President Museveni has asked Uganda Communications Commission (UCC) to explain circumstances under which they reduced the renewal license fee for MTN Uganda from the “earlier communicated $100m (Shs 380bn) to $58m (Shs 220bn).”
Museveni said such a deal would not be good for Uganda.
He further wondered why MTN was allowed to “continue repatriating” millions of dollars back home in South Africa.
The President reiterated Cabinet’s concern that capital flight was eroding the benefits of Foreign Direct Investment (FDI) in Uganda.
MTN’s 20-year license expired on October 20, 2018.
Late last year, the telecom obtained a 60-day extension from UCC which ends on January 20, 2019.
Uganda’s Information and ICT Minister Hon Frank Tumwebaze last September announced that Cabinet had given him “a go-ahead to give a no-objection to UCC to renew MTN’s license with new stringent terms in pursuit of the Broadband Policy Goals.”
Some of the licensing conditions set for all telecom service providers including MTN are national coverage – whereby every operator must be able to cover the entire geographical place of Uganda so as to enable universal access, promote effective competition and quality of service.
In this case, MTN is expected to extend internet to the parish level as well as upgrade internet speeds to a minimum of 8 MBPs.
Cabinet also decided that all local operators as a licensing condition will have to list on the local stock market to “help mitigate capital flight among other benefits of local content development opportunities that come along.”
State House officials told Eyalama reporter on Sunday that the President is currently internalizing UCC’s response filed late last year.
In its defence, UCC said it benchmarked the revised fee against countries in East Africa and other parts of Africa.
For example Kenya, which has a bigger GDP of $74bn, charges $27m for a 15-year license for a telecom company. The country’s population is 49 million.
For Tanzania, a telecom pays a license fee of $800,000 for 25 years. It has a GDP of $52bn.
Additionally, Rwanda charges $500,000 for a 13-year license. Nigeria which has a bigger population of 190 million people gives a five-year license to telecoms at $94m each.
UCC, therefore, said it was not wrong for a country of about 40m people to charge $58m for a license renewal especially for a company like MTN which has invested millions of dollars in the economy.
According to correspondences seen by Eyalama reporter, MTN says implementing stringent license obligations to address government concerns includes extension of network coverage to all parishes as well as upgrading internet speeds to a minimum of 8 Mbps.
In line with the new broadband policy passed by Cabinet, MTN’s investment will increase to $200m within 24 months of renewal of license.
Officials say this is over and above average of $80m for MTN’s normal business capital investment.
UCC explained it didn’t want to be stringent on renewal fees as the “total value of renewal is $258m inclusive of renewal fee of 58m and additional investment cost of 200m.”
Experts believe investment in future technologies will drive further developments of the ICT sector and the general economy.
In its response, UCC expressed confidence that since “one of the license renewal terms is that MTN shall list part of its shares on the USE, this will ensure that part of returns on investment will be shared by the local shareholders. Therefore the profitable entity is key in ensuring the benefit to the local shareholders.”
Sources said during meetings with ICT Ministry officials, MTN expressed willingness to list on the local market here in Uganda.
However, they would need about two years to complete the process.
In regard to capital flight, Uganda does not have a law barring foreign businesses from repatriating profits back home.
Legal experts say unless a law is put in place, most multinational companies would continue to take out millions of dollars from the country.
However, this is a double edged sword, as some investors shy away from countries with such restrictions.
During meetings with MTN, Ugandan government officials were told the telecom invested in the country when the transport infrastructure was so bad that the telecom was at times forced to upgrade roads to access hard-to-reach areas to extend network services.
More to this, the broadband policy passed by Cabinet requires all entrants into the telecom market to pay the high license fees.
“Whoever wants to be operational must meet these requirements. If you charge highly, it means everyone who comes will pay that money. In these circumstances, can UTL raise 58m for a license? Because they will hold the same license…” wondered a government official who preferred anonymity to speak freely.
Nevertheless, industry players say MTN Uganda will need to address public concerns including calls drops and delays in resolving consumer complaints.
MTN last year said it was “not possible to have a consistently good quality of service throughout its license period” but that it had done more to provide a reliable service.
The telecom company would as well need to handle concerns of third party access seekers (aggregators and value added service providers) who claim denial/delays in provision of service, discriminatory trade terms, unfair pricing, unclear vetting criteria and delayed reconciliation of revenues amongst others.
MTN late last year spearheaded the integration of mobile financial services which allow customers experience simplicity and efficiency in mobile money transactions across all networks.