Texting year for telecoms in Uganda

The year 2013 was a tough year for the Ugandan telecom sector, considering previous years when it was considered the fastest growing business. However mobile penetration has drastically slowed.

Apart from the buy-out by India’s Airtel Bharti of Warid Telecom (Uganda) the sector was characterized by increased tariffs, particularly after the budget reading in June.

This came as telecom companies, emerged out of heated price wars of 2011 and 2012 and found themselves in a unsustainable situation especially at a time when the cost of doing business was on the rise.

Warid who were the architects of this price war were forced to exit the market as the returns on their investment didn’t make business sense. 

Former Warid subscribers, long used to some of the cheapest call rates around, were understandably not happy with this development. 


2013 highlights

Airtel Bharti reportedly bought out Abu Dhabi founded Warid for $100 million a move that stirred the sector into alertness.

It created a gap between the two leading companies MTN and Airtel and the rest of the pack which includes Uganda Telecom, Orange, Smile Communications and new entrants K2 in terms of customer numbers.

Boasting of eight million and 7.4 million subscribers respectively, MTN and Airtel are the big boys in a market now relying more on data rather than calls from revenue and any other innovation that uses a phone.

Citing a harsh economic environment and the introduction of new taxes in the 2013/14 financial budget including a 10% levy on mobile money transactions and an international call tax, companies were forced to raise their tariffs.

The telecom firms also spent heavily in upgrading their networks to meet the increased subscriber traffic and demands and quality of service delivered to consumers.

The mandatory SIMcard registration was the other major highlight in a sector that was the fastest growing in the country ever since government liberalized the communication sector.

Despite a stern warning from Uganda Communication Commission (UCC) that all unregistered SIMcards will be deactivated, a number of them (unregistered cards) are still functional.

Fred Otunnu, the acting Director for Competition and Consumer Affairs at UCC in an interview said the few cards that are still unregistered are pending during this validation period.

Other reports indicate that the Commission is lax in ensuring that unregistered SIMcards are switched off.

Like the registration period, a threat from UCC to deactivate counterfeit phones circulating on the market made big scary waves with traders and people alike using these knock-off phones. But calm was restored after  Otunnu said the project will be brought back in the near future.

Otunnu explained that they are studying a survey they conduct to that effect but was adamant the counterfeit phones are going to be eliminated.


New revenue sources

The traditional bread earner for telecoms, the voice calls segment and SMS sending, suffered a slump as high tariffs and many cash-challenged subscribers had to cut down on their phone budget.

However a new cash cow for the telecom companies emerged in the form of mobile money transaction charges and mobile internet data sales that saw these firms earn considerable money.

A good example of the shift in the revenue source for telecoms was when MTN Uganda in August 2013 in their half year results indicated that SMS revenue declined 14.6% as customers opted for newer data-driven social media platforms to communicate.

The revenue growth, registered at 15.4%, was equally supported by strong data revenue growth as subscribers turned to accessing internet on their mobile phones and laptops.

The growing use of social media played a part in the need for internet. This positively impacted mobile data revenue, which increased 57.4%.


Mobile money

The introduction of mobile money onto the Ugandan market in 2008 was a blessing in disguise as more people have embraced it ignoring other traditional ways of handling money especially  banks and couriers companies.

This has seen the monetary figures transacted growing to billions of shillings. In 2012, 242 million transactions were conducted over the mobile money platform with about $5 billion flying about in the air.

Fast forward through 2013 to today, that number could easily have doubled as more people take on the use of M-Banking to do business and make savings.

This kind of transaction has proved to be a lifeline for the telecom companies who have such services.

The increasing demand for Mobile banking for example saw MTN Mobile Money record a 51% increase in subscribers and more than 25 million transactions per month as of August last year.

Close to 20million Ugandans are using mobile phones with an estimated half of that using mobile money platform to save their earnings, paying for utility bills or bailing out a friend in need by sending him money.

 Slowly by slowly and as times change mobile banking is getting embedded in the daily lives of Ugandans and is becoming part of life as it is easy to access and use as compared to banking halls.

According to the 2013 Finscope III Survey, the mobile money platform is leading in terms of financial transactions outside the banks.

The surge has seen the share of the adult population accessing financial services rise from 28 percent in 2009 to 54% in 2013.


Mobile internet

On the positive side of business, the telecoms are reaping big moneys from the increasing demand of broadband/data and access to internet while on the move.

As internet becomes part and partial of modern society, especially among the middle class, demand for data is also increasing.

This is hence providing a reliable source of revenue for the telecom companies who are also playing the cards well.

The rise in numbers of smartphones and mobile computers has ensured that people consume more broadband while on the move.

This trend facilitated the introduction of LTE internet service to the market which makes it easy to navigate the internet with higher speeds.

MTN, Orange Uganda, Smile Communications all this service on top of providing the able 3G.

In an interview, Orange Uganda’s Chief Marketing Officer Damien Lacey believes that mobile internet and the use of data will be central in the survival of telecoms.

To that fact telecoms are also taking on trading in high tech devices to facilitated data or broadband consumption in a complementary role.

This is being helped by the global trends that have seen increased use of ICT over the years.