MTN Uganda in regulatory limbo as interim licence expires

Sunday January 20 2019

mtn uganda

A report by the Internal Security Organisation (ISO) to President Yoweri Museveni accused MTN Uganda of underdeclaring its call volume and actual profits, which it was allegedly repatriating without paying the taxman. FILE PHOTO | NMG 

CHARLES M. MPAGI
By CHARLES M. MPAGI
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On Sunday, January 20, the second interim licence for giant telco MTN Uganda will expire.

Last week on Friday, authorities were scrambling to avoid a regulatory vacuum as what was initially expected to be a routine process to grant a 10-year extension to the most successful telco in the country got bogged down by uncertainties over what it should pay the National Treasury.

MTN’s 20-year licence expired on October 20, 2018, prompting the regulator, Uganda Communications Commission, to grant it a 30-day interim licence after the Cabinet scuttled the process of getting a quick licence and demanded a review of the telco’s operations.

The market leader was accused of underdeclaring its call volume and therefore not paying its fair share to the taxman, a charge it denied.

Last year, Minister of Information and Communications Technology Frank Tumwebaze told The EastAfrican that the Cabinet would make a final decision on the licence.

This came as UCC released a favourable report on MTN, recommending renewal of the licence after conducting public hearings.

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The regulator said the licence would be renewed subject to new conditions, key among which was listing on the local bourse to give citizens a chance to share in the telco’s profits.

However, MTN faced a bigger problem: A report by the Internal Security Organisation (ISO) to President Yoweri Museveni accused the telco of underdeclaring its call volume and actual profits, which it was allegedly repatriating without paying the taxman.

It is understood that following the report, President Museveni showed keener interest in the licensing process, keeping tabs and exerting pressure on the minister to get a better deal.

President Museveni sent a letter to Mr Tumwebaze demanding an explanation about why the licence fees for MTN were initially estimated at $100 million but had been nearly halved to $58 million.

This prompted issuance of a second interim licence extension to MTN running for 60 days from November 20 until January 20.

With the deadline looming, Mr Tumwebaze told The EastAfrican that, “We will not allow a regulatory vacuum to disrupt their operations. The regulator will find an appropriate way within the law to allow them to run their operations smoothly.”

“It will be renewed, no problem,” said UCC executive director Godfrey Mutabazi, adding, “We cannot frustrate such a big investor,” and that there was “nothing holding back” the licence.

Market share

MTN dominates the Uganda mobile telephone market, boasting more than half of the country’s total subscribers, estimated at about 22 million.

But The EastAfrican understands that the Ministry of Finance, which participated in an initial meeting with the Attorney General and the ICT Ministry, was yet to revert with a position on the right fees.

This failure prompted Mr Tumwebaze to write a response to the president, explaining the discrepancy in the licence fee.

The December 14, 2018 letter to the President, a copy of which The EastAfrican has seen, explains the rationale for the lower licence fee.

It was intended to free up the process even as the finance ministry comes up with a technical evaluation of what should be charged.

“Following the advice to involve the Ministry of Finance, I requested the Minister of Finance to designate competent officers on the correct formula for computation of the license fees since the law on telecoms regulations [UCC Act] is not clear on the same,” Mr Tiumwebaze wrote.

In their response to the president’s letter, UCC said the figure of $100 million was only proposed as a basis for negotiations with MTN and was not definitive.

“Please find attached a report detailing the basis upon which the Commission recommended the initial figure of $100 million and the revised renewal fee of $58 million.”

New policy

Apparently, MTN complained that the figure was too high because they would be required to invest an extra $200 million to meet the requirements of the new policy including delivering 3G coverage across the country and at least 4G network in urban areas.

The new policy also requires all telecom providers to provide free national roaming, where a subscriber does not have a signal, but another network is present.

“In accordance with the national broadband policy, MTN’s capital investment is expected to increase by $200 million in the sector within the first 24 months of renewal of the licence. This is over and above the average $80 million for their normal business capital investment,” Mr Mutabazi wrote.

“The commission also benchmarked the revised fee against other countries in East Africa and other parts of Africa. Kenya, Rwanda and Tanzania charge licence fees of $27 million, $500,000 and $800,000 respectively,” he wrote, “the commission believes that the revised renewal fee of $58 million represents a reasonable value for a 10-year licence.”

No licence had been issued by the time of going to press and weekends are not official working days in Uganda.

In his letter, Mr Tumwebaze said consideration was also given to the requirement for parity when licences of other telcos come up for renewal.

“The purpose of this brief, therefore, is to update Your Excellency on the actions we have taken and to also inform you that the Attorney General and myself are waiting for input from the Ministry of Finance. Thereafter, we shall present our final recommendations on the matter for final resolution.”

Mr Tumwebaze proposed that for the country to gain and at the same time encourage further investments, the telco should be granted a longer-term licence of 15 to 20 years instead of 10 years.

MTN declined to comment on the matter, instead referring The EastAfrican to the regulator.

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