Q1 Review : Price Wars, Mobile Money Fraud take Toll on Telecom Sector.

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Our Reporter.

As is everywhere in Uganda’s business environment, the first two months of 2018 have not been rosy for the telecoms sector.

It is increasingly becoming clear that MTN Uganda and Airtel and entangled in a war of prices for both data and voice services.

On the side are smaller players trying to survive in a high operation-cost environment. While the likes of Africell are fighting on, it is increasingly likely that Smart and K2 telecom are quietly bowing out of business while Afrimax has officially kicked off an insolvency process.

In February, Afrimax (Vodafone) filed for bankruptcy, having failed to break even in Uganda’s highly competitive telecoms industry.

On February 15, Vodafone posted a statement on their website, www.vodafone.co.ug , announcing a Provisional Administrator Manager.

“Dear customers, this is to inform you that the directors of Afrimax Uganda Limited T/A Vodafone Uganda recently appointed a Provisional Administrator Manager, Mr Donald Nyakairu, who has been charged with restructuring and reorganizing the company in a bid to improve commercial and operational efficiencies.”

In the interim transition period, the statement added, customers will experience a temporary deterioration in the quality of network services as the Administrator implements the required changes and negotiates with suppliers.

“We apologise in advance for any disturbances and inconveniences caused and reassure all customers that any unused data will be reimbursed once our network is fully restored,” the statement read further.

Afrimax entered the Ugandan market less than four years ago, with a specialization in data provision.

Unfortunately, there was hardly room in the market and the company could hardly penetrate the data market. The cost of doing business was unbelievable and company struggled with very few customers.

Experts have attributed Afrimax’s demise to an unfair playing ground where bigger companies have used price wars to crowd out smaller firms.

Just as has been the case, Uganda has a duopoly (MTN and Airtel) when it comes to provision of telecom services. It is increasingly becoming impossible decision for any new telecom company to enter Uganda’s telecom market under the current conditions.

For instance, while the likes of MTN and Airtel have a nationwide coverage, Vodafone only operated in greater Kampala.

PRICE WARS.

Price wars were first introduced by Warid Telecom (now Airtel) in the late 2000s with their pakalast packages.

This trend has since gone on to spread in to the data market with big players Airtel and MTN fighting to outprice each other in what is becoming a two-horse race.

At the start of this year, Airtel announced a 3G network countrywide upgrade that will cost over Shs 180 billion. On the same day, it introduced on to the market a new internet proposition in which it cut data bundle prices by more than 50 per cent.

“Currently, 154 new sites are being rolled out. An additional 165 sites are under implementation with an objective to enhance rural capacity and coverage thus providing an unmatched internet experience to our customers. We also have the new ‘Data Blasta’ bundles priced to meet the different needs of all Airtel customers, whether daily, weekly or monthly,” VG Somasekhar, the Airtel Uganda managing director said.

In February, MTN responded in equal measure as it slashed its data rates by ‘over 100 per cent’.

“What we are currently witnessing is data revolution coming into full swing. The reduction in pricing is by 100%, indicating our commitment towards internet Connectivity and affordability for all,” said Wim Vanhellaputte, MTN Uganda CEO, while launching the data promotion.

“It is important that our customers not only get lower rates, but also experience a good quality network – where we are keen to continuously invest; everywhere. MTN Uganda over a two year period of 2017 and 2018 has budgeted over Shs 400 Billion invested in network upgrades in order to improve customer experience,” he added.

As one expert said, in the long run, we are likely to see both MTN Uganda and Airtel Uganda have the same prices, although this might not be intentional, as they try to maximize profits.

Away from these two market leaders, Africell continues to compete for the data market with its Don’t Be Cheated data product growing in popularity among the young and youths thanks to its lowered pricing too.

And this state of affairs only spells doom for the likes of Afrimax who do not have the capacity and reach of the big boys in the sector. Their only option is closing shop, unfortunately!

MTN Uganda CEO Wim Vanhelleputte (left) addresses the media at the MTN CEO Briefing held at MTN Towers on Tuesday 20th February 2018.

MTN PULSE

To tap into the youthful generation, MTN introduced MTN Pulse recently. MTN Pulse is described as a community built for the young Ugandans to give them the power to be themselves, unleash their full potential and live life with #NoFear.

Through this initiative, MTN looks to empower the youth, with data bundles, music streaming, video uploads, games and career placement and advice among others.

One can join this community by simply dialing *157# and follow the prompts, or by visiting the MTN Pulse website to register.

Vanhelleputte, MTN’s chief executive officer, said that the brand is as old as most of the young population in the country, a reason for the decision to customize products and solutions that are appealing to the youths and those that they can identify with.

“Young people want to be creative. They want to communicate. The Fear Of Missing Out – FOMO can be real. MTN Pulse will be able to allow them do gaming, listen to music, create sharable video content, get the latest updates to parties and offer data bundles that suit all their plans,” he said

Olivier Prentout, the Chief Marketing Officer for MTN Uganda, stated that for the first time ever, there will be a weekend bundle that can only be accessed through the Pulsers community code of *157#.

“We understand that the weekend is filled with activities that must be shared. Those moments can now be shared with an affordable youth friendly weekend bundle,” he said.

The launch of MTN Pulse marked the conclusion of a month-long teaser campaign called #NoFear.

During the campaign, MTN had several of its billboards in Kampala ‘defaced’ and sprayed with the words #NoFear in what was viewed as a bold, fearless act of expression, which are desirable traits sought in the Pulsers’ movement.

Whether MTN Pulse will be impactful remains to be seen as its predecessor – MTN Holla Life; even with its unmatched offering, had a premature death.

AIRTEL SUED FOR 13BN

Still this year, Airtel has been dragged to court for allegedly failing to pay commission worth more than Shs13.5 billion to a businessman who brokered the sale of Warid Telecom to Airtel.

In the case before the Commercial Court, Mr Wissam K. Fawaz contends that $3.7m (Shs13.5bn) amounts for two percent of $186.4m (Shs676.4bn), the value of Warid telecom’s assets in Uganda that were acquired by Bharti Airtel Limited.

Through his lawyers, Mr Fawaz is also claiming for the interests at a rate of 10 percent per year from May 2013 till full payment, general damages and legal costs incurred.

Fawaz says he brokered the sale of Warid to Airtel and deserves his share which was agreed upon during negotiations.

According to media reports, Airtel was summoned on January 3, 2018 to file its defence within 15 days upon receipt of the complaint.

But on January 5, Airtel Uganda Limited wrote to the lawyers of MMAKS Advocates declining service of court documents, because the company is neither an appointed agent of Bharti Airtel Limited nor party to the court proceedings nor indebted to Mr Fawaz.

MTN License back and forth.

Application for renewal of a National Telecommunication License by MTN Uganda Limited continues to be discussed at length. While it is expected that MTN’s license will be renewed considering the telecom’s massive contribution to Uganda’s development, several issues continue to come up that MTN just like other telecoms must urgently address.

“The Commission shall issue to MTN Uganda Ltd an Evaluation Report on or before the March 13, 2018 and the same shall be a matter of public record at the Commission. A public hearing shall be conducted on Monday, March 26, 2018 at the Uganda Communication Commission’s Conference Hall, located at Plot 42-44, Spring Road, Bugolobi, Kampala starting at 10:00am,” UCC recently noted.

Mobile Money and Sim-Card Registration Fraud.

While all this is happening, the biggest elephant in the house for telecoms is Sim Card registration and swapping problems that grow by the day. Several reports of criminals using sim cards to defraud unknowing customers including members of parliament and ministers are on the increase. But that is not all, criminals are using registered sim-cards to ‘kid-nap and harm’ Ugandans.

In the face of these challenges, Uganda Communications Commission (UCC) has since issued strict instructions to all sector players on how to mitigate mobile money fraud and issues related to sim-card registration. This issue is expected to top telecom discussions in the second quarter of 2018.

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