UCC lacks capacity to monitor telecom revenues, says report

A subscriber makes a phone call. According to a report by the Auditor General, the communications regulator lacks capacity to monitor telecom companies. FILE PHOTO

Kampala- The Uganda Communications Commission (UCC) could be losing out on much-needed revenues from telecom companies due to lack of monitoring capacity.

UCC earns at least 27 per cent of its revenue from telecom companies, which helps keep it an autonomous and independent institution.

However, a report by the Auditor General indicates that the commission lacks capacity to verify revenue declaration by telecom companies.

“A review of the revenue collection system revealed that the commission has not yet built capacity to independently verify the revenue figures reflected in the operators’ audited financial statements to counter the likelihood of audit risk or collusion,” Mr John Muwanga, the Auditor General, revealed in the 2014/15 report.

Every year, when telecoms submit their financial statements, they are expected to remit 2 per cent of their revenue to UCC.

UCC retains half of the proceeds for its operations and the other half is remitted to the Consolidated Fund.

The report indicates that due to the capacity failures at UCC, there could be underpayment by telecoms.

“As such, there is a risk of under-collecting revenue for the commission in the circumstance,” Mr Muwanga added.

Shs20b revenue shortfall
The report also showed that UCC collected Shs20.3b less than it had budgeted, which meant some tasks could not be completed in financial year 2014/15.

Of the Shs104.6b it had projected to collect, UCC had actual revenue of Shs84.3b by the end of June 30, 2015.
“Significant variations in revenue collections may imply unrealistic budgeting and/or inadequate implementation of collection strategies. As such, management is constrained in the implementation of planned activities,” the report reads.

In their explanation to the Auditor General, UCC attributed the shortfall in revenue to increased use of fiber optic cables by internet service providers, non-billing of Uganda Telecom (UTL), the One Network Area which reduced rates on call to Rwanda and Kenya, introduction of excise duty on international calls and lack of interest earnings from anticipated fixed deposits on idle funds.

During the year, UCC moved to revoke the licence of UTL over failure to pay Shs13 billion in fees.

UTL had been experiencing financial trouble due to lack of investment in a competitive market.
According to UCC, efforts to recover Shs13 billion from UTL were curtailed by the government intervention in the matter to convert all debt into equity.

Absence of tribunal
Since UCC was set-up, there has been no tribunal instituted to deal with dispute resolution. The UCC Act, 2013 provides for a Uganda Communication Tribunal, to hear and determine all matters relating to communications services.

“Absence of a tribunal to boost the amicable resolution of disputes among operators and the commission stifles the communication sector’s operational environment in Uganda and affects the commission’s ability to promote competition, including the protection of operators from acts and practices of other operators. It may also result into increased legal costs to the Commission in the case of litigation,” the Auditor General warned.

UCC said the law provides for the President to appoint a judge to the tribunal on the recommendation of the Judicial Service Commission. This had not been done, UCC said in response to the Auditor General.