UTL on route to recovery

Drop in the cost of internet

Otuhumurize revealed that the company plans to further lower the cost of its internet for the government entities from the current US$100 per Mbps to US$50Mbps by the end of the Financial Year 2017/18 and thereafter to the general public.

This is to be at par with the rest of the East African countries, most specifically Kenya and Rwanda.

This comes barely two months since the government announced plans to procure all mobile and fixed telephony communication services as well as internet from UTL at a lower price in an effort to trigger a price cut of these services by service providers.

According to Keith Muhakanizi, the permanent secretary in the Ministry of Finance, Planning and Development and the initiator of the new move, internet service providers in the country are charging clients as high as US$300 per megabit per second per month yet their counterparts in the region are charging below US100 per megabit per second per month.

So far, UTL has connected 132 Ministries, Departments and Agencies at 118 different points during the past six months even as the government still owes the telecom firm Shs14bn. This is in addition to the already existing 74 MDA’s in 132 different points.

UTL’s troubles stretch as far as 2007, characterized 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 Libya in 2011 affecting capital inflow to the company.

Till recently, the Libyan government through a private company called Ucom controlled management as the major shareholder with 69% shares.

Ucom was in turn owned by the Libyan Post, Telecommunication and Information Technology Holding Company (LPTIC) via its subsidiary LAP GreenN. The government of Uganda owns 31% shares.

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 firm 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 in 1998 arguing that these additional liabilities were never for UTL but for the government under the privatisation law.

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 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 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.

And as the six month period for the administrator comes to an end this month, according to the Insolvency Act 2011, it remains unknown on whether government will extend the URSB administration period or pay its creditors’ claims standing at Shs 540bn.

Evelyn Anite, the State Minister for Investment and Privatization in the Ministry of Finance Planning and Economic Development, could not be reached for a comment on the future of UTL as she was unable to answer our repeated calls.

But in past interviews with The Independent on matters UTL, Anite has sounded optimistic that the temporary managers would turnaround the company to become one of the most influential and profitable in the telecom sector space.