Muhakanizi’s fight for UTL

“While I welcome the proposal of the Ministry of Finance and UTL, promising to offer internet services at a much lower cost, we need to scientifically examine how this will be achieved and sustained given the fact that UTL as an already licensed operator in the market is not yet offering the same,” he said.

He says his ministry would have expected to receive a proposal from their counterparts in the finance ministry and UTL demonstrating how the telecom firm will offer cheaper internet services sustainably below what government is currently getting from NBI.

He says if the proposal is found convincing, a possible partnership between NITA-U and UTL would be explored to build synergies and deliver cheaper internet but not to jeopardise NBI already in existence.

So far, NITA-U has connected internet to 237 MDAs through the backbone, of which 141 MDA sites are fully utilising the services (Internet, Data Links and IFMS) through the backbone.

UTL’s old troubles

Muhakanizi’s latest fight comes nearly six months since the government took over the affairs and management of UTL with immediate effect after UCom, a subsidiary of Lap Green Network of Libya, which is the majority shareholder announced that it will not avail any more funds to the telecom firm.

LAP Green, a Libyan government firm, owns a 69 % stake in UTL with the Uganda government holding the remaining 31 % stake.

But as companies that are owed millions of shillings threatened to sue the telecom firm, the government placed it under receivership in April to keep it in operation.

Since 2007, UTL’s performance has been characterised by heavy indebtedness, decline in market share and losses as a result of inadequate investment, competitive pressure, dilapidated network and governance challenges.

The situation worsened when UN imposed sanctions on the Libyan assets at the height of political turmoil in the West African state in 2011 affecting capital inflow to the company.

Though UCOM resumed control of the company two years later following lifting of international sanctions against Libya, Libyan Post, Telecommunications & IT Holding Company (LPTIC), the parent company of UCOM, was not able to inject more capital into the company citing disagreement with the Ugandan government.

According to LIPTIC’s proposed turnaround plan, the Ugandan government was to convert the debt it owes to UTL into LPTIC equity.

Also, the government was to accept to erase the liabilities for actuarial amounts of pensions which exceeded the statutory contributions of 10% for the company’s former workers during the time of privatisation arguing that these additional liabilities were never for UTL but for the government under the privatisation law.

Agreeing on these two issues was to enable shareholders raise about US$48million through the sale of towers and funding from the LPTIC to revamp UTL.

The money involved was said to be about Shs18 billion owed to UTL and its portion of 31% of the US$48 million capital call under the LPTIC-proposed salvage plan.

Meanwhile, UTL has been sinking from the dominant position of major player in the nascent privatised telecom sector, to relegation as a cash-strapped company operating decadent 2G and 3G technology with the government as its main client.

The telecom’s strength was in the fixed line connection to government ministries, departments and agencies, with a significant fibre infrastructure and wireless broadband facilities.

It has been unable to upgrade its technology to match competitors operating latest 4G technology, a scenario that has forced a mass exodus of its customers to rival networks. This has led to decline in company’s clients from about 2 million in the 2000’s to around 700,000 at the moment.

It now remains to be seen whether Muhakanizi’s latest fight will yield tangible results and lift UTL’s fortunes to join a line of few successful state-owned enterprises.

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