Airtel Uganda fights on as Tom Gutjahr exits

Tom Gutjahr joined Airtel Uganda in August 2014

What you need to know:

Tom Gutjahr joined Airtel Uganda in August 2014, replacing Arindam Chakrabarty who had been the firm’s acting managing director, following the promotion of VG Somasekhar, the previous MD in Uganda within Airtel business in Africa. However, some financial filings show that the telecom was operating a deficit of about $80m (Shs266b) in June 2014, up from $76m (Shs253b) in 2013. Jonathan Adengo & Mark Keith Muhumuza explain.

One year and nine months. That is how long Tom Gutjahr lasted as chief executive officer (CEO) of Airtel Uganda. Last week, Bharti Airtel announced that Gutjahr would be leaving Uganda and Airtel. He joined Airtel Uganda in August 2014, almost a year after the telecom acquired the Warid Telecom. On his appointment in 2014, his roles were specific. He was meant to steady the ship, manage the transition and provide leadership to what had become Uganda’s second largest telecom company. He, however, had two specific roles: make Airtel Money one of the mobile money platforms accessible to many and expand internet connectivity using the 3G network.

On Thursday last week, Airtel Uganda issued a statement announcing a new managing director who is taking over from Tom Gutjahr. Gutjahr will be leaving the company at the end of May 2016 to head Djezzy (OTA), the largest mobile operator by subscriber numbers in Algeria, North Africa owned by Egyptian-group Orascom Telecom Holdings.

During his two-year tenure as Airtel Uganda MD, he managed the tough transition after Airtel’s acquisition of Waird. In an interview with the Daily Monitor, Gutjahr is confident that he has grown Airtel Money to control about one-third of the total subscribers. The market is still dominated by MTN’s Mobile Money. Estimates indicate that Uganda has about 18.5 million mobile money users. Airtel is not keen on sharing actual subscriber figures but before the acquisition, Airtel had just about 1 million mobile money users. Now the figure is estimated about 4 million users. Gutjahr takes credit for this growth.
Gutjahr replaced Arindam Chakrabarty who had been the firm’s acting managing director, following the promotion of VG Somasekhar, the previous MD in Uganda within Airtel business in Africa to look after a portfolio of eight countries.

Gutjahr was a CEO in Tigo Paraguay (Millicom International Cellular), the biggest operation in the Millicom Group. Prior to that, he had a stint as CEO for the Tigo operation in Rwanda in 2011; and CEO for Tigo in Chad between 2008 and 2010. The acquisition of Warid came with chest-thumbing by Airtel that could bring the telecom closer to the competition, MTN Uganda.
Bharti Airtel, India’s largest telecom company bought Warid telecom at $100m (Shs1.8 trillion) in 2013. At the time, Airtel was number three in the market. With the acquisition, Airtel became number two, bringing the numbers to about 7.2 million. The numbers have grown at a much slower pace since then. Airtel is non-committal on actual figures but the estimates point to the growth of about 3 per cent to 2014.

“We have won significant market share in Uganda. Many people see us as a driving force when it comes to services and prices,” Gutjahr said.
Expanding internet coverage and improving speeds was one of the Key Performance Indicators for Gutjahr and there has been an investment on that front.
Last year, Airtel Uganda invested more than $40 m (about Shs133.2b) in improving its network. The outgoing MD said they have built more than 1,000km of the optical fibre cable across the country to strengthen their data connectivity.

Unprofitable Airtel
Airtel Uganda does not disclose revenue performance for Uganda. In the Bharti Airtel’s Annual report for 2015, it only gives the group financials. In Uganda, Airtel operates three registered companies: Airtel Towers Limited, Bharti Airtel Uganda B.V, and Airtel Mobile Commerce, through a complex web ownership. All the three companies file separate financial results. Daily Monitor has seen some of the financial filings for the three companies and only two of those had a profit and loss segment. Bharti Airtel Uganda B.V recorded a loss of $10m (Shs33b) as of June 2015, down from $12m (Shs39.9b) over the same period in 2014. The company was furthermore operating a deficit of about $80m (Shs266b) in June 2014, up from $76m (Shs253b) in 2013.

Additionally, the telecom has had challenges dealing with a loan it took from Standard Chartered Bank. The other business venture, Airtel Towers Limited (results only up to December 2014), is also making losses too. Despite the growth in revenue from Shs30b - pre-acquisition of Warid in 2013 – to Shs70b as at June 2014, it also made losses. The losses for the tower business arm grew to Shs23b from Shs358m before the acquisition mainly due to the depreciation of the company assets at the time. There was also expansion in management fees. The Tower Company paid about Shs5b to Bharti Airtel Uganda BV in management fees for providing the human resource for managing the masts.
According to 2015, financial results report released last month, Airtel Africa segment has a total customer base of 76.3 million customers across the continent. The group is number two in 14 African countries including Uganda.

Gutjahr passes on mantle to Anwar Soussa
As Gutjahr leaves, Airtel is still unprofitable. Airtel Africa’s executive chairman, Christian de Faria in a statement announced Anwar Soussa, as the managing director of Airtel Uganda, who would take over from Gutjahr with effect from June 1, 2016.
“I am confident that under Anwar’s leadership, Uganda will continue to consolidate its position while providing the best in class services to Airtel customers in Uganda. Anwar will focus on strengthening our external stakeholder relations, consolidating commercial capabilities and help build a superior network,” the statement read in part.

Anwar has had a long stint in the telecommunication industry in Africa. He joined Airtel from MTN Cyprus where he served as the chief operating officer. He holds a Bachelor of Science degree in Marketing from the American College of Greece and a Master of Science degree in Marketing from Concordia University, Canada.
Speaking to Daily Monitor on the sidelines of a press briefing on Friday, Gutjahr said he “…had been approached by the largest telecom company in Algeria and the offer was too good to pass up,” he said, adding: “After consultations with my family, I accepted the offer because my wife comes from Algeria and she will be with her family.”

“I leave Airtel Uganda in a much better shape than I found it,” he said. We are only a few points behind and we are going to close the margin very fast. The growth has been tremendous, Airtel Uganda controls one-third of the mobile money network in the country.”
Gutjahr said it was normal industry practice for such changes to occur saying two to three years is a pretty noble thing and as such, does not find anything wrong with his decision to move on.
On his part, Godfrey Mutabazi, the executive director Uganda Communications Commission, the regulator of the telecoms industry, says it is normal industry practice for telecom companies to keep changing management.

“Most of the managers who have moved on from the Uganda market have gone to bigger markets and management roles, this for us is a testimony to the vibrancy of our industry. It’s not a question of ‘come and go’ but rather good performance,” he told Daily Monitor in a telephone interview.
He said Airtel had done well but we have an industry challenge of quality of service which still has issues. “This is an industry that cannot be treated in isolation because technology is ever changing and telecoms are moving away from microwave links to fibre cables,” he said.
Experts say the telecom industry is dynamic and the Uganda market is quite different from the other markets in Europe. Whereas in the developed countries you can have a seamless connection even on the countryside, in Uganda the quality drops as you go deeper to the countryside.

2015 Industry performance

Subscriber base. Mutabazi says every industry needs communication to grow; communication has become the backbone of the economy. He said: “The technologies are changing and as such, we are now moving from voice to data, which dynamics we must appreciate.”
According to the UCC national report for 2014-2015, a number of registered subscribers has grown from 11.8 million in the FY 2013/14 to 14.35 million in FY 2015. This growth, the report says, was largely driven by the growing number of services integrating mobile money as part of their payments systems.

These services now span various non-financial sectors including education, trade, and commerce, health, utilities, agriculture, and tourism.
Internet bandwidth usage. The report also notes total internet bandwidth usage grew from 26.9Gbps in FY 2013/14 to 31.2Gbps in FY 2014/15. The growth of 15.7 per cent was driven by increased appreciation and usage of broadband services in Uganda.