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MTN@20; mixed feelings of pride and frustration

It is 20 years since MTN Uganda started doing business in Uganda. And what a journey it has been. JEFF MBANGA looks back at the impact the telecom giant has had on the economy.

From breaking the monopoly that Celtel Uganda enjoyed to spearheading the revolution that is the mobile money service, MTN enjoys a special seat on the table of giants that have transformed Uganda’s economy for the better.

The company’s huge investments have contributed to the economy on at least three fronts: tax payments to the country’s treasury; employment opportunities from within company and the numerous service providers; and deepening mobile telephony and financial services.

And yet, as the Uganda Communications Commission assesses MTN’s performance for the last two decades, special attention needs to be placed on the kind of company MTN is gradually becoming, and weigh the risks and opportunities that action comes with.

Playing second fiddle to Celtel Uganda, MTN Uganda embarked on a simple strategy – exploit Celtel’s laxity and make investments where few dared to venture.

It took MTN less than five years to dominate and cement its position as Uganda’s number one telecom company in terms of investments and network coverage. And the company has since then defended that position ruthlessly, using a take-no-prisoners approach.

While MTN’s business strategy is commendable, it is important to look at how aggressive the company has been and whether, along the line, it has also engaged in anti-competitive practices that stifle growth. This is because for a company the size of MTN, there is always a high temptation to choke other smaller players out of the market, and ultimately pay little allegiance to the regulator.

There are a couple of worrying examples. Let us start with issue of tax. MTN Uganda’s parent company, MTN Group, is structured in such a way where it shifts revenues made in fairly high-tax jurisdictions such as Uganda to the tax haven that is Mauritius.

There is an ongoing tax arbitration case where MTN Uganda was accused of hiring management services it did not need from MTN Mauritius. Uganda Revenue Authority accused MTN Uganda of using the trick as part of a plan to balloon its costs in Uganda and lower its tax bills.

When URA tried to further investigate the matter, it was frustrated by the insufficient information it received from MTN Uganda.

Although MTN Uganda is the biggest taxpayer in the country, it is important that it pays the right amount of tax. If MTN Uganda does not do that, the threat of this becoming a precedent then becomes real.

Then there is MTN Uganda’s anti-competitive behaviour. A recent March 2018 evaluation report on MTN Uganda, carried out by the Uganda Communications Commission, lists a number of companies whose businesses have been frustrated because of the South African telecom firm.

That frustration has been born out of MTN Uganda’s reluctance to agree to interconnection agreements. Being the largest telecom company in terms of subscribers in Uganda, new players tend to be desperate to sign up to interconnection agreements with MTN. By law, negotiations for interconnection agreements should take not more than three months after the application is made.

However, when One Solution Limited requested MTN Uganda for interconnection services, it took more than five months for a reply to come. It then took MTN Uganda more than two years to agree to One Solution’s request for interconnection.

Another company, Simbanet, had to wait for more than two years to have MTN Uganda agree to its request. Even then, it took the intervention of UCC to have the deal between the two companies signed.

Roke Telkom has not been as lucky. The company has been waiting for more than five years to have MTN Uganda agree to its request. There is no clear timeline when this will happen.

Another company, Ezee Money, also faced a similar brunt of being denied an opportunity to be hooked to MTN’s network.

In its defence, MTN Uganda, which has just under 12 million subscribers on its network, says the delays and rejections have been due to mainly two reasons: its network was not compatible with those of the applicants, and also it had a right to limit the financial risks it was taking on with these new players.

For example, in Roke Telkom’s case, MTN has declined to sign up to an interconnection agreement with the company because of an earlier separate incident where the company failed on its financial commitments.

Still, UCC says MTN’s reasons are not justifiable. Getting MTN Uganda to toe the regulatory line is important. The company is gradually becoming a huge financial institution as a result of its stellar mobile money service. Regulators such as Bank of Uganda have tweaked their monetary tools in order to mitigate the risks of inflation as a result of the huge volumes of money running through the mobile money system.

Another bigger risk is the issue of illicit funds. Now that it is easier to send money to MTN Uganda’s mobile money system through World Remit, the threat of the flow of illicit money becomes real.

This is where bodies such as the Financial Intelligence Authority come in. The FIA has to have the staff and the expertise to look into any financial impropriety that MTN Uganda might engage.

Twenty years after MTN Uganda came into the market, the company has the task of moving the market in a direction that casts the telecom industry in good light. Smaller players and the regulators hope that MTN Uganda can undertake this role with proper business practices.

jeff@observer.ug

Twitter:@jeff_mbanga

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