Parliament has recommended that government clears a Shs45.6b debt that Uganda Telecom (UTL) holds with the Eastern and Southern Trade and Development Bank currently known as TDB.
The debt is a condition for the acquisition of a $650m (Shs2.4 trillion) loan from the same bank.
Part of the detailed report released by the Parliamentary Budget Committee, indicates that TDB after obtaining an expression of interest to extend $650m loan for different projects, had set a condition for government to take over UTL’s debt obligation.
Members of the committee, according to the report, recommended payment of the loan obligation with the aim of acquiring full ownership of UTL.
“The loan repayment by government will be recognized as consideration for equity in the new telecommunications company proposed for establishment,” the document reads in part.
Mr Amos Lugoloobi, the Parliament Budget Committee chairperson, confirmed that members had recommended that government repays the loan and take full ownership of the telecom, noting that the money to repay the loan was part of the Shs1.9 trillion supplementary budget.
“We indicate that the funding for the entire budget is going to come from domestic borrowing and a motion has been laid on table for that borrowing,” he said, adding that the money paid in regard to the UTL loan will be converted into shares for government in the telecom.
UTL, which is 31 per cent owned by government and 69 per cent owned by Libyan owned state enterprise Ucom Limited, acquired a $52m loan in 2004 from Eastern and Southern Trade and Development Bank.
According to documents, the loan was secured with mortgages of prime properties belonging to UTL, some of which were foreclosed after the telecom fell into financial distress and failed to fulfil its obligations in 2016.
The current debt owed by UTLto TDB, which was also once known as PTA Bank is $13m.
The rational for clearing the debt, the committee noted, was premised on saving government’s relationship with TDB Bank in which it owns a 15 per cent stake and holds the chairmanship of the board of directors.
In addition, the assumption of the loan will deter further foreclosure of UTL’s mortgaged properties.
Calls to Ms Ruth Sebatindira, the Utl administrator, whose main role is to work around on returning the telecom to profitability so as to attract investors and settle creditor’s debts went unanswered by press time.
State minister for Finance in charge of Investments and Privatisation Evelyn Anite, who has been at the heart of a storm surrounding UTL was also unavailable for a comment by press time.
Proposal to form new telecom
Parliament has also set a proposal to establish a new telecommunications company, which will be wholly owned by government, pending Cabinet approval.
According to Committee documents, in order to facilitate revamping of Utl, government, in principle, should be agreeable in taking over the TDB loan in return for equity in a new telecommunications company.
This, the report said, awaits formal approval by Cabinet after which as new telecommunications company will be established.
Mr Lugoloobi said issues on how to buy out the Libyans are pending valuation of Utl adding that there is some paperwork that needs to be done.