29 April 2013

Uganda: Warid, Airtel Deal Causes Anxiety

Kampala, Uganda — The Bharti Airtel takeover of Warid Telecom last week, has caused a mixed reaction from Warid customers.

Some are worried about maintaining their numbers and also missing out on popular products they had been enjoying on the Warid network.

However, Fred Otunnu, the Head of Communications at the Uganda Communications Commission (UCC) says that customers should not have any fears because the regulator would ensure that customers' interests are taken care of.

"Customers should not worry and that (what will happen to Warid Telecom subscribers) should not be an issue. The regulator will make sure that customers' are protected," Otunnu said.

He told the East African Business Week in an interview that UCC was waiting to look at the technical, finance and business models of the two companies before granting a transfer of license.

"The law provides for up to 45 days within which we should have evaluated the business models of the two companies before we can grant a transfer of license."

Speaking on the agreement, Manoj Kohli, MD and CEO (International), Bharti Airtel said, "We are delighted at this agreement with Warid, which also happens to be the first in-market acquisition in Bharti Airtel's history.

We believe this market consolidation offers great synergies by bringing together the best of Airtel and Warid to better serve customers in Uganda and drive forward our vision of offering affordable best in-class services in Africa.

This development will translate to a healthier telecom sector in Uganda which will be ready to invest and grow in wireless broadband and m-Commerce services".

Douglas Mazune, a sports journalist said, "Now that Warid has sold us (its subscribers) to Airtel, I wonder how the takeover will affect us," he said, adding "I have my functional Uganda Telecom (UTL) line to fall back to.

I wouldn't be surprised if other networks like MTN and UTL benefit instead."

He also adds that, "Given Warid's market penetration approach (Pricing via Pakalast) it is most likely to have the highest number of customers that subscribe to more than one network. Warid customers are mostly price-sensitive and not loyal to the brand."

What remains to be seen is how the other telecom companies react to this merger with some analysts predicting that price wars could yet again emerge as MTN, the market leader, defends its market share.

Though the financial terms of the deal have not been disclosed, speculation has been rife in Uganda for months about the impending take over.

With the announcement, market analysts say that several people will be affected as the two companies merge.

"Suppliers and workers alike will be affected as the new company will look to avoid duplicating roles. So even the agencies will be affected as the new company will have to make a decision at using only one advertising agency," says James Opio, an independent researcher.

Some experts say that having initiated the price wars in 2011 that saw the prices of voice calls drop to Ush3 per second, Warid telecom did not recover and hence its sale was imminent in a market that was already saturated.

Unconfirmed reports also say that there was a counter offer from South Africa's Vodacom and Bharti Airtel that has operations in 20 countries across Asia and Africa won the bid.

Information also shows that Bharti Airtel which bought money-losing operations in 15 African countries for $9 billion, has yet to make a profit there. It remains to be seen with this latest move will yield profits for the World's fourth biggest telecom.

The move will enable Airtel further consolidate its position as the second largest mobile operator in Uganda with a combined customer base of over 7.4 million and market share of over 39%. The market leader in Uganda is MTN.

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