21 October 2009
editorial
MTN Uganda, the country's biggest telecommunications company, on Monday announced the conclusion of a $100 million (Shs191 billion) syndicated loan from local financial institutions to its network expansion.
The development, the first of its kind in Uganda's history, comes at a time when the company is celebrating 11 years of thriving operations. It also comes at a time of stiff competition in the telecommunications sector. Boasting of five other telecom players already, the country is set to get one or two more players in the course of 2010.
Given a population of more than 30 million and just under 10 million mobile phone lines, we think the telecommunications market is still large enough to accommodate more players.
The consumers, eventually, will be the beneficiaries from the competition as services become more affordable and more efficient. Given the high price companies offering poor services will pay, the consumer surely has a reason to be happy.
That is why the decision by MTN to get capital from local banks to improve its network is a positive one. With its proven market leader status, MTN could have sat on its laurels. Instead, it has been doing what every progressive company must do - ensure consistent improvement of its product portfolio and services.
Other companies have no choice but to take their cue from MTN. The days of expensive yet poor telecommunication services must become a thing of the past.
Secondly, that local banks including, Stanbic Bank, Standard Chartered, KCB, Barclays Bank, Dfcu Bank and Orient Bank have all teamed to share the risk of such a hefty loan, is a clear signal of the confidence they have in MTN as a company and Uganda as a telecom market.
But as a way forward, we think companies like MTN should also think of raising capital by floating shares on the Uganda Securities Exchange.
Thirdly, this development is a challenge for the government to improve the business environment in the country. Recent reports, including the World Bank's Ease of Doing Business and the Global Competitiveness report, have not painted a positive picture.
Concrete steps must therefore be taken to make the situation more conducive for business if the private sector is to remain competitive and the engine of economic growth that the government wants it to be.
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Indeed this is good for Ugandans. Probably there shall now be more total telecommunications services providers in Uganda and Ugandan teleco service consumers can only benefit. Of course MTN as a very wise company have their reasons for taking this loan. They are changing strategy. Mobile telephony has become low profit. MTN still have a lot to do to catch up with Uganda Telecom which controls about 80% of the telecommunications services in the country. MTN however, remain the leading mobile phone company, whilst Uganda Telecom is the leading total telecommunications company. Which has more revenues? Thats anyones guess