20 January 2013

Uganda: A Case of Poor Service Delivery, Optimism

Kampala — The growth that the telecommunication sector has gone through is the fastest Uganda has seen in the past 15 years but the year 2012 has been a cautious year for both the telecom companies and the subscribers.

Emerging from the price wars of 2010 and 2011, which drastically brought the cost of making a phone call to an all time low of Ugsh180, later proved to be unsustainable as all telecoms in unison raised it to Ugsh240.

The service providers took on a guarded way of doing business preferring temporary promotions to price cuts.

By having almost a uniform tariff across the five major operators, users had an easy job of choosing and remaining loyal to their network of choice. Subscribers chose quality of service one was receiving and juicer promotions.

What is important to note though is that telecoms failed to reach the desired benchmarks set by the sector regulators, Uganda Communication Commission (UCC), some performed well off than the others as it was indicated by the quarterly quality of service performance reports.

Deceptive sector growth

Well as the sector had its own challenges some stakeholders insist 2012 was a successful year with general improvement. In an interview Mr. Fred Otunnu the head, communications at UCC, the telecoms industry regulator, emphasized the good year it has been.

"I can say overall there was good performance registered, in terms of quality of service there was improvement in some areas but of course in some areas there was stagnation." Otunnu said acknowledging that services were not entirely superb.

Uganda like its neighbors in the East African region saw a variety of value added services put on the market by the operators with mobile money as a service leading the pack followed by increased mobile internet use.

"Traffic for data continued to grow, reliability in data transmission continued to register improvement albeit a few challenges of cable cuts along Kenya Uganda route." Otunnu said.

Despite the regulator being pleased with the sector growth some of the operators are not satisfied with the outcome of their investment in the year 2012 compared to previous years.

The Director Marketing, Brand and Communication at Orange Uganda, Bertrand Lacroix, says the price wars between operators that hit the market through 2011 to date have had a tremendous effect on revenues.

Mr. Lacroix partly blames the price wars on a volatile inflation which did not only suffocate the telecom sector but the entire Ugandan economy.

"However, this is beginning to fall thanks to interest rate hikes, with our Country Risk team are estimating at around 14% for 2012 down from 20.3% in April 2012. The economy continues to grow strongly, although worries over public spending are intensifying." Mr. Lacroix reveals optimistically.

Orange's revenue worries is a reflection of a general problem that is being felt in the entire sector with continued customer spending dwindling for various reasons among which is the widespread poverty in the country and competition.

Orange's Lacroix explains that the biggest challenges in the sector include price erosion by competition negatively impacting on the company as far as growth is concerned.

He said "Although the drop in call tariffs saw corresponding jumps in subscriber numbers and traffic, it failed to increase revenue for players as anticipated."

Another challenge for the industry has been infrastructure vandalism through frequent fibre cuts, equipment theft at sites and fuel challenges, thus affecting growth adding to the operation bill.

Poor service delivery

It is a common occurrence to find one or two people complaining and swearing over the poor service that their network operators were delivering. This was also made worse by the telecom companies making their customer care lines unreachable living grieved subscribers with nowhere to register their problems.

This forced many to turn to social networks like facebook and twitter to voice out their anger. This majorly resulted from failing to make calls, calls dropping, unexplained deduction of airtime, receiving unsolicited SMSes and loss of mobile money transacted.

This kind of relationship between service provider and subscriber affected the sector in one way or the other. Some people switched to other networks or reduced their spending.

However service providers like MTN Uganda which received most of the bashing explains that they are focused as a business to provide relevant products and services that suit the needs of their customers. "Going forward we will ensure that we continue to remain relevant to our growing customer base through innovation and dedicated customer service." explained the Chief Executive Officer of MTN Mr. Mazen Mnroe.

The public outcry prompted the line Ministry, the ministry of ICT and the regulatory body UCC, to issue numerous warnings including closure of business and severe punishment for those service providers who did not comply with the required standards of delivering services. However the law doesn't allow the regulators to implement punishments.

"We have proposed penalties but you see those penalties have to be gazzated as a legal instrument, we are in the process of gazzating the statutory instruments to provide details of the penalties." Otunnu said acknowledging that that has been the challenge causing delay of effecting these punishments.

The law is of a general nature and it is in broad terms, but now they have broken it down and will be made public soon. The ministry is undertaking the task because it is within the powers of the minister & the ministry.

Another contentious issue has been the unsolicited SMSes which come with unwanted charges as subscribers never understand why they should be charged for a service they don't want and can never opt out. But UCC says they have initiated guidelines to streamline the issue of SMSes with regard to frequency at which a person receives the SMSes, the timing and the costs.

Otunnu however urges that those people who want to stop receiving the messages sometime they don't press the right buttons. He adds that sometime people receive what they call unsolicited yet it is them who accidently or unknowingly subscribed to the service.

Internet The New Gateway

The past twelve or so months have been unique with customer spending shifting from the traditional voice call service to a new phenomenon, mobile internet, which has attracted investment to tap into the evolving demand from mostly a young clientele.

Arguably the biggest telecom company in Uganda, MTN, will have an additional 600KM of fibre infrastructure completed adding to the existing 2,800km of fibre providing the capacity for high speed data connectivity and wider National coverage of 3G mobile data services that extend internet access to the rural areas of Uganda.

This follows an investments exceeding USD80 million and another proposed investment worth USD70million to support the subscriber growth and rollout of new innovative products and services. It points to a good future for the sector.

Mr. Mazen Mnroe the chief executive officer of MTN said "As a company, we have made our investments steadily in the country over fourteen years, and we continue to do so because we are looking into the long term. Our products and services, too, will grow steadily with the same consistency."

Mazen adds that "the future of Uganda is bright and very promising, especially with the very young generation being over 60% of the population relying more and more on access to communication and digital services, MTN is confident that together with all partners we will drive Uganda to the next level and ensure that jointly we will deliver the ICT agenda." As a pioneer in providing 3G services, Orange Uganda have established leadership in the internet market earning recognition occasionally as the mobile operator with the best network quality and customer care in Uganda, by the regulator UCC.

It should be noted that the fight for the spot of the best internet service provider was ignited by the introduction of 3G services by Airtel and Warid telecom adding to the already recognized MTN and Orange.

This makes internet the new battleground for supremacy, but all in this the customer at end of it should be able to gain good and quality service.

The dependence on the sea cable at the Mombasa Sea and an insufficient cable line between Uganda and Kenya present a huge challenge the operators cannot fight by themselves without the help of government.

Lacroix noted that growth in industry was mainly in the roll out of mobile broadband solutions and other Internet related infrastructure. He adds that investment in the sector is expected to grow in the near future as the existing and new service providers expand their networks.

Cashing in on Mobile money

Mobile money has been the largest revenue earner for MTN but now considering the potential it posses for the business other operators are likely to chip in and cash in on the revenue that it can bring into their coffers.

Airtel money, M-sente, WaridPesa and Orange money are going to come out strong to curb the dominance that South African company is enjoying.

Commenting on the success of mobile money, Mr Mnroe stated that the significant growth of Mobile Money Financial Services and increased demand of Internet access are the key areas that MTN Uganda will focus on in the days to come.

"The expansion of Mobile Money as well as data and digital services will be the primary focus areas for MTN in Uganda during the coming years." Mr. Mnroe said.

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