Will revived UTL survive competition?

On November 1, State Minister for Investment Evelyne Anite told the Monitor “government had finally saved UTL”.

Whereas she did not reveal how it had been saved, it signalled an end to nearly five years under administration.

Government had placed UTL into administration to protect it from collapsing, burdened by debts in the excess of Shs200b and a bleeding balance sheet.

Actually, UTL had became a shell of its former self with subscribers, staff and debtors unsure of the direction to take.

Even in administration, UTL appeared to be a haunted telecom, with government officials bickering on who, between the administrator and Investment minister had the best strategy.  

Nelson Bemanya, the first administrator had a good exchange with Anite, but was eventually seen out and replaced by former Uganda Law Society president Ruth Sebantidira, who initiated an Asset Purchase Agreement in which the telecom reverted to government in a deal worth Shs256b and $15m (Shs56.1b).

It is from this that government has indicated it will form a new telecom expected to be launched within next year.

It will be interesting to see how government makes a comeback in a largely saturated market controlled by Airtel and MTN, which have held off competition and seen out a number of telecoms with the recent being Africel.

UTL troubles

It is difficult to point out when UTL was a stable company. Actually, even in its initial days of launching, the shareholders seemed not to be sure of the direction they wanted to take.

Before, it reverted to UTL, the mobile section of the telecom carried Mango as the new brand in town.

But before long, signs of a struggling telecom competing for space in a turf that had known little competition then had started to manifest.

The telecom market first operated under an exploitative monopoly of Celtel, which has changed hands several times to now Airtel, before it was eventually dismantled by MTN.

It is then that UTL also entered the foray but seemed to lack the financial muscle to invest in a sector that needed constant investment.

And before long, UTL had fallen on the sidelines, unable to service a number of obligations, among which included off-network termination charges and supplied goods and services.

Indeed, threats to block UTL customer off-network calls had almost become a song, while different service providers  such as media and tower operators, among others, had got in the habit of declining non-cash orders from the telecom.

Stephen Kaboyo, who was UTL’s chairman before it went into administration understood its troubles better than anyone.

He had arrived at a time when UTL was deep in the red, low on cash flow and with a bleeding balance sheet.

“Telecom business requires continuous investment to keep up with technological changes. For UTL, there was hardly any investment,” he says, and notes that it got worse with the war in Libya, which scattered the Col Muamar Gadhafi regime and its global investments.

In 2010, the Arab spring swept through North Africa, leading to the ouster of Col Gadhafi.

The Libyan government held majority shareholding (69 percent) in UTL under Lap Green, whose assets were frozen by EU as part of sanctions against the Gadhafi regime.

However, even the ouster of Col Gadhafi did not make things better. In fact, they worsened under the successor company - Libyan Post Telecommunications & Information Technology Company.

For almost five years, UTL had no investment capital, which saw its market share nose dive while debt accumulated. 

“By 2017, UTL needed an investment worth $250m to bring it back to life,” Anite told a meeting of staff members in November.  

Yet, she noted, the Libyan Post Telecommunications & Information Technology Company could not raise the money thus deciding to exit - leaving UTL to government  with a debt of over Shs700b.

By then, Kaboyo says UTL had hit rock bottom, worsened by a failing network, which led the telecom into serious cash flow challenges.

Thus, the only option out was getting into administration, which Anite said then was the best for UTL subscribers and government.

“I can assure you that the company will be here today, tomorrow and the day after tomorrow,” she said then.

However, before long, Anite and Bemanya were bickering over strategy. The bickering peaked as the two backed different investor camps to take over UTL assets.

In one corner Bemanya supported Nigeria’s Taleology, while Anite backed Mauritius Telecom. The two accused each other of influencing for different investor camps.

However, Taleogy’s $70m bid turned out to be hot air, according to a 2018 Financial Intelligence Authority report, which left Mauritius Telecom as the only contender. 

But reports indicated that Bemanya shot down Mauritius Telecom’s bid as being below the assessed market value of UTL, which was set at $80m.

“The offer is way below the $70m made for consideration of assets, $285m capital investment over three-years and a shareholding split of 62-38 percent, tabled by Hamilton Telecom,” he is quoted by the East African as to have said.

The Bemanya, Anite show would come to an end after Bemanya’s contract expired in November 2019. 

In, came Sebatindira, who in February, initiated an Asset Purchase Agreement, fronting  Uganda Telecommunications Corporation Limited (UTCL) as the purchaser of UTL’s assets in a deal worth Shs256b and $15m.

“These sums are to be applied towards some liabilities, namely Trade and Development Bank loan, WIOCC Investment, pension arrears to Uganda Contribution Employees Contributory Pension Scheme and NSSF,” Sebatindira wrote in her hand over report, noting that the last payment would be made by June 2023.

It is from here that a new company – UTCL - will be born to drive on the UTL legacy.

While receiving the administration report, Grace Ssekakubo, the UTCL chairperson said: “The question on everyone’s mind is, is [revival] a national telecom provider viable?”

Well, she said, this will be a question to be answered in the market when UTCL finally launches.”

Today, the telecom sector is largely a turf of two giants - MTN and Airtel - accounting for almost 95 percent of the market.

Will UTCL survive competition? 

Leveraging on broadband 

Kaboyo believes that new players can survive if they focus on niche markets or products. 

For instance, he notes, UTL had strength in offering government communications, which he says UTCL should build on.

However, he says, this can only be delivered if government mobilises some good amount capital and operational expenditure to update the network that is almost obsolete and support the week balance sheet.

Beyond voice services, Ssekakubo says, UTCL will take advantage of a rapidly growing broadband sector.

“The market performance reports from UCC demonstrate the extraordinary opportunities that lie ahead, particularly in broadband networks,” she says, and cites other opportunities in new technologies and payment channels.  

Equally, Michael Niyitegyeka, an expert in Fintechs believes that the new telecoms must prioritise niche services and government business because the current market “is tough” but because UTCL will have massive infrastructure it can leverage on government services to push into the next level.

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