Buy-Import-Export Premium Grade UGANDA VANILLA BEANS Buy-Import-Export Un-Refined Raw SHEA BUTTER
The year is ending and holiday season is on. While many Ugandan business are in recess, the Transport Sector, and retailers are making some good returns from a spending happy population.
As I perused through today's papers with almost no business news. I found this article from the Monitor Newspaper and thought it really sums up the tough business climate in the Uganda ICT Sector through 2011.
2011 has been a tough year for the telecommunications sector, battered by high inflation, high interest rates, a weak shilling and price wars.
Nonetheless the sector managed to come to terms with the economic shocks that hit Uganda, hurting performance of many businesses across the country.
The year saw inflation touch its highest in over two decades, soaring to 30.4 per cent in October 2011, up from 0.2 per cent in October 2010.
Interest rates rose close to 30 per cent, up from an average of 15 per cent over the same period, making loans repayment costlier.
The shilling lost value in 2011, weakening by about 25 per cent, touching its lowest mark in September to sell at Shs2,950 for a dollar.
Mr Sifiso Dabengwa, the MTN Group chief executive officer, was early in the year quoted by Reuters saying telecoms
in Uganda would be hit by the surging inflation and increased competition in the sector.
“... the real challenges include price erosion by competition and the fact that inflation is high to a certain extent negatively
impacts the company as far as growth is concerned,” Mr Dabengwa told journalists in August 2011.
The telecom industry entered 2011 with price wars, stretching through the last quarter, resulting into a huge drop in call tariffs
both within and off-network.
Players slashed voice tariffs from a market average of Shs380 per minute to Shs180 per minute,
as they sought to protect their turfs and attract more customers in anticipation of increasing revenues.
They further lowered on-network tariffs to an average of Shs1 per second in the first quarter of 2011.
Although the drop in call tariffs saw corresponding jumps in subscriber numbers and traffic,
it failed to increase revenue for players as earlier anticipated. Mr Themba Khumalo, the MTN Uganda chief executive officer,
was quoted saying that the company’s average revenue per user (ARPU) - a key industry measure of performance,
had declined to about $4 in the first half of 2011 from $6 about a year ago.
The price wars also deteriorated service quality, with consumers getting more disgruntled over dropped and blocked calls,
due to the fact that players had hardly invested in network expansion and upgrade, before the price wars, to support growing traffic
and subscriber numbers.
Growth in subscriber numbers outpaced investment in network expansion and upgrades, forcing players to use the compression method –
trying to fit more calls on less frequencies; thereby, hurting service quality. Uganda Communication Commissions in its March
2011 Quality of Service report indicated that the sector’s service quality was hugely wanting.
The report cited Warid and Airtel as the telecoms with the highest number of dropped and blocked calls - an unsucessful call is
when a user’s attempts to make a call but fails due to network failure, while a dropped call is one unceremoniously terminated by the network before end.
Mr Khumalo told this newspaper that 2011 had been a challenging year for the company due to
infrastructure vandalism through frequent fibre cuts, equipment theft at sites and fuel challenges, thus affecting growth.
Mr Nyombi Tembo, the ICT state minister, talked tough when he announced during the Orange Uganda annual expo in Kampala that the government
would in 2011 act with caution while renewing licences for telecoms with poor services. He said:
“The government would in 2012, not renew licences for telecoms providing poor services.”
Thus, he advised companies must invest in network expansion and upgrade, to offer better and improved services in 2011.
Indeed according to Mr Shailendra Naidu, the Warid chief commercial officer, the firm will in 2012 hid by Mr Nyombi’s
advise as it has plans to undertake a massive network expansion, in order to improve both voice and data services as well as
investing in technology to support the firm’s new platforms including Warid Pesa, the firm’s mobile money platform.
Airtel revenues are said to have fallen by more than half from Shs26 billion ($11.3 million) in August to Shs12.6 billion ($5.4 million)
in September before a slight recovery to post Shs13.1 billion ($5.7 million) in October.
The drop in revenues resulting from prices wars and the increasing cost of doing business, forced telecoms to rise call
rates again with MTN taking the first step. The firm announced that it had doubled its tariff from Shs2 per second to Shs4 per second or
Shs240 per minute.
Its was followed by Airtel, which increased its tariffs from Shs3 to Shs4 per second, citing the rising cost of doing business as well as
inflationary pressures. Uganda Telecom, Warid and Orange followed suit rising their calls tariffs by about the same margin.
However, even with the revisions in tariffs, revenues generated from voice have continued to falter forcing telecoms to look at
alternatives sources including; data and mobile money platforms.
Airtel, early this year invested in network upgrade launching 300 service sites (masts) across different parts of Uganda.
MTN also has plans to invest in high quality infrastructure to address expansion and improve service levels.
The effect of the price wars saw telecoms lose revenue with MTN, whose revenues from domestic sales had
initially rose to Shs67.3 billion ($29.2 million) at the onset of the price cuts, plunge to Shs44 billion ($19.1 million) just a month later.
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