Telecom Firms in Uganda sell Assets to Cut Operating Costs

23-March-2012

Telecom firms are offloading their network infrastructure to other players to ease the financial burden that these assets bring, and offer a clear signal to mobile phone subscribers who have lately grown impatient with dropped and blocked calls. Orange Uganda and WARID Telecom have sold their assets to Eaton Towers, while MTN Uganda is preparing to relinquish its infrastructure to American Towers Corporation any time from now.

Our sources say Eaton Towers is also holding discussions with utl to take over its assets, while it is not clear whether Airtel will look for another operation considering that it already enjoys a partnership with Nokia Siemens, which manages its assets.

These decisions are driven by the need to save money. While telecom companies do not publish their financial accounts for the public, a few indications within the industry, such as the tax they pay and the revenue they contribute to Government's Rural Communication Development Fund, point to financially straining times.

And the Quality of Service surveys by the Uganda Communications Commission show that none of the five big telecom firms has a network that is free of dropped or blocked calls.

This is where the likes of Eaton Towers and American Towers come in. According to the details, Orange Uganda signed a 15-year deal that is "focused on both the outsourcing of the operation and maintenance of existing sites and providing build-to-suit for new sites with a view to reducing both operating costs and capital expenditure."

Philippe Luxcey, CEO of Orange Uganda, says: "The partnership will enable us to expand our network and develop new multimedia services, in particular in rural areas, helping us achieve our ambition to provide the Ugandan population with the best network coverage and high-quality services. Through this agreement, we will be able to reduce our operational costs and, at the same time, prevent the proliferation of masts, thereby reducing the environmental and visual impact of our network, especially in urban and ecologically-sensitive areas."

WARID has offloaded 394 towers to Eaton Towers. Warid Telecom Uganda and Eaton Towers expect to close the sale of existing towers in the first half of 2012, subject to customary closing conditions," notes a press statement from WARID.

Sriram Yarlagadda, the CEO WARID Uganda, says in a press statement: "This transaction will reduce our long term infrastructure costs and help us focus on our core business of providing affordable communication service to our customers."

The competition within Uganda's mobile phone market has become intense, with the telecom companies engaging in price wars at the expense of generating revenue. The country has roughly more than 10 million customers. However, the next battlefront is likely to be in the kind of services customers can enjoy over the phone. The inception of money transfer services over the mobile phone is turning out to be a competitive front.

MTN, with its mobile money product, has taken the market by storm, but the product has been shortchanged with heavy network interruptions that have left customers frustrated. WARID Telecom, around the time MTN was having its network problems, jumped into the market, and promised to fill the void with its WARID-Pesa through its ticklish advertisements that appeared to hit at MTN's poor network service.

Utl, which has been quiet for about a year, at least finds time to blow its trumpet with its M-Sente product, which is also a money transfer product. Attracting customers will come down to who has the best network. Eaton Towers says it has big plans for its Africa operations. The company acquired a $150 million of private equity funding from Capital International Private Equity Funds to improve and widen its Africa operations.

The company already operates 800 telecom towers in Ghana. American Towers Corporation has been in Uganda less than a year. According to the company's website, it operates at least 39,000 sites worldwide.

The Observer Newspaper