The telecom industry is one of the most dynamic industries in Uganda. From the monopoly of Celtel, the first telecom to introduce mobile services in Uganda, the market has become cutthroat as companies edge each other out in competition for the millions of users. To survive the intense rivalry, companies have had to become innovative and creative with their products, diversify into new areas and improve on general business processes. In the recent past, the telecom industry has latched onto fiber growth with carriers inking deals to acquire as many assets as they could in an effort to add capacity to their networks and quickly build out their network footprint.
Figures from the financial year 2017/2018 show that the two telecom giants on the Ugandan market spent more than Shs580bn ($155,419,000) of this Airtel invested more than Shs180bn and MTN invested more than Shs400bn in internet upgrade in order to improve customer experience.
This expenditure was mostly prompted 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 making the “ old-school telecoms” re-invent their marketing plan and put emphasis on improving their internet connections across Uganda.
Thus creating an opportunity for the already existing telecoms to fight back which until now has been seen as unfair competition in terms of prices for data and voice packages on the market.
Current prices of data and voice packages in the market range between Shs500($0.13) and Shs10,000($2.7) for one to access internet on their phone across the telecoms players which is mostly dominated by South Africa’s giant MTN, India’s Bharti Airtel, Smile telecom, and Uganda telecom.
Surviving OTT
However internet penetration suffered a setback with the introduction of Over the Top Tax (OTT) that was required to be paid by any customers across all networks before they access the internet. Users were required to pay a minimum of Shs200 for a day or Shs1,400 for a week to stay connected.
It is such changes in the industry that made different players in the industry consider new avenues of raising revenue such as moving into media. As the power shifts out of the communications networks telecoms are buying up shares in media that cuts across networks. For example MTN Uganda and Kwese TV (now defunct) entered 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, during the signing of the agreement then said the companies created time bundles dedicated to Kwese Inflix ranging from two hours of unlimited consumption at only Shs1,600($0.42)
MTN is not unique in this move, companies such as Facebook and Google have been seen doing even more such as building their own data centers buying up unused fiber optic infrastructure and funding the creation of new undersea cables. The smaller brands unable to afford such moves have been left with the less attractive options of either selling off their codes or going into mergers with bigger brands to maintain their customer base.
The dog eat dog world
On February 15, 2017, 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 cases of 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 and band width among others. This was 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 Nyakairu whom court had appointed as a provisional administrator to breathe new life in the telecom failed.
The stiff competition in Uganda’s telecom industry is one that has been manifested by cut throat prices that hardly leave room for new players to operate in the market.
For instance as many Buganda loyalists celebrated the inception of K2 telecom in 2013, little did they know that the telecom which is linked to Buganda kingdom would struggle to stay afloat in a market dominated by MTN that owns the lion’s share of the 24.8 million customers. As of May 30, 2018 K2 telecom operating on code 073 was shut down by the Uganda Revenue Authority over a debt amounting to Shs94.8 million($25,403) of which Shs77.8 million($20,847) was Pay as You Earn and Shs17 million($4,555) of local excise duty.
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 its operations.
Information from Uganda Communications Commission shows that K2 telecom was off air since January-2017 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 onto the market.
It was only when Airtel agreed to buy off their K2 under the brand endorsement agreement they signed in 2019 which allowed the transfer of all K2 telecom customers to the Airtel network with a prefix in the first three digits from the 073 series to 070 series.
The calling rate wars
The new tariff regime which kicked off in 2013 by MTN dropping cross network calling rates to Shs3 continues to force the other telecom companies to come up with cheaper voice plans that can lure more customers to use their voice services.
In the market, almost every telecom has come up with voice plans that stretch as low as Shs1,000 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.
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. The acquisition stiffened competition sparking off an unsustainable and unhealthy price war that had a major effect on country’s economy. In the financial year 2010/2011 URA reported a Shs89.1bn shortfall in its Shs2.9 trillion domestic revenue collections target which was partly blamed on the calling rate 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 7.5 million subscribers , Uganda telecom 2 million subscribers , Africell 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 five years.
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