cost of Shs125b
The telecommunication sector was the most dynamic in Uganda three years ago; especially after Warid Telecom ignited a price war that saw call rates drop drastically much to the benefits of customers.
In 2013, however, the sector posted a slowdown, with a few happenings that transpired benefiting player more than subscribers.
The major highlight was Airtel’s acquisition of Warid Telecom in April at an estimated cost of $500 million.
The deal not only reduced the number of players in the market but also worked against mobile phone subscribers who now have to dig deeper in their pockets to make a phone call.
This is because Warid, whose philosophy was to offer affordable call rates, which had forced giants like MTN and Airtel to also lower call rates to remain competitive, was taken over by Airtel.
This meant Airtel and MTN went neck and neck in subscriber numbers because the acquisition was likely to increase the Airtel’s customer base in the country.
Increased call rates
A few weeks after the acquisition, MTN revised its call rates to their pre-2010 levels, now that it knew no other player would challenge it by lowering rates now that Warid was no more.
Citing challenges in the operating environment, the companies then increased call rates for on-network per-minute and per-second billing plans from Shs240 to Shs270 and from Shs4 per second (Shs240 per minute) to Shs4.5 per second (Shs270 per minute), respectively.
Calling subscribers on other networks using the per-second billing plan increased to Shs5 per second (Shs300 per minute) from Shs4 (Shs240 per minute).
Also hiked were data tariffs from Shs15,000 to Shs18,500 for the freedom bonze bundle, Shs75,000 from Shs60,000 (freedom silver bundle ) while the freedom gold bundle went up to Shs150,000 from Shs120,000.
Airtel also later increased its internet charges, with subscribers getting only 25 megabytes (MB) for Shs500 down from 60 MB and 100 MB down from 250 MB for Shs2,000.
The monthly data bundle was also reduced from 150 MB to 125 MB for Shs5,000.
Of all the four major players in the telecommunication industry, Uganda Telecom Limited has been a bit silent for the most part of the year.
New taxes introduced
The other thing that didn’t go well for mobile phone subscribers during the year was the introduction of new taxes in the 2013/14 financial budget including a 10 per cent levy on mobile money transaction and an international call tax.
The new taxes sought to raise Shs32 billion and Shs43 billion, respectively for the government to enable it raise more funds to meet its increase in the resource envelope to Shs13.1 trillion in the 2013/14 financial year.
With the new taxes, mobile money charges were hiked, a move industry observers said could slowdown usage of mobile money services.
MTN for instance increased charges for sending money to registered and non-registered mobile money users by an average of Shs480.
The new tariffs that took effect in July, came barely a month after the same player increased mobile money fees by between Shs100 and Shs200, citing the need to enable it improve service delivery and ensure a sustainable availability of its mobile money services across the country. Although the Ministry of Finance and the Uganda Revenue Authority said the tax should be borne by telecom companies which were getting huge profits from the platform without paying any tax, the telecoms turned a deaf ear to this and instead transferred the cost to the final consumer.
Because of the growing popularity of the mobile money platform, the increase in charges didn’t stop the customers from using the services since it still remains one of the cheapest and simplest ways of sending money compared to traditional ways.
For instance, Bank of Uganda indicates that a total of 32.6 million transactions valued at Shs1.65 trillion were conducted in September 2013, alone.
Annual available statistics indicate that the volume of money transacted through the platform increased to Shs11.7 trillion in 2012, up from Shs3.75 trillion in 2011.
The International Calls Levy, on the other hand, is said to have made international calls very expensive for subscribers.