Money, policy and misinformation are at the centre of the long-running tension between Uganda’s leading telecom operator, MTN, and the government.
That much was confirmed at a meeting last week between President Yoweri Museveni and MTN Group CEO Rob Shuter, MTN Group Chairman Phuthuma Nhleko and another official from the company headquarters in South Africa on May 13.
What remains to be seen is whether the meeting will lead to a resolution of the issues and a quick renewal of the teleco’s licence to operate.
The company currently operates on a temporary 90-day licence after its licence expired in October 2018 and Museveni has refused to renew it in spite of holding several top level negotiations with company officials; both local and from MTN headquarters in South Africa.
The main disagreements between MTN and the government have been over licence fees and the government’s insistence that MTN lists on the Uganda Securities Exchange (USE).
But tensions went a notch higher in February when the government deported four top MTN officials, including the CEO, amidst accusations of clandestine anti-government activity, espionage, and sabotage.
Sources knowledgeable about the latest meeting told EYALAMA website reporter on conditions of anonymity that there were positive indicators for MTN.
Museveni reportedly authorised the Ministry of Ministry of Finance to finalise licence fees negotiations with MTN and the sector regulator; the Uganda Communications Commission (UCC) to make the final decision.
At the meeting, Museveni also appeared to have had a change of attitude regarding the deportation of the MTN bosses; especially former CEO Wim Vanhelleputte aka Wim.
“I am the one who ordered for the deportation of Wim but I was misled,” a source privy to the details of the meeting quoted President Museveni as telling the officials.
EYALAMA website understands that following the State House meeting, another was held between MTN and government officials at the Ministry of Finance offices. This was chaired by the Minister of ICT, Frank Tumwebaze, and attended by representatives from UCC and the Attorney General.
When contacted, UCC Executive Director, Godfrey Mutabazi told this reporter that UCC would look at the arguments MTN is raising and advise the authorities accordingly.
Hopes of licence renewal for MTN were dealt a major blow when the government in February deported former CEO Wim Vanhelleputte, then chief marketing officer, Olivier Prentout, general manager for Sales and Distribution, Annie Tabura, and mobile money general manager Elsa Mussolini.
Before that government operatives from the Internal Security Orgainsation had in July 2018 broken into MTN’s main Data Centre in Kampala.
Although this was a major breach, MTN opted not to overly fuss over it.
But the February deportation caused regional and international concern as it involved nationals from Belgium, Rwanda, Italy, France, and of course South Africa. Rwanda took exceptional concern over the deportation of its citizen, Tabura, and cited it as part of a wider targeting of Rwandan in Uganda. The matter was roped into bigger squabbles between Rwanda and Uganda that crested with Rwanda closing its border to Ugandan goods.
When MTN fired its then-General Manager for Corporate Affair, Anthony Katamba immediately after the deportations, it cited them in his dismissal letter.
“I would like to inform you that your employment with MTN Uganda Limited is hereby terminated with effect from 12 February 2019 (Termination Date) on account of the Board of Directors’ (Board) loss of trust and confidence in your ability to execute your current role as General Manager Corporate Services,” reads the termination letter in part.
It adds: “As you are aware, MTN Uganda has over the past several months and up till now experienced a number of legal and regulatory challenges in this market. Being the company’s principal legal and regulatory adviser responsible for resolving or minimising the negative impacts arising from any regulatory and legal matters in the market, the Board has unfortunately lost its confidence in your ability to carry out this critical function going forward in light of the prevailing and emerging challenges that the company is facing.”
Katamba had been part of MTN’s local team led by Uganda Chairman Charles Mbire, and including former CEO Wim Vanhelleputte , that was at the centre of chasing the renewal. They negotiated mainly with the telecom sector regulator, the Uganda Communications Commission (UCC).
But when disagreements between them failed to be resolved, the government side escalated them to Museveni and the MTN side brought its Group leadership from South Africa.
That is how MTN CEO Rob Shuter first met with President Museveni in January in Davos Switzerland on the sidelines of the World Economic Forum. That Shuter was with MTN Group Chairman, Phutuma Nhleko, at the Kampala meeting, speaks volumes. A former CEO MTN Group, Nhleko is known in MTN circles as a super negotiator after he got Nigerian authorities to reduce a fine of $5.2 billion they had slapped on MTN to $1 billion.
Kampala is yet to renew MTN’s licence. A few days after the Davos meeting, Museveni deported the MTN Uganda boss. MTN has since then intensified efforts to resolve the issues and the May 13 meeting was the latest.
Big money, business stakes
The stakes are high for both MTN and the government.
The company controls 55% of the Ugandan telecom market. It made Shs1.38 trillion for the year ending December 2018 and grew its subscriber base from 10.7 million in 2017 to 11.3 million over the period.
For government, MTN is a major cash cow. Initially the government wanted MTN to pay $118 million (Approx.443 billion) as licence fees for a ten-year licence. The government appears to be in a tight corner because it has already spent money hoping to recover it from MTN.
The Minister of State for Planning, David Bahati revealed as much when he asked parliament to approve a Shs.280 billion ($75 million) supplementary budget to pay for the two Bombardier CRJ 900 aircrafts from Canada as part of the restoration of the national air lines. He said the money to repay would come from proceeds from the MTN licence, among others. The two planes arrived in Uganda in April.
But the money MTN will eventually pay for the licence is not clear. The Finance Ministry initially proposed the US$118 million. UCC had also previously demanded US$100 million and then whittled it down to US$58 million. MTN offered to pay only US$20 million.
Negotiating MTN’s licence fees is difficult because, UCC says; Ministry of Works and Telecommunications did not provide a fixed figure when the first licence was agreed in 1997. This left room for negotiation after expiry of the agreement.
To arrive at the current figure, UCC officials say they looked at what MTN Uganda paid in 1997 and considered all the changes that have since happened in the economy and the customer base and reached an initial proposal of $100 million.
A source privy to the details of the meetings says the MTN team is focusing its argument on the methodology the team at the Finance Ministry uses to come up with the figures. It appears there is no formula and the figure is arbitrary.
MTN says, for example, it is concerned that it is being asked to pay US$118 million when a competitor, Airtel Uganda, only paid $100,000 (Approx.Shs375 million).
Apart from this MTN insiders note that already, they pay about $11 million to government in spectrum and other fees per year. In ten years, that comes $110 million. As a result, they said that they should only give government $8 million more to make the $ 118 million. But that was a figure proposed by the Finance Ministry.
As already noted, UCC had asked for US$100 million. When MTN protested again, UCC in a November 16, 2018 letter indicated that the figure had been cut to US$58 million.
The UCC Executive Director, Godfrey Mutabazi wrote to MTN informing them that that was the conclusion of negotiations over the terms for renewal of the licence.
Mutabazi communicated the same position to then-CEO Wim the following day, November 17.
Two days later, Wim wrote saying MTN was encouraged by the outcome of the meeting but appeared to through a spanner into the deal.
“As discussed and agreed in that meeting, in order to conclude the ongoing (Second National Operator) SNO-licence renewal discussions, MTN will pay a SNO-licence renewal fee of USD 20,000,000 upon the granting of the renewal of our current SNO-licence, as is, for 10 years, including the continuous right of use of the currently used spectrum,” Wim’s letter reads in part.
Wim noted that MTN was planning to make further investments into the network to meet the objectives of the new broadband policy and deliver in the longterm the required 4Mbps internet speed countrywide. He noted that they estimated to spend some USD200,000,000 in the next few years to achieve this.
Mutabazi was not happy. Six days later he replied MTN saying UCC was astonished that MTN was still raising issues that were already formally answered in the earlier letter.
Regarding the licence renewal fee to be paid, Mutabazi wrote, the Commission reiterated its position that was communicated in the letter of November 16, 2018, that after reviewing the key parameters, the Commission had agreed to revise the renewal fee from the initial USD 100 million to USD 58 million.
“The revised figure was communicated as the final amount that MTN was expected to pay as licence renewal fee, unless otherwise modified by the ongoing consultative process within government,” Mutabazi noted.
He added that the position presented by MTN in its letter of November 19, 2018 is not a true reflection of what parties had agreed upon; especially in so far as MTN claimed that the Commission had agreed to MTN’s proposal to pay USD 20,000,000 and obtain an extension of the 1998 SNO licence.
“We wish to emphasise that the renewal period shall be covered by the new terms and conditions,” Mutabazi’s letter reads, “which the commission has duly shared with MTN.”
Mutabazi also noted that the renewal process had been halted until the terms and conditions for the renewal have been harmonised with other government authorities.
EYALAMA has learnt that Mutabazi’s decision to halt the negotiations with MTN appears to have been influenced by intervention in the matter by Museveni.
Museveni argues that the US$58 that UCC has asked MTN to pay is too little.
“You ought to be aware that over the 20 years span during which MTN has been operating in Uganda, it has reaped vast profits most of which have obviously been repatriated. This is common knowledge derived from the company’s own declarations and from our own sources,” President Museveni wrote to UCC and ministry of ICT on October 28, 2018.
“Accordingly, the company’s obligation to sow where it intends to reap for the next 10 years; as well as its ability to do so, is and cannot be in doubt.
“I am, therefore, astonished by UCC’s proposal of a renewal fee of $58m, far less than the $100m it has originally set. I am even more intrigued by UCC’s decision to abandon original market expansion multiplier formula of 2.64 for 1.69, which obviously leads to a different result. What is the reason for this change of heart?” I am hereby directing both of you to protect the interest of both the country and investor by ensuring that you scrutinise the process and involve Finance and the tax matters. I expect a quick resolution and an update in 14 days.”
Apart from the licence fees, EYALAMA website understands that authorities are also keen to get MTN to list on the local stock exchange in order for locals to own a part of the company.
The National Broadband Policy 2018, which guides development of the sector, notes that listing of all telecom operators, on the local stock market, as a licencing condition will help on mitigation of capital flight among other benefits of local content development opportunities that come along.
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