How Utl got into the current mess

Tuesday March 24 2015

Vendors walk past one of Utl’s business centres in Kampala

Vendors walk past one of Utl’s business centres in Kampala recently. PHOTO by Stephen Wandera. 

By Didas Kisembo

To understand Uganda Telecom Limited’s (Utl) troubles, it is not enough to just look at the current happenings but bring into perspective the events of the past five years. Utl recently made news when yet again another of its managing directors quit after a short stint at the helm.

Ali Amir, who in 2013 was tasked to revive Utl fortunes quit, citing personal reasons. But insiders say he was hounded out after failing to achieve key deliverables.

Prior to that, Utl had been dragged in the mud as several of its workers disparaged the telecom for failing to remit their savings for over a year. But the telecom blamed this on the continued failure by government and other key agencies to clear bills amounting to more than Shs7b.

However, given the pile around the telecom’s neck, this seems to be a drop in the ocean.
Between 2008 and 2009, Utl almost faced industrial action with MTN Uganda and Airtel threatening to lock out its calls over failure to pay a combined sum of more than Shs20b accumulated in interconnection charges.

In two public notices published around the same time, the two telecoms warned that Utl’s customers would be blocked from routing their calls through their networks if the telecom does not pay Shs13b to MTN and Shs7b to Airtel. Utl denied the sums, saying it was only aware of Shs6b for MTN and Shs2.6b for Airtel.
The matter has since gone silent after interventions by industry regulator, Uganda Communications Commission and government to avert a crisis in one of Uganda’s key economic sectors.

The above factors, coupled with claims of tax defaults and delayed payment of suppliers, among them advertisers, put the brand in disrepute, making most of Utl’s management positions untenable. Donald Nyakairu, who stirred the company in one of its worst crises in 2011 exited the telecom after serving as managing director for slightly over a year.

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He was replaced by David Holiday, a Briton, who also quit shortly before bringing in Ali Amir.
Other key positions including chief commercial officer were not spared.

Shailendra Naidu, who had formerly worked with Warid Telecom quit last year after serving as chief commercial officer for less than two years. Russell Saunders, the former project manager, quit after two years as a result of piled pressure for failure to achieve key deliverables.

Genesis of the troubles
Probing the story of Utl’s rise and ultimate woes requires a one-way ticket back to the beginning of the country’s telecommunications history. After several years of serving out as a market monopoly, Uganda Posts and Telecommunications Corporation was divestured in the 1990s, giving birth to Uganda Telecom Limited, Post Bank and Posta Uganda.
At the turn of the millennium, government held a 51 per cent stake in Utl but ceded ownership to Egyptian telecom - Orascom, which later sold to Ucom.

In 2007, Lap Green, a subsidiary of the Libya African Investment Portfolio bought into Ucom pushing its stake to 69 per cent. This meant that Utl had new owners with government maintaining a 31 per cent shareholding.

The telecom had around this time exhibited an upward growth trajectory but was interrupted in 2011 by the arrival of the Arab Spring in Libya after sweeping through much of North Africa. The events of the Arab Spring, which resulted in the ouster of Col Muammah Gaddafi and the subsequent placement of embargos on key Libyan assets, suffocated funding for most of the country’s investments outside Libya.

Libya has an investment portfolio of more than $66b controlled by the country’s sovereign wealth fund headquartered in Geneva, Switzerland.

With Utl’s operations constrained and finances shackled, cracks started developing in the once solid enterprise. The telecom, which not only needed strategic intervention, was (and still is) in dire need of a financial sway that would lift it from the abyss.

Performance
A 2006 World Bank paper titled, Impact of privatisation in Africa: Uganda telecommunications, indicates that after making a profit of Shs2b for the last seven months of 2000, Utl posted a net loss of Shs7b in 2001 but later registered a net profit of Shs5b in 2002.

The telecom continued to perform poorly, posting a loss of Shs8b in 2006. This affected shareholder funds falling from Shs68.9b in 2000 to Shs54b at the end of 2006.
In 2007 Abdulbaset Elazzabi, the then managing director said they had since Lap Green’s arrival invested more than Shs300b in network expansion and service quality.

Perspective> Industry watchers

According to David Abigaba, an ICT expert, Utl’s problems do not revolve around the issue of management but the telecom continues to look in the wrong places for solutions. “You cannot continue firing manager after manager when the actual source of the problem is Lap Green. Its turbulent fortunes are tied to Utl and for Utl to survive two things must happen…,” he notes.

“… either the European embargo on Lap Green is lifted, helping boost its performance, subsequently laying grounds for it to pull up Utl or Utl gets new ownership to steer it back on track,” he adds.
However, Allan Ssewanyana, a technology innovator, who has been closely following the events at Utl disagrees, saying: “government needs to do more to save Utl”.

“I feel government has disengaged itself from the goings-on at Utl. That 39 per cent share is huge and they are not living up to that stake. They have left it for the foreign company to tussle it out and steer the ship into oblivion. Government should step in. It is about time it should,” he says.

dkisembo@ug.nationmedia.com

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