Kampala — Posta Uganda, the country's traditional postal service provider, is sliding out of business after taking damaging knocks from new sophisticated players amid severe under funding from the government.

"Posta needs re-capitalisation to become profitable," the former Posta Uganda Board Chairperson Aisha Lubega said last week.

Her statement underlined the deep seated precarious situation under which the company is operating. Almost ten years after its formation, the company has failed to break even despite initial government promises to subsidise it with a Shs1 billion annually. It only posted profits in 2004/05 of Shs400 million according to company reports shown to Business Power.

"Running a post office is a challenge. It has got its commercial and social arm of service provision. Every citizen has a right to communication but quiet often we operate in those areas at a loss but we have to be there. If government can intervene on the Universal Service Obligation, then we can break even," Posta Uganda General Manager for Operations David Kitongo said.

Mr Kitongo said Posta Uganda has received only Shs150 million from the ministry of Works since 2002. Today, the company fails to deliver on some of its most core business for lack of financing.

It delivers mail at no profit, it is burdened by outstanding statutory obligations and is deeply indebted to the tune of Shs4.3 billion as assessed tax liability and more than Shs2.3 billion for contributions to the National Social Security Fund and staff contributory schemes, according to the company's ministerial policy statement for 2007/08 presented in June.

Posta Uganda formerly Uganda Post Ltd was formed in 1998 after Uganda Posts and Telecommunications, formed in 1983 by an Act of Parliament, was split into four separate entities; Uganda Post Ltd, Uganda Telecom Ltd, Uganda Communications Commission and Post Bank Uganda Ltd.

The company's share capital of Shs25 billion are wholly held by the government.

Last week however, at the inauguration of a new board, financial woes returned to haunt the company.

In order to be able to make money and survive the tough onslaught of competitors armed with new information and communication technology, the company is barely on its knees for serious capitalisation. It has since more than halved it jobs from 611 to 300 to keep up with the pace. Early this year, during the Pan African Post Day, former Managing Director Collins Oneko sounded even scarier about survival.

"The traditional African postal industry is facing stiff competition at a rate never seen before. In order for the Post to survive, it has to re-engineer itself so as to incorporate new technology in its service delivery or else it becomes obsolete. This is what the consumer market dictates today," he said.

Confident

Posta Uganda Managing Director Alex Mulooki, however, is confident that e-competition is less of a threat than an opportunity for the postal company to muscle its resources for competition.

"I don't think we are threatened by other service providers. For us it's an opportunity to venture into other areas of communication and watch over what Posta will be in the years ahead," Mr Mulooki said.

Among the changes to come are the automation of the company's operations, introduction of Electronic Fund Transfer Services within East Africa and setting up of telecentres in rural towns to offer Internet facilities.

"Postal service is not merely about sending letters, but we do delivery of bulky items like parcels and packets, which emails can not do.

We may lose that portion of writing, but we still have that niche to stay afloat in the ICT world," he said. Mr Mulooki said Posta has ventured into direct marketing -mail is delivered directly - transportation and agency services. Posta provides agency services to MTN and Celtel Uganda on commission basis.

"Posta still has a monopoly of delivery. Our challenge is to improve and expand our services. All this is coming as a challenge, but to us, it is an opportunity" he said.

Following the liberalisation of the communication industry in 1998, there are 25 licensed local and international courier firms and one national postal service provider (Posta Uganda).

Nonetheless, the emergence of new players in the market has to a significant extent eroded Posta Uganda's market share in some of its product segments. As a result of liberalising the industry a number of private companies sprung up to provide value addition communications services.

These include paging, private voice data transmission via satellite, cellular services, payphones, fax bureaus and cyber cafes. The ICT State Minister Mr Alintamu Nsambu also emphasized that competitors cannot duplicate postal services. Comparing it to Europe and the US where ICT is advanced, Mr Nsambu said postal services remain a traditional mode of communication.

"All other ICT providers do is not a direct substitute to postal services. Yes, e-mail is there, but it can not take over postal services," Mr Nsambu said.

"The only threat is may be the nature of service delivery, which they should improve. They should improve the way they serve the public, keeping people's parcel safe from thieves".

He said the Universal Service Obligation budget could be there but that lack of follow ups and slow nature of implementation has delayed the release of funds.

"There is no way I can see government not budgeting on this basic sector. It is not that the budget is not there, but it is the usual government's inefficiencies, bureaucracies and attitude towards business," Mr Nsambu said. "Government looks at businesses in a traditional way. Those funds should be provided".

Infrastructure

Posta Uganda has vast infrastructure on which to compete adequately. It has over 80,000 box rentals with 300 distribution points countrywide. The biggest percentage is concentrated in Kampala. The number of rental boxes is expected to go up to 37,000 in Kampala alone.

Opening a rental box number in Kampala costs Shs58,000 with an annual rental fee of Shs35,000. Outside Kampala, opening a rental box costs Shs25,000 and an annual fee of Shs20,000.

In 2006, Posta carried 35,000 mailbags mainly for corporate customers, an increase of 14.5 per cent in the previous year. Express Mail Service rose up from 14,000 in 2006 to 15,000 in the first quarter of 2007.

International incoming mails grew up by 54 per cent, from 2,800 in 2006 to 4367 in the first quarter of 2007. Electronic money transfers within the EA region also grew by 15 per cent.