MTN Uganda in its sights
Like UTL, MTN owns a license to operate both fixed-line and mobile networks in the landlocked East African country.
Telkom confirmed this week that it was in talks with Ucom, which owns a controlling 51% stake in UTL (the remaining 49% is held by the Ugandian government).
Ucom’s majority shareholder is SA-based Telecel International, a subsidiary of Egypt’s Orascom Telecom.
Newswire Reuters this week quoted UTL chief commercial officer Hans Paulsen as saying that Telkom and Ucom had not yet been able to agree on a price. Ucom shareholders are understood to be entertaining offers from other parties.
Telkom says in a statement that it has been following a “detailed evaluation process to ensure that this opportunity is a strategic fit, all risks and resource requirements are understood and that the potential returns exceed our minimum requirements”.
Telkom’s pursuit of a stake in UTL, which operates fixed-line and mobile networks in Uganda, is in line with the group’s stated intention of expanding elsewhere in Africa to offset lackluster growth in its SA fixed-line business.
It is not clear whether Telkom will work with the 50%-held associate Vodacom should its bid for Ucom succeed, but it will need all the help it can get if it is to tackle MTN Uganda successfully. MTN has almost two-thirds of the Ugandan mobile market. UTL and a third Ugandian mobile operator, owned by Celtel, have just 35.5% of the market between them. The industry is also highly competitive – evidenced in MTN’s average revenue per user of only US$12/month.
Telkom has no experience in operating a mobile network and it would be logical for it to seek Vodacom’s assistance.
Vodacom chief communications officer Dot Field says the cellphone group “cannot comment” on whether it has held discussions with Telkom.
In the past, relations between the two companies have been poor but Telkom CEO Papi Molotsane has pledged to work more closely with Vodacom than did his predecessor, Sizwe Nxasana.
If Telkom has chosen to go it alone in Uganda, it could indicate that relations are still icy.
Though Uganda’s mobile market is highly competitive, the fixed-line market still looks like a lucrative proposition. At the end of September 2006, Uganda, which has a population of 28m, had only 117 000 fixed-line users (compared with 2,4m cellphone subscribers).
Internet penetration is even lower, in part because of the high costs associated with carrying international bandwidth. Because Uganda does not have access to a submarine cable system, it has to rely on expensive satellite links to provide Internet access.
With at least one international cable system expected to come on stream by 2009, there is the potential for strong growth in broadband.
On the downside for Telkom, the Ugandan telecom market is set to become much more competitive in the next few years. UTL and MTN recently lost their state-sanctioned duopoly over national telecoms services. The Uganda Communications Commission is expected to begin issuing new licences soon.
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