Regulator sets strict conditions before Africell leaves Uganda

By JULIUS BARIGABA

Africell Uganda not only seeks to end its loss-making and indebted activities, it has less than a month to find the money to meet the difficult exit conditions set by the sector regulator, in particular by paying its creditors before the official liquidation of the company. operations on October 7.

East Africa learned that in June, the struggling telecommunications operator approached the Uganda Communications Commission (UCC), asking for advice on how to exit the market after seven years in business.

“We have been discussing the exit plan since June,” UCC spokesman Ibrahim Bbosa said. “The commission guided the process, but gave them conditional approval. “

The UCC says that one of the highest conditions is that Africell start paying its creditors and submit a progress report on the company’s accumulated debt and liabilities to the regulator, at least 30 days before the due date. agreed exit.

But while creditors still haven’t paid Africell less than a month to shut down its business operations, the regulator now wants Africell – already heavily indebted by its own debt and the one it inherited – to take letters. credit to clear all outstanding arrears by the day of discharge.

Much of its debt consists of unpaid interconnection charges the company owes to other operators, MTN and Airtel, as well as some of the smaller telecoms in the market. The other significant portion of the debt is its unpaid levies on users of American Tower Company and Eaton Towers, the major telecom network operators who in 2019 threatened to take Africell offline for outstanding arrears amounting to to billions of shillings.

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Officials from MTN, Airtel and the tower companies all said East Africa that Africell has not yet paid the money it owes but would not disclose the amounts or the length of time they were not paid, citing nondisclosure clauses in contracts.

Sources say Telecom started approaching local banks in July for money, but due to its fragile balance sheet it made no progress and turned to its parent company for the letters. credit. However, they say it didn’t work much because the Central Bank didn’t receive any letters of credit.

Just four years after starting operations in Uganda, the company was in debt of US $ 258.3 billion ($ 72.7 million), more than double its total revenue in 2018, according to its audited financial statements for the year. At the same time, the company had accumulated losses amounting to US $ 1.5 trillion ($ 427 million), most of which had been inherited from French mobile operator Orange, the company from which it had acquired. operation in 2014.

Not a running business

In mid-2019, Africell Holdings secured a $ 100 million line of credit from the US Overseas Private Investment Corporation (OPIC), to finance infrastructure investments for its operations in Uganda, Democratic Republic of the Congo, in The Gambia and Sierra Leone, Reuters reported.

Africell Group Founder, CEO and Chairman Ziad Dalloul said OPIC money would be used to expand fintech services such as mobile payments, microinsurance and microfinance.

A subsidiary of Lebanese company Africell Holdings, Africell Uganda acquired a majority stake in Orange Uganda and resumed operations in 2014, inheriting approximately 620,000 customers. The company has since grown its subscriber base to 1.2 million, according to UCC records.

The 1.2 million customers, however, only represent 4.2% of Uganda’s mobile subscriber base, reflecting stagnant market share and Africell’s inability to shake MTN’s duopoly. and Airtel.

Africell sought a buyer to resume its activity and facilitate its exit, but was unable to attract local competitors or offers from operators based abroad because “the company is no longer in activity”.

It has also failed to migrate its customers to an established operator’s platform, and on October 7, its 1.2 million subscribers will be transferred to ISP Blue Crane Communications to manage their transition. .

Meanwhile, after its operations cease, Africell’s mobile frequency and spectrum will be returned to UCC, while network tower sites will be returned to third parties to whom they are leased, the company said.

The regulator says the company must comply with data protection and privacy law while it transfers customers to Blue Crane, and also dismantle its network in accordance with the national environmental protection law.

“Our network technology equipment will be transferred to the extent possible within the Africell Group, maximizing value for Africell’s Pan-African customer base and minimizing waste,” the company said.

Speculator problem

With a spectrum license and a stable corporate customer base for fixed Internet, Africell’s exit and inability to find a buyer has baffled industry experts who say the industry still has room for operators with strong niche products.

“We have all kinds of services in the industry, and over 5,000 towers, but that’s not enough for the growing demand for cellular services,” said Charles Nsamba, public affairs manager at ATC.

Africell Uganda acquired and took over the telecommunications operations of Orange Uganda in 2014, under a $ 12 million deal, but the company announced on September 7 that it was exiting the market.

“Africell UG is terminating all mobile network services in Uganda. By October 7, current Africell UG subscribers must close their accounts and switch to alternative mobile providers. Africell UG provides support and guidance throughout this process, ”the company’s website announced.

In a statement to its employees, Africell said that in a country with a mature and competitive telecommunications sector – an inference to the big market players MTN and Airtel – there is little capacity for small players to scramble for customers and deliver digital transformation. of the society.

“We believe that the possibility of achieving this impact is increasingly limited. We have therefore taken the difficult decision to permanently end Africell UG’s operations in Uganda.

Analysts say that apart from established players such as MTN and Airtel or even Uganda Telecom Ltd – until it ran into operational and managerial difficulties after 2011 – the smaller operators who entered the market in the mid-2000s fell victim to speculators.

“Influencers were given spectrum they hoped to sell and went looking for buyers at a time when the big players were still investing. It took a lot of money since everyone was building their own infrastructure, ”said one analyst, who preferred anonymity.

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