Uganda bags $78m from Airtel in licence renewal payment, highest in the region

Saturday January 08 2022
Airtel Money staff

Airtel Money staff assisting clients make financial transactions as mobile banking services gained traction in Uganda. PHOTO | MORGAN MBABAZI

By Allan Olingo

Airtel Uganda paid the Ugandan government $77.79 million to renew its 20-year licence, its latest financial report shows.

The company also borrowed $4 million from Standard Chartered Bank to pay for its licence renewal in October 2020, the new disclosures in its full financial year ending March 2021 show.

This comes as the parent company, Airtel Africa, announced this week that it will spend $60 million to pay off its debt to the Tanzania government after bagging $159 million as part of the sale transaction of its telecommunications tower assets in Tanzania to SBA Communications Corporation.

According to its 2020 financial results, Airtel Uganda said it paid $77.78 million, in October 2020, to the Uganda Communications Commission (UCC) to renew its Public Service Provider License.

“The licence period covers July 2020 to July 2040. A payment of $77.78 million has been made for the period covering July 2020 and June 2030,” it said, pointing to the fact that it will have to make additional payments for the 10-year difference.

The revelation of the payment, the highest in the East African Community, opens the lid to how much telecommunications firms in the region are paying governments for their licences.


In June last year, the region’s largest telecommunication provider Safaricom and its consortium that included Vodacom, paid the $850 million licence fee needed to start providing telecom services in Ethiopia.

In 2014, it paid $20.16 million to Kenya’s Communication Authority as its 10-year licence renewal fees. In 2017, it paid a further $25 million for a licence to provide 4G LTE services

The payment of the licence fee by Airtel Uganda is also an indication that President Yoweri Museveni’s administration had backed down on its demand for the Airtel unit to list on the Uganda Securities Exchange (USE) as part of its licence renewal.

In September 2018, UCC said it will introduce a requirement for all telecommunications firms to list on the Uganda Securities Exchange as a condition for obtaining or renewing a licence to operate in the country.

“The UCC announced an intent to change the licensing framework in Uganda, which might include listing obligations and impact the licence fees payable and duration of the licence. Once the new licensing framework has been established, Airtel Uganda would be requested to submit an application based on the proposed framework,” the company said in 2019.

It added: “Although there is no legal or regulatory requirement for telecommunications operators to list on the Uganda Securities Exchange, the National Broadband Policy 2018, issued by the Ministry of Information, Communications Technology and National Guidance proposes the introduction of a requirement for all telecommunication operators in Uganda to list on the local securities exchange through an initial public offering,” the firm said.

Airtel is also set to pay Tanzania millions of dollars as part of the 2019 IPO settlement agreed with the John Magufuli administration, which saw its Dar unit exempted from listing on the Dar es Salaam Stock Exchange (DSE), the parent Africa unit revealed this week.

This was after Airtel Africa closed on its tower transaction worth $176.1 million. Under the terms of the transaction, Airtel Africa’s subsidiary in Tanzania will continue to develop, maintain and operate its equipment on the towers under separate lease arrangements, largely made in local currencies, with the Purchaser. With first closing, approximately $159 million of the proceeds for the transaction has now been paid, with the balance payable in instalments upon the completion of the transfer of remaining towers to the purchaser.

In 2019, the firm and Tanzania reached a settlement allowing its IPO to proceed on condition it co-operate in the sale of towers owned by Airtel Tanzania, and “proceeds distributed in a predefined manner towards repayment of shareholder loans to be retained in Airtel Tanzania, and balance distributed as a special one-time payment to Tanzania.”

Tax claim

Another part of the condition was that Airtel Tanzania would pay the government $26 million over 60 months, from April 2019 to April last year. Airtel Tanzania’s corporate tax loss for the financial year ended 2017 was also to be carried forward, and the TCRA fines treated as settled without any liability.

In its 2020 financial results, Airtel Tanzania disclosed that it paid $8.64 million to Tanzania for support services. It also revealed that Tanzania Revenue Authority vacated its tax claim of $874 million. It also revealed that it offered Tanzania a 49 percent shareholding at “zero cost’ in November 2019 worth $3.12 million, and payed the Dar administration a further $3.89 million for support services in the six months to December 2019.

Among the four countries it operates in, Airtel remained profitable in Uganda and Tanzania in 2020, with its Kampala unit posting a profit of $113.99 million, up from $88.9 million. The Dar unit saw its profits rise four-fold to $49.64 million up from $12.99 million while its Kenyan unit doubled its loss to $51.75 million in 2020. Airtel Rwanda narrowed its losses to $36.97 million in 2020, up from $51.59 million the previous year.

Airtel Kenya’s auditors also raised the red flag on the company’s financial health after it raised its cumulative losses to $678.53 million.

Airtel also saw its net liability position widen further to $383.05 million in the full year to March 2021, up from $331.15 million as of March 2020, pointing to its insolvent position.

“These conditions, along with other matters… indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern,” warned auditors Deloitte.

The company’s weak financial position is in sharp contrast to regional market leader Safaricom, which posted a record $601.92 million in the last financial year ended March 31, from $645.57 million the previous year.

Safaricom’s drop in profit came on the back of a decline in service revenue and increased costs in Covid-19 business environment, plunging the telco into the first full year profit fall since 2012.

The directors say they have obtained a commitment from its major shareholder to obtain additional funding to meet its obligations as they fall due.

Airtel Kenya has the highest shareholder loans of the regional subsidiaries of $45.75 million, and its director said that with this, there is “sufficient liquidity to manage its operations.”

These loans are from its holding company Bharti Airtel Kenya BV, and are supposed to be payable ‘’on demand’’ and are unsecured, carrying an interest charge of three percent per annum.

“The directors are of the opinion that the company is a going concern on the basis of it generating cash flows of at least the management projections and also obtain additional funding from its shareholders required to meet its obligations,” states the board in a note accompanying the financial statements.

The negative asset position means Airtel Kenya would have been unable to meet its financial obligations maturing this year, even if it sold all assets that could be readily liquidated.

“The directors acknowledge that the continued existence of the company as a going concern depends on the outcomes of various strategic measures that the directors continue to pursue to return the company to profitability and continued financial support from the company’s shareholders and bankers.”