Taxes, simcard registration dominate talk in the telecoms sector in 2018

February 26, a light skinned beauty was gruesomely murdered. The country was hit by shock after kidnappers of 28-year old Suzan Magara sent her butchered body parts to her parents.
The morbid murder, propagated by kidnappers who took advantage of using different Simcards was followed by a directive by telecoms regulator - Uganda Communications Commission (UCC) - stopping the swap and registration of Simcards.

This was only the start as a number of directives were issued by the Bugolobi-based regulator.

Telecoms were allowed to resume selling Simcards but only from stationed outlets contrary to how it had been done before.

Shortly after, UCC also felt that it is was important to stop selling voucher airtime cards, a reform that took the country some time to adjust to.
Different deadlines were issued and later shifted until when airtime cards were nolonger on market.

New taxes
While telecoms thought they had a breather, government through Parliament, passed the Excise Duty Amendments, 2018 in July, allowing Uganda Revenue Authority to collect a 1 per cent tax on all mobile money transactions. Shs200 was also introduced for over the top services.

This meant that all social media users would be required to pay Shs200 per day to access platforms such as Facebook, Whatsapp and Twitter, among others.

The two taxes ushered in a period of massive losses as the industry registered a 27 per cent drop in transaction volumes for the period running to November when the tax was amended to 0.5 per cent on only withdrawals.

Basically, taxes had caused a volatile period in the sector with agents, telecoms and the public alike, singing with one voice – cut the tax rate.

According to Bank of Uganda, during a Parliamentary meeting with the Finance Planning and Economic Affairs Committee, nearly Shs672b had been lost in the first two weeks of July, when the 1 per cent tax was implemented.

Wim Vanhelleputte, the MTN chief executive officer, acknowledged in a live post on social media that the year had been trolled with some serious challenges, key among them, the mobile money tax.

“Mobile money tax almost brought the service on its knees, not only for us, but also other stakeholders such as dealers. Subsequently mobile money transactions reduced between 30 and 40 per cent,” he said.

Similarly, Sumin Namaganda, the Airtel public relations manager, said the tax had adverse an effect on volumes but she was hopeful that it will return to normal in the year ahead due to a review that reduced it to 0.5 per cent.

Effect of mobile money tax
The market shall for a long time live with the effects of the 1 per cent mobile money tax that awakened Ugandans more than ever.

However, Parliament in November reviewed it downwards to 0.5 per cent only on withdrawals.
Before, the tax had applied to transactions including bills payment.

Robinah Nyangoma, a mobile money agent in Mengo is optimistic for the return of normal business. And if we are to go with the numbers at her stall, it has already returned.

However, according to Nyangoma, it is hard to tell if the increase is a result of festive season or a reduction in taxes.
“Customers have increased, because at least now you can work on at least 20 a day. They still complain but not as before,” she says.

Ms Nyangoma’s transactions had dropped so much during the 1 per cent tax levy earlier, especially with her Airtel line barely raising 10 customers a day.

Airtel, Ms Namaganda said, is now recovering while Vanhelleputte admits that the new month (December) has been good and they expect even better.

Market statistics revealed that the tax reduction would amplify transactions back to Shs871b in December from the Shs475b in July.

OTT stays
Despite advise from multinationals such as Facebook against OTT on the basis that Uganda is killing its own bargaining power with international powers, President Museveni insisted that social media tax would remain because it (social media) is a luxury and a forum for gossip that ought to be taxed.

National broadband policy
In September, Cabinet resolved to pass the National Broadband Policy, a guiding principle for the telecommunications and the ICT sector.
The policy, which requires telecoms to list on the stock exchange, also reviewed MTN’s 20-year licence which will expire by the end of the year.

Subsequently, the telecom was awarded a 10-year renewal subject to fulfillment of requirements.
Key among the requirements is localise ownership, which continues to be a talking point.

According to Vanhelleputte, whereas the option of localasing through the stock exchange is priority, there are ongoing discussions to explore other alternatives.
For instance, MTN has argued, the telecom could localise by selling shares to local institutions such as investment and pension funds.

Market share
This continues to be a tough battleground with Airtel, though still a bit distant, closing in on MTN’s market leadership.
The two telecoms were in the period under review, greatly affected by Simcard registration that saw players switch off several Simacards.

However, efforts to gain leverage over each other, especially in terms of investment, continue to be a key determining factor to achieve an edge.

For instance, according to Namaganda, Airtel currently has a 95.9 per cent reach.
This has helped the telecom to attain a 91.1 per cent coverage of Uganda’s land mass as well as improving service delivery.
On the hand, MTN, in 2019, plans to expand its coverage through a Shs250b infrastructure investment.

Exchange between UCC pay TV service providers
Although broadcasting is outside the telecoms sector, it equally engaged Uganda Communications Commission this year. An exchange ensued after UCC announced in April a new licencing regime for pay TV service providers. The regulator had threatened to close any pay TV service provider who would defy paying the required Shs220m in regard to issuance of new licences. The licence had been increased from Shs22m.

The, war, which had silently been brewing, now came to the fore with pay TV service providers claiming that the new licence regime fees were not only exorbitant by unrealistic.
UCC and pay TV services providers soon entered into discussions after a week of a deadlock and tough exchanges.

A way forward was later reached with the licence for new entrants reviewed to Shs95m.