BUY UGANDA VANILLA BEANS                                                                                                                                SOYBEAN OIL 

In Uganda, telcos seek mergers to boost sales

Uganda’s telecommunications industry is beset by conflicting perceptions; the regulator favours the smooth entry of new players, but existing operators seem set on consolidation.

Analysts said the situation could lead to stringent rules and conditions for mergers and a surge in new firms offering data and enterprise solutions.

Although the recent merger of Airtel Uganda and Warid Telecom received the nod from the Uganda Communications Commission (UCC), insiders at Airtel Uganda say the regulator could tighten conditions for future transactions in order to maintain a wide field and induce more innovation in alternative products like data and enterprise management tools.

READ: Uganda’s call rates go up as industry consolidates

Now telcos have shifted their focus to data and Internet, leading to mobile Internet products that cost as little as Ush2,000 ($0.79) per week.

However, UCC reportedly says that having a large number of firms offering a wide range of data products would give consumers better value for money.

Faster growth in data products is expected to increase opportunities for development of e-commerce services like online forex trading and electronic banking that rely on stable and high speed Internet services, analysts say.

In addition, the rising demand for mobile money services has led to total transactions exceeding Ush13 trillion ($512 million), and more than 12 million users by the end of June 2013, according to data from the Bank of Uganda.

However, weak enforcement of quality targets by UCC poses a hurdle to growth of cost effective data and Internet products, a challenge that has also affected phone calls on all networks.

Whereas UCC data shows that most of the operators scored more than 60 per cent on voice quality in the last review, complaints of dropped calls persist among phone users.

In contrast, depressed revenues from voice calls and modest growth in data users has compelled many operators to cut costs and seek opportunities for consolidation. This has led to salary cuts for senior staff and transfer of tower maintenance functions to independent firms.

Nevertheless, profitability remains a big challenge for the industry with only one operator, MTN Uganda, reporting a profit from its operations in 2011 and 2012.

“Industry regulators are worried about consolidation; this explains why the Communications Authority of Kenya is reluctant to approve the breakup of yuMobile. While they admit that the voice segment is saturated, they insist data and Internet products are still underexploited and are willing to license more players to fill the gap. Though UCC set soft conditions for our merger with Warid, it is unlikely that those conditions will be applied for future transactions,” said a business analyst at Airtel Uganda who requested anonymity.

Efforts to reach UCC officials proved fruitless by the time of going to press.

“Growth patterns in the data segment are dominated by high-end users who constitute a small base in the telecommunications market. There are roughly four million consumers of data services in the market but only one million of these are highly active. Few people can afford to buy one GB of data per month at Ush45,000 ($18) on average. Due to reduced revenues, many firms have slashed salaries and are pursuing consolidation opportunities,” said Ibrahim Mwesige, IT operations manager at Smile Communications Uganda.

“Consolidation in this sector was foreseen a few years ago. When firms started competing on price, they eventually found themselves with little cash to invest in operations. Perhaps the regulator ought to increase the performance targets in order to discourage players from pursuing short-term commercial targets,” said Keith Kalyegira, the chief executive officer at Capital Markets Authority.

The East African Newspaper

Click here to post comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Frequently Asked Questions about ICT in Uganda.

Haven't yet found what you Want...?

If you haven't yet found what you were looking for or you need detailed information about the subject matter on this page


feel free to ask our business travel consultants.

Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.