TMCnet - World's Largest Communications and Technology Community



Higher Call Rates
[August 18, 2014]

Higher Call Rates

(AllAfrica Via Acquire Media NewsEdge) Many Airtel or MTN subscribers might not be aware as yet that their calls now cost more. Yes, the tariffs have gone up this time - not down - as the case used to be just about a year ago. The two dominant players, who together control the industry with about 95% - approx.17 million of the 18 million subscribers - have all increased their voice tariffs on the per second package. Airtel's increase took effect on July 30 while MTN's did on Aug.1. MTN is now charging Shs 5.5 per second (Shs 330 per minute) for on-net calls and Shs 6 (Shs 360) for off-net calls.

Airtel, on the other hand, increased to Shs 5.5 per second (Shs 330 per minute) for both on-net and off-net calls. The other players; UTL, Orange, Smart and K2 are yet to follow suit. But even if they don't, the big boys don't appear to care too much because there is no chance that they will threaten the customer base of MTN and Airtel, anyway. UTL is not far off anyway; it still charges Shs 5 per second (Shs 300 per minute) for both on-net and off-net calls.

Orange charges Shs 4 (Shs 240) for on-net calls compared to Shs 7 (Shs 420 for off-net calls). K2 charges approx. Shs 1.6 per second (Shs 100 per minute) for on-net and Shs 240 for off-net. Smart telecom, the newest entrant, charges about Shs 74 per call - irrespective of whether it's on or off net and for as long as the call lasts for about 30 minutes.

But how come only two out of six players increased their voice tariffs and the rest did not? "The two are the drivers of the sector on all fronts," said an industry player of a small telecom company, they assume - and maybe they are right - that no customer will leave because of the increase, the player added, it could be a planned move.

Anthony Katamba, the head of legal and corporate affairs at MTN, told The Independent that they did not increase because they control the market but in response to the rising cost of doing business.

"The cost of most of our imports has gone up because the shilling has been depreciating for the past months," Katamba said.

For most of June and July, the unit has been trading at over Shs 2,600 against the dollar compared to a period before.

Bank of Uganda's monetary policy report for June indicates that the local unit averaged Shs 2,532.39 to the dollar in May, which presents an exchange rate appreciation of 2.1% on an annual basis, but a depreciation of 0.1% on a monthly basis. Katamba said heavy investments in the telecom sector are being threatened by the weaker shilling.

Similarly, Arindam Chakrabarty, the Airtel Uganda chief commercial officer, told The Independent in an interview that investing in the telecom sector in Uganda has become very expensive and that a volatile economic environment would always force operators to adjust tariffs to be able to sustain their operations. The Uganda Communications Commission (UCC) says operators consulted them before they adjusted the tariff.

"They gave us the reasons and we accepted them to adjust," Patrick Mwesigwa, the commission's acting executive director, told The Independent on Aug.8.

But other analysts say following the exit of Warid from the scene, what we have now is a near duopolistic market, and the two dominant can now agree to adjust prices upwards without any fear of reprisals from the competition. With UCC also seeing no problem with the new rates - the regulator always argued that the low tariffs were not sustainable - for now, the consumer will have to be content with the status quo, until another 'Warid' shows up. For the five years Warid Telecom was in the market, it sparked an intense price war, which saw an average tariff on per second package drop to Shs 2 from over 5. Will the market ever get another 'Warid?' Well, that is the question, and it could be answered soon.

Africell pointed out The Independent has been told by sources that West Africa-based Africell that bought Orange Uganda's shareholding of up to 60% early this year, is ready to roll out and that top executives such as the chief executive officer and the chief operating officer are already in the country ready to get as many Ugandans as possible talking - more cheaply.

The current top management will soon wave their good byes. It is said that the France- based company's unit in Uganda failed to break even since 2009 when it launched in Uganda although it was a market leader in the mobile data segment for a long period of time.

Africell is expected to pick up the company's 0.6 million subscribers and try to turnaround operations and make some money.

Sources said the company plans to apply the tricks it used in The Gambia and Sierra Leone and recently in DR Congo to quickly take a big bite of the market share in Uganda's telecommunication space.

This could come to pass but at a cost. At the end of 2012, the company launched business in DR Congo market with a strategy of offering free-on-net calls, which upset the existing operators - Airtel DRC, Vodacom DRC, Tigo DRC and Congo Chine Telecom (CCT) - forcing them to deny the company interconnection to their networks. But it refused to back down. After about one year and six months, Africell DRC counts 5.3 million active subscribers out of around 23 million subscribers - enough to get it to the market breakthrough line. If that is the strategy Africell has for Uganda as well, then the market is set to get big ripples.

UCC Executive Director Godfrey Mutabazi told The Independent by telephone on Aug. 8 that they were still doing due diligence on the Africell deal and once they are done they will announce to the public.

More tariffs wars Airtel's Chakrabarty worries that having more than three players dominant players will unleash a new round of tariff war, which he fears could cause further drops in telecom revenue and subsequently in taxes to the government. However, he suggested that a new comer cannot give Airtel a sleepless night because; "From our point of view, we see opportunities, consolidation and a favorable investment climate for investors in future." When asked about the competition likely to come from Africell, MTN's Katamba said the market has six players but MTN has continued to grow its market share and the curve won't grow downwards any time soon. "We will stick to what we know and I am sure we will continue to grow," Katamba said confidently, adding; "We will focus on offering quality services while heavily investing in the network." However, as if to caution new comers not to be overambitious, Katamba said with only about a half of the population being telecom subscribers, the market remains unprofitable, "which is why you saw Warid and Orange quitting." He suggested that we are likely to see another consolidation in the future as "the market will continue to weed out the weak players leaving behind the strong ones." Katamba could be right. Over the last few years, sector revenues have moved from voice to data segment and mobile money. Revenues from SMS continue to dwindle as many subscribers shift to online personal communication social media such as Facebook and Twitter. To compensate for the lost revenue on the voice segment and SMS, MTN has put more focus on mobile money and mobile data.

In its group results for the six-months up to June 2014, MTN Uganda's mobile money recorded a 20.7% increase in registered users from December 2013. At end-June 2014 it had 6.2 million users. Revenue from the segment grew by 39.4%, supported by an expanded agent distribution network of over 30, 000 merchants and monthly transaction volumes of over 28.5 million.

It increased its subscriber base by about 13% to 9.9 million and increased market share by 3.3 percentage points to 56.8%. The consistent focus on bundled and segmented offerings across voice and data underpinned the growth. Total revenue increased by 6.8%, benefiting from a 54.7% increase in data revenue.

The data segment contributed 24.7% to total revenue, supported by increased investment in the 3G network and improved data speeds in the major centres.

Winning hearts back Corry Regina Busingye, the manager-in charge of the brand and communications at Uganda Telecom, told The Independent in an email that their strategy to remain competitive in the market is very simple - "promise what we can deliver and deliver what we promise." She said they are focusing on offering affordable and relevant products and solutions to customers; ranging from business to personal solutions. She was adamant that they have the most affordable rates in the market so far.

"In 2014, we intend to solidify that position by offering even more affordable and relevant solutions to every Ugandan," she said.

However, observers see UTL as a company with experience in the market but dormant because it has failed to grow its subscription numbers to the extent that even Warid that joined the market late had surpassed it. Some actually thought the company, which has a majority Libyan shareholding, would be taken over earlier than Orange.

In a country with just over 50% tele-density, Busingye stated that the market is far from being saturated. "There is room for operators to compete and compete profitably," she insisted. Other analysts say the shift to social media has been caused by the fact that call rates are unaffordable, which means the market remains if the call tariffs are affordable.

Indeed, Collins Asiimwe, an industry observer, told The Independent that any telecom company that fails to hit one million customers in one year stands to collapse or quit the market.

He said the demand for telecom services in Ugandan today is moving from voice and SMS to data. "You will realize all telecom companies are heavily investing in the data segment, whoever plays their cards well will win the market segment," he said, adding, "We may soon see another merger." He said any market needs a leader, a challenger and the one offering value for money. "Uganda has two characteristics; leader and challengers who are all struggling to offer good quality service," he said, but some are not growing at a rate you would wish then to grow, he added, "they need to up their game." What the market needs, according to Asiimwe, is a player who is ready to build a mass brand, get as many customers as possible of different categories and hold onto them.

He says the data market continues to grow leveraging on lifestyle change towards using ICTs and in the near future price wars might shift from voice to data, which means companies will have to innovate, expand their network, and go into partnerships and above all offer good quality services if they are to benefit from the segment.

Going forward, Asiimwe says, Africell might shake the market because it has already done it in the neighboring DRC.

Copyright The Independent. Distributed by AllAfrica Global Media (

[ Back To's Homepage ]

Technology Marketing Corporation

35 Nutmeg Drive Suite 340, Trumbull, Connecticut 06611 USA
Ph: 800-243-6002, 203-852-6800
Fx: 203-866-3326

General comments:
Comments about this site:


© 2018 Technology Marketing Corporation. All rights reserved | Privacy Policy