Will next decade give Uganda new revolutions in telecom?

Tuesday January 7 2020

The telecom sector has been one of Uganda’s

The telecom sector has been one of Uganda’s cornerstones of growth in the last decade. The question now is, will it have more revolutions in the decade we just kicked off. Photo by Edgar R. Batte 

By Christine Kasemiire

In 2010, when only 32.7 million people lived in Uganda, there were only 12.8m mobile phone subscribers.

Today, the population is estimated to be more than 42 million and at least more than half of it, to be precise 25.4 million, have mobile phones.

Fine, there are those who have multiple lines thus the numbers might not be indicative of unique users but it is not disputable that the telecom sector has registered tremendous growth, especially in the last decade.

Telecom services now reach far and wide in other wards the services are now border to border.
According to the latest sector performance report for the period ended June 2019 released by Uganda Communications Commission (UCC), of the 25.4 million subscribers, 5.5 million own smartphones and about 16 million feature phones.

“In the period … the total number of smartphones in the market grew by 1 per cent. The number of smartphones in the market stands at 5.5 million,” the report indicates.

However, according to Statista, a technology and telecommunications research center, the low penetration of smartphones compared to features phones is not unique to Uganda.

Advertisement

“In the past five years, about 1.4 billion smartphones were sold worldwide annually, reflecting stagnation in the smartphone market during the last few years. The smartphone market still has high growth potential though,” the publication notes.

In Uganda’s case the low penetration might be a combination of a number of factors, but one cannot be blind to low living standards and poverty.

For instance, Uganda National Bureau of Statistics, notes that unemployment rate stands at 9.2 per cent and the median monthly wage of paid employment for someone between 14 and 64 years is Shs168,000.

At the same time, average household monthly expenditure has decreased from Shs328,200 in 2012 to Shs325,800 in 2016, which creates a divide between those that can afford telecom services and those that view them as a luxury.

Therefore, many Ugandans will choose a phone based on apparent needs that might not go beyond calling, receiving or sending a text message.

Internet penetration
Consequently, the rather low smartphone penetration might also be a proper explanation for the diminutive Internet penetration, which currently stands at only 38 per cent.

“Mobile Internet subscription stands at 15.1 million up from 14.3m, reflecting a growth of 5.4 per cent. The total market including OTT and web access Internet penetration stands at 38 per cent,” the UCC report reads in part.

Meanwhile, the idea that Uganda’s telecom sector has multiple players does not remove the fact that two telecoms run the country.

With a combined market share of 90 per cent, Airtel and MTN influence the telecommunications sector. At least this was the case in the last five years and it remains so.

Like guitar strings move to the brush of the pick, what the two telecoms decide, subscribers abide.

Cost of Internet
Data from 230 countries and territories about the cost of data compiled by dable.co.uk, a broadband, TV and mobile phone price comparison site, indicates that Ugandans pay on average $4.69 (Shs17,231) for 1GB (gigabyte) of data, the second highest in East Africa.

This is only cheaper than Tanzania’s $5.93 or Shs21,787 for gigabyte.
Consumers in Rwanda, according to the report, pay the least, with 1GB costing $0.56 or (Shs2,057). In Burundi and Kenya, the same goes for $2 (Shs7,344) and $2.73 (Shs10,024), respectively.

In DR Congo consumers pay $0.88 (Shs3,231) while in Sudan they pay an average $0.68 (Shs2,496) for the same.

Zimbabwe pays the highest price both in Africa and in the world: $75.20 (Shs276,134) followed by countries such as Equatorial Guinea; $65.83 (Shs241,728) and Saint Helena; $55.47 (Shs203,686).

In the 2017/18 National Information Technology Authority survey, 76 per cent of Ugandan Internet users cited price of data bundles as a key limitation while 49.2 per cent cited slow Internet.

“When subscribing to the Internet, individuals consider maximum download speed (35 per cent) more important than the price of the subscription (30.9 per cent). Individual Internet users mentioned the high cost of using the Internet (76.6 per cent), the slow speed (49.2 per cent) and poor connectivity in some areas (41.4 per cent) as the three top barriers to using the Internet,” the March 2018 study conducted by The Collaboration on International ICT Policy for East and Southern Africa, reads in part.

However, to decipher the challenge of cost of Internet in Uganda, it comes down to the chicken and egg predicament.

Mr VG Somasekhar, the Airtel Uganda managing, director like a song on repeat always emphasizes, the price of Internet can only reduce with an increased number of subscribers.

“With more customers, more usage can come, then the rates can come down. But first we shall have to see penetration also go up,” he said in an interview early last year.

While it is arguable that the oligopoly offer the best deals possible and not fleece the fenced in subscribers, some government policies have left subscribers in a bind. With a massive and desperate need to grow the country’s tax base, Uganda Revenue Authority looked to people’s twitchy fingers.

OTT Tax payers increase
In 2018, government introduced taxes on both mobile money and over the top (OTT) services otherwise known as social media tax, limiting access to some sites lest Shs200 is paid as a levy on a daily basis.

Blows came from all directions, including opposition politicians, the public and not so vocal corporations such as Facebook, amplifying the infringement caused by the tax.

Thanks to Virtual Private Networks, the tax man registered meager collections at introduction.

However, recent figures from UCC indicate OTT is making some growth with more people now paying.

“In the second quarter of 2019, OTT tax revenues grew by 17 per cent. The figures are a reflection of those who have used OTT services at least once in the quarter,” the UCC notes.

The data indicate that Shs15.3b was collected in the period leading to June 2019 from Shs13.1b in January.

The figures are reflective of the tax man’s faith that subscribers would after a while of hesitation, reject the strenuous use of VPNs, cementing the longevity of the tax in the sector.

The mobile money revolution continues

URA is seemingly laughing last and best when it comes to mobile money tax. After a major uproar to the tax that arguably burdened mobile money subscribers, mobile money services are slowly regaining traction.

A Bank of Uganda report for the year ended June 2019 highlighted an increase in number of mobile money transactions.

“The number of mobile money transactions increased by 87 per cent from Shs1.3b in 2018 to Shs2.5b during the year to June 2019,” the Central Bank said.

The same is equally displayed in the UCC quarterly report indicating that more transactions were recorded between March and June 2019.

However, the aggregate value of money transacted through the platform as at the end of 2019, according to the Bank of Uganda report dropped by Shs6.1 trillion.

This begs the question: “What happens if the value of transactions continues dropping?”

It would mean that if many people are sending small amounts of money through mobile money, URA equally collects small amounts of taxes.

In the same measure, UCC notes that more people are saving on mobile money. Data shows that Shs331b was the balance on customer accounts in June compared to Shs326b in January.

Mobile money service registered 4,898 new agents in June bringing the number of mobile money agents to 200,857 agents serving over 15.4 million active subscribers.

Advertisement