Solving UTL puzzle

Experts say Bemanya should stay but government should focus on recapitalising the telecom firm

Kampala, Uganda | JULIUS BUSINGE | Debts, poor corporate governance, fights, politics and ageing infrastructure have taken centre stage in debates surrounding Uganda Telecom Limited.

Bemanya Twebaze, a Ugandan lawyer and corporate executive, who has served as Uganda’s Registrar General and Chief Executive Officer of the Uganda Registration Services Bureau since 2011 is among the officials on the spot since he was appointed as a temporary administrator for the company in May 2017.

The other officials on the spot include; Evelyn Anite, the state minister for privatization, the Attorney General William Byaruhanga and President Yoweri Museveni.

This is happening as the two big telecom sector players –MTN and Airtel – continue to invest and attract new customers that would have joined UTL had it made similar investments before, and avoided the confusion it is in at the moment.

“Building Uganda telecom is building Uganda,” a source familiar with the matter surrounding UTL told The Independent.

“They (those fighting) do not understand that the company is a cash cow for Uganda. They need to put aside their egos and deploy the right strategy to make it one of the most attractive and loved by subscribers like it is the case with MTN and Airtel.”

The infighting at the telecom firm followed the July 18 letter from President Museveni, directing Anite to institute an audit into UTL.

Earlier, the Attorney General, Byaruhanga and his deputy, Mwesigwa Rukutana had argued that there cannot be an audit of the administrators’ activities in UTL until the administration process comes to an end.

The duo argued that the ministry of finance has no control over the company in its current status. They cited section 174 (1) of the insolvency act, which provides that only listed creditors can apply to court to remove the administrator from office.

“The Finance Minister as a shareholder of UTL cannot apply to court to remove the administrator and any such application is bound to fail,” they said.

Anite had earlier written a letter on June 26 asking the AG to apply to court for orders replacing Twebaze, saying they had encountered considerable difficulty in dealing with the administrator and completely lost confidence in his ability to continue with the administration process.

She argued that the government has absolute powers to make decisions on behalf of the company in accordance with the Insolvency Act and regulations.

She also said the government was the biggest creditor of the company with slightly over Shs207billion.

Her other concern was that Bemanya has blocked the government from getting periodical performance of the company as plans to get an investor were underway.

As at February 2019, the company needed around Shs255bn to clear some of the Shs536bn debt as well as help it upgrade its network to 4G.

Several achievements had been recorded since April 2017 when provisional administration started following the exit of Libyans – the majority shareholder with 69%.

URSB said the company had enhanced value where creditors’ claims and thetotal liabilities had reduced from Shs709bn to Shs536bn. It had also recorded improved efficiency with network availability increasing from 75% in April 2017 to 97.5% and the wage bill had fallen by 45% to 1.02bn.

The company had been able to influence reduction in the cost of internet to ministries, departments and agencies from US$300 per Mbps in June 2017 to currently US$70 per Mbps, a step that triggered other telecom operators to lower their tariffs.

By press time, Bemanya and his junior staff had not responded to our questions that sought progress on this performance.

 Experts offer solutions 

Ronald Sebuhinja, a former employee for MTN Uganda for 11 years and currently serving as the chief technical officer for Yo Uganda Limited, a technology solutions company told The Independent in an interview that the focus should not be on the fights but on making a lot of investment given that every single year, other companies spend millions of dollars on improving technology, hardware which keeps evolving.

“You cannot stop investing…once you stop the competitors will be offering better services than yours,” Sebuhinja said.

He said the government must be disciplined while it makes investments in the company.

“You have to run the company extremely carefully,” he said, “The big players that are making profits in the sector know exactly how to manage their investment.”

Sebuhinja said the company’s competitors have operations in other countries – MTN is in 21 and Airtel operates in 15 countries across Africa – which gives them an advantage of economies of scale when it comes to negotiating with vendors of equipment, pulling together resources and cutting costs compared to companies like UTL.

The other option for UTL would be to venture in other markets through acquisitions or direct entry, Sebuhinja said.

He, however, said this is not an easy option as it requires high initial capital for licensing fees amidst stiff competition from the already existing operators.

“It is quite a bit of a puzzle to see how UTL will be revived to become a profitable business…if they invested a lot of money and got world class management, it is possible it could thrive,” he said adding, “Government is not enough for the company to make money…they need to penetrate into the mass market.”

Paul Lakuma, a research fellow at the Economic Policy Research Centre based at Makerere University said the whole issue about UTL starts with the lack of money to keep it as a going concern.

Lakuma said the government needs to streamline its business lineage towards the company.

“I would not support UTL to be 100% government owned…we need some ethical hand in it from the private sector with minimal government interference,” he told The Independent.

He said the government can support its leadership but does not dictate on matters decision making.

Lakuma said the current fights over the company could further make it lose its market share to the two big players that control almost 95% of the market.

“UTL does not need to be a leader; it has to get its market share and keep it,” he said. “Let it be efficient when it comes to serving the government and other clients…and let the government also pay for the services on time so as not to affect its operations.”

He said UTL could also come up with new products that are competitive.

What should the future look like?

Sebuhinja says the government has an option to run the company as a loss making entity, the way countries run airlines.

But the question is; what benefit will that bring? Sebuhinja said that a local telecom company would only stop revenues from being repatriated.

The other advantage would be for the government to use it to handle its communication as part of managing its security which is what Museveni has pointed out several times.

Sebuhinja said that the government has tax revenue and could choose to put aside some money to pump in UTL as managers minimise operational costs, losses to such an extent that it is not too much of the drag.

However, he said that there is going to be a problem having the government as the company’s manager given that it has no good records when it comes to managing entities.

He also said that fights for UTL should be geared towards getting an external investor who is willing to pump in the funds needed to keep it in business.

On who should manage what, Sebuhinja said the administrator should be left to do his job because the company is almost insolvent.

“If the government thinks he is not doing a good a job, then let it come up with the money, recapitalise it and pay off the existing debts and take control of it,” he said.

Lakuma said sourcing expatriates to help in its management is important for some time until the government finds a new manager.

“Even if it is revived, the company must work its way up in terms of product innovation and show the market that there is value in it,” he said.

As at the end 2017, the company had about 700,000 customers – that is about 3% of the 23 million subscribers.

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