How small telecoms have been swallowed up by bigger firms

An Airtel customer service centre in Kampala (FILE PHOTO)

KAMPALA – One thing for sure no one can accuse the Ugandan telecom market of sitting still in 2017 with the industry having multi-billion mergers and acquisitions come to close

The telecom market in 2017 was all about fibre with carriers inking deals to acquire as many assets as they could to get their hands on in an effort to add capacity to their networks and quickly build out their network footprints.

Figures from the financial year 2016/2017 show that the two telecom giants in the Ugandan market spent over Ugshs580 billion ($150,189,000) of which Airtel invested over Ugshs180 billion ($46,610,500) and MTN invested over Ugshs400 billion ($103,579,000) in internet upgrade in order to improve the customer experience

Which expenditure was provoked by emerging competition from Vodafone and Orange networks which came into the market between 2014-2016 pulling their strength to offer better data services on top of voice services made the old-school telecoms re-invent their marketing plan and put emphasis improving on their internet connections across Uganda.

Telecommunications firms have spent milions of dollars to lay fibre optic cab;e across Uganda (FILE PHOTO)

What this showed is that these old-school communication companies were under threat from all sides looking for ways of fighting back which has in the past been seen in unfair competition in prices of both voice and data packages on the market.

Prices of data and voice packages in the market range between Ugshs 500($0.12947) and Ugshs 10,000($2.58947) for one to access internet on their phone across the five telecoms players. The Ugandan market is dominated by South Africa’s giant MTN, India’s Bharti Airtel, Smile telecom, Africell and Uganda telecom

As telecoms consider new avenues of raising revenue most of them are considering moving into media as the power shifts out of the communications networks with telecoms entering agreements and some are buying up shares in media that travels across networks.

For example, during the world cup competitions, MTN Uganda and Kwese TV entered into an agreement with Kwese TV announcing an introduction of bundles at MTN with Kwese Inflix that give customers the comfort to watch TV on their mobile handsets.

MTN chief of marketing Olivier Prentout said we have created time bundles dedicated to Kwese Inflix ranging from 2 hours of unlimited consumption at only Ugshs 1,600($0.41432)

Companies like Facebook and Google are going even further building their own datacentres buying up unused fiber optic infrastructure and funding the creation of new undersea cables.

This means smaller brands that cannot afford all these innovations will face an impediment there by closing shop, selling off their codes or go into mergers with bigger brands to maintain their customer base.

Such examples have happened, On 15th-February-2018 the high court of Uganda issued an order confirming the application of Mr Donald Nyakairu as the provisional administrator of Afrimax Uganda limited and interim protective order was granted to the company for a period of three months pursuant to section 139 of the Insolvency Act 2011.

Such protective orders are used in bankruptcy to bar unsecured claims by creditors or the release of the confidential or potentially harmful information. Afrimax was the holding company of the Vodafone brand in Uganda

A Source privy to the matter says Vodafone closed in the last week of April -2018 due to issues occurring from customer drops, inflated prices by service providers for example in terms of rent , bandwidth among others

This has however worsened with the Afrimax Group which received rights to operate under the global Vodafone brand announcing that the company was undergoing liquidation after efforts by Donald Nyakairu who court had appointed as a provisional administrator to breathe new life in the telecom failed

The competition in Uganda’s telecom industry is characterized by cut-throat price which has hardly left room for new players to operate in the market.

As many celebrated its inception in 2013, little did they know that K2 telecom which is linked to Buganda kingdom would struggle to stay in a market dominated by MTN whose share out of the 24.8 million customers whose gap still wants against other telecoms like Airtel and Uganda telecoms

As of 30th –May-2018 K2 telecom whose code is 073 was closed by Uganda Revenue Authority over a debt amounting to Ugshs 94.8 million($24,548.2) of which Ugshs 77.8 million($20,146.1) was Pay as You Earn and Ugshs 17 million($4,402.10) of local excise duty

Airtel_Ug and s K2 Telecom Friday, July 27 signed a brand endorsement Agreement that will see K2 subscribers enjoy all the services offered by the Airtel network (FILE PHOTO)

The closure has left the Buganda lining telecom entering into an agreement to be hosted by Airtel Uganda part of the deal is to see the co-branding of Sim-cards with K2-Airtel with a code of 0708 for all its customers

Figures from UCC show that K2 telecom has over 100,000 customers in the market

According to URA, the closure came at a time when the memorandum of understanding signed in 2013 was breached by K2 telecom which forced the tax man to swing into action and close of K2 telecom operations

Though K2 operations have been taken over by Airtel this doesn’t stop the tax man from recovering their money as K2 is still obligated to pay up their Debt, meaning that K2 telecom needs come up with modalities to pay up the loan

Information from Uganda Communications Commission show that K2 telecom has been off-air since January-2017-to date after the fall out with Africell (then orange) over failure to pay up costs for being hosted on their network since 2013 when they came into the market.

According to Edgar Karamagi the communication manager Africell, we last dealt with K2 telecom beginning of last year (2017) when they agreed to seek other companies to host their network.

The new tariff regime which kicked off in 2013 by MTN for voice to its competitors dropping cross network calling to Ugshs 3 up to now has forced many telecom companies to come up with voice plans so as to lure more customers to use their voice services.

In the market almost every telecom has come up with voice plans that stretch as far one a slow as Ugshs 1000 for On-net callers lasting 24 hours at no extra cost there by navigating their way to the lowest call rate bandwagon that came into play 2010 with the famous “Pakalast” that saw many customers join the Warid network

Warid merged with Airtel in 2013 stiffening the price-wars between the MTN and Airtel (ARCHIVES)

Though Warid managed to stay relevant up to until 2013 when they were bought off by Airtel many Ugandans had acquired the Warid sim-cards

Which acquisition stiffened competition was criticized due to the unsustainable and unhealthy price wars that hurt the economy, in the financial year 2010/2011 URA reported a Ugshs 89.1 billion shortfall in its Ugshs 2.9 trillion domestic revenue collections target partly due to price wars in the telecommunication sector.

Data from national information technology authority shows Uganda’s mobile users have increased in number since 2014 from 19 million to 24.8 million mobile users as of 2017.

With MTN having the biggest share of 11 million subscribers, Airtel with 7.5 million subscribers, Uganda telecom with 2 million subscribers, Africell with 1 million subscribers and 1.5 million subscribers that are shared among telecom companies that switched from voice services to data.

Some of the companies that switched to data services include Smile telecom, Roke telecom and Liquid telecom that have since majored in offering data services in the market for the last 5 years.



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