Vodafone in the Mix

Will firm challenge giants MTN and Airtel in Uganda’s telecom space?

Two important events happened on On Nov. 18. First, Uganda’s largest telecommunication firm, MTN, called an abrupt press conference at its headquarters on Hannington Rd in Kampala. An unusually big number of journalists turned up to capture the message from Chief Executive Officer, Brian Gouldie and other top company officials, despite the short notice and the late afternoon event.

“MTN has been in Uganda for over 15 years and the experience that we have can manage all challenges related to telecom business,” said Gouldie. The conference was called at a time when some of the company’s customers particularly on the data segment had threatened to petition the government over what they termed “poor services” offered to them by Uganda’s 15 year old telecom giant. Gouldie added: “At MTN, we listen to customers’ needs. If we didn’t, I wouldn’t be here talking to you.”

On the same day, the British telecom firm, Vodafone announced the signing of a memorandum of understanding with Afrimax to offer voice and data services in the country. Observers said MTN’s abrupt press conference could have partly been fueled by the Vodafone-Afrimax news. “You cannot rule that out,” said one observer, who didn’t want to be named. “Even if they are big players they cannot sit and watch their customers walk away to join other players.” Every CEO in Gouldie’s shoes would indeed feel the heat.

“Of course I feel concerned when we fail to meet customer expectations,” said Gouldie. He admitted that their data service has faced some challenges such as multiple data bundle activation failure, which led to multiple charges, delayed data bundle loading, failed activation, inaccurate data bundle billing among others. Officials said the company has 3.4 million customers on the data segment but only about 4, 800 were affected by the short-lived network problems. A serious competitor would definitely look at this as the best time to launch in a market dominated by giants.

The coming of Vodafone could potentially intensify competition in the market dominated by South Africa-based MTN with over ten million subscribers, and Airtel Uganda that boasts of slightly over seven million subscribers. The two payers control over 90% of the telecom market in Uganda, which has slightly over 18 million subscribers with the country’s tele-density recording at around 46%. But the other small players including Uganda telecom, OrangeAfricell, Smart and K2 have already given up hope of challenging the two big boys. Before selling out to Airtel, Warid Telecom had given the giants a good run for their money through a low tariff strategy but this severely dented its viability in the process.

Vodafone’s business strategists will surely take this scenario into account. Warid’s folding up did leave a competition gap in the sector, which probably resulted in the recent 0.5% increase in voice tariffs by MTN and Airtel. That is the gap that Vodafone wants to exploit. Already, Vodafone has a 40% shareholding in telecom giant Safaricom, which has 21 million subscribers in neighboring Kenya. The potential synergy between Vodafone Uganda and Safaricom would give any competitor a few sleepless nights but portends good times ahead for telecom services consumers.

Vodafone and Afrimax officials remain tightlipped about their market strategy until probably late December, according to a source privy to the operations of the companies, probably because they are yet to finalise formalities with the regulator, the Uganda Communications Commission (UCC). “We haven’t seen them,” Fred Otunnu, the head of communications at UCC told The Independent on Nov.21, “you ask them the details.”

Some analysts have argued that Uganda’s telecom market is “too small” to accommodate more than three or four big players like it is the case in other markets like Kenya, South Africa and Nigeria. But Otunnu said UCC is okay with the current number of players and that it is up to them to innovate, offer quality services and come up with new products to boost their business growth potential. Otunnu however did not rule out the fact that there might be more mergers and acquisitions in Uganda in case some players fail to break-even. He declined to elaborate.

Anthony Katamba, the head of legal and corporate affairs at MTN, also welcomed “serious” and “credible” competitors in the market. He suggested that Uganda’s telecom market has over the years had weak players because it was opened up too quickly compared to other markets say Kenya, Nigeria and South Africa. “These other markets have also opened up their markets but it is balanced,” Katamba said, adding that in South Africa they have three cellular providers, two fixed line operators serving a population of about 50 million. In Nigeria, they have four or five players serving a population of 120 million. In Uganda, we have seven operators serving a comparatively smaller population of about 35 million.

“In my opinion, I believe this market requires limited liberalization to make sure there are creditable, serious investors who are going to develop critical infrastructure and commit sufficient capital to be here for the long term.” In VodafoneAfrimax, the giants appear to have got their match. Officials said in a press release that under the non-equity framework agreement, Vodafone and Afrimax would explore potential partner market opportunities in a variety of territories in sub-Saharan Africa. Available information indicates that Vodafone is one of the world’s top telecoms with 434 million subscribers. The company has a primary listing on the London Stock Exchange and has a secondary listing on NASDAQ. The extent to which Vodafone will shake the market remains to be seen but already, many Ugandans are rubbing their hands in glee.

Source : The Independent

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