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Libyan partners abandon broke Uganda Telecom Ltd

Friday March 10 2017

Significant differences emerged between Uganda and Libya during a recent shareholders meeting, leading to a falling out over the troubled Uganda Telecom Ltd, leaving Kampala with the cash-strapped company and no money to turn it around.

The EastAfrican has learnt that the shareholders failed to agree on modalities to raise the capital required to revamp the company. The equally cash-strapped Ugandan government had proposed a debt swap for equity while the Libyan shareholders wanted each partner to inject actual finances into the company.

A preliminary report by a parliamentary select committee that is investigating UTL operations reveals that the company owes the government and private sector entities over Ush700 billion ($197 million).

It owes the sector regulator Uganda Communications Commission Ush22.2 billion ($6.25 million), arising from unpaid spectrum fees, and also owes the Uganda Revenue Authority Ush58.4 billion ($16.4 million) in back payments of pay-as-you-earn, value added tax, withholding tax and excise duty.

“Right now, we need $48 million to take us to another level,” said UTL’s managing director Mark Shoebridge.

Close to 40 per cent of the required funds will go into upgrading UTL’s infrastructure. Its rivals MTN and Airtel are operating 4G technology while UTL still operates on 2G technology.

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Without divulging details, Finance Minister Matia Kasaija said last week at a press conference that the government was going to repossess all the Libyan shares, making Uganda a sole shareholder. That decision follows a year of discussions that led to what is being termed as a turnaround strategy. The strategy was due for approval this month and shareholders agreement was to have been signed.

“As we were about to sign, the Libyans got upset over matters that I cannot divulge and Libyan Posts and Telecommunications Company (LIPTIC) informed us that they were not interested in the business, instead of negotiating as the case is when partners fail to agree on issues,” Mr Kasaija told The EastAfrican.

Until last week, UTL was owned by LAP Green and the Uganda government. LAP Green — Libya’s telecoms investment arm in Africa and one of Muammar Gaddafi’s legacies — had the majority share of 69 per cent while Uganda government owned 31 per cent.

The falling out comes two years after the two countries agreed to raise the money needed to recapitalise the ailing telco and to revitalise all other businesses in which Libya has a stake. These include Lap Textile Company and National Housing and Construction Company.

In 2015, a LAP Green delegation headed by Libya’s Foreign Affairs Minister Mohamed Al-Dairi met with Uganda shareholders led by President Yoweri Museveni to discuss rescue plans for the companies, starting with UTL.

“This visit is within the framework of development and consolidation of relations between the two countries and our knowledge of the regional role played by Uganda and the role of President Museveni in Uganda, East Africa and beyond. Therefore, Uganda deserves our continued attention,” said Mr Al-Dairi in a joint statement issued after that meeting.

That position was however abandoned on February 25, 2016 after a meeting of Libyan shareholders resolved to terminate the partnership. 

Besides modalities to raise finances, the question over who the bonafide Libyan shareholders were became sticky. Official records show these to be LAP Green, but along the way, Libya Posts and Telecommunication took over, and even wrote the terminating letter.

Currently, Libya has two governments following the coup in which Gaddafi was killed in 2011. One government sits in Tripoli and another in Benghazi. It is unclear who is in charge of foreign operations. Concerns have been raised that Uganda could have been dealing with unscrupulous representatives all along.

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