Tough times ahead as Vodafone files for bankruptcy in Uganda

Saturday February 24 2018

Vodafone Uganda has filed a petition for insolvency as it attempt to revive its business. PHOTO | AFP

Vodafone Uganda has filed a petition for insolvency as it attempt to revive its business. PHOTO | AFP 

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British telco Vodafone’s two-year attempt to break into the competitive Ugandan market has proved difficult, and pushed the firm to court to seek bankruptcy protection.

The High Court Civil Division in Kampala issued a protective order on February 15, enabling the ailing company to explore options for business recovery. The same order confirmed the appointment of Donald Nyakairu as the company’s provisional administrator.

Vodafone Group Plc is one of the world’s leading telecommunications groups, with a significant presence in Europe, the Middle East, Africa and Asia-Pacific through the company’s subsidiaries, joint ventures, associated undertakings and investments.

In Kenya, the company last year sold the bulk of its stake in Safaricom to its majority-owned South African subsidiary, Vodacom Group Plc.

4G data services

Afrimax Group and Vodafone Group merged in 2015 to form Vodafone Uganda.

The merger was remarkable with the launch of 4G data services.

The company filed an insolvency petition before the High Court. This a legal procedure that enables it explore the possibility of either winding up or reviving the business without undue pressure from creditors.

“I have been appointed by the directors as an independent professional to manage the company and look at its financials for the next three months. One of the mandates is to determine whether the company can be maintained as a growing concern because at the moment it is unable to pay its debts,” Mr Nyakairu told The EastAfrican.

“We are saying that instead of going into liquidation, we should study the extent of its indebtedness and see how to take care of creditors and workers.”

The EastAfrican has learnt that the administrator is exploring a third option — attracting new investors after ruling out problems with market saturation.

Vodafone came into play when market leaders like South Africa’s MTN, Africel and were long established in data provision services in Uganda.

“I am working on a business rescue plan, part of which involves engaging with investors interested in taking over the company. We already have consortium of investors who might be inclined to take over the debts,” Mr Nyakairu added.

While the company reorganises, the public which was already used to the fast 4G LTE network could experience problems accessing the services.

Rescue plan

A public notice put out by Mr Nyakairu informs all creditors of the company that a meeting of creditors has been scheduled for March 12, 2018, at the company’s offices in Kololo.

“The creditors will consider my appointment as provisional administrator, my proposals to restructure the business and execute a debt management plan as well as a decision whether the company should continue with the administration process, be wound up or go into liquidation,” he says.

Even though Vodafone is a private company, sources at the Uganda Registration Services Bureau, the body that registers companies in the country, told us that they will play a supervisory role in the process.

A quick look into the company’s operations, according to the provisional administrator, reveals high operational costs. Bringing down the costs, he added, would require restructuring the company.

Besides that the company had poor coverage as opposed to its competitors. This is unlike the case in Zambia where the company’s operations are successful.
Vodafone sold its interests in Ghana.

In its bid to expand, Vodafone had also ventured into voice telephony services through a national roaming agreement with Uganda Telecom and Smart Telecom.

“We should stabilise the company again once the investors come on board,” said Mr Nyakairu.