Finally, France's Orange telecom has agreed to sell its entire 95 per cent stake in its subsidiary in Uganda to a Beirut-based Africell Holding at an undisclosed fee.
The deal is subject to approval from relevant authorities, the company said on Monday. The sale of Orange Uganda has been on the rumour mill for a while as the company continued to face a tough time to increase its subscriber numbers since it launched into the market six years ago.
Orange agrees that its business in Uganda has failed to generate the kind of money the company expected.
"Orange has agreed to sell its 95% stake in Orange Uganda to Africell. A review was recently carried out that led the Group to conclude that after 6 years of operations, the subsidiary in Uganda had not met the Group's criteria in terms of operational performance and value creation," Olivier Emberger, the press officer at Orange, told The Observer. The value of the deal is not included.
Africell, a Lebanese company owned by Lintel, has three other subsidiaries in Africa: Africell Gambia, Africell Sierra Leone, and Africell DR Congo. On its website, the company says it has a combined subscriber base of seven million people, which is less than what Airtel Uganda or MTN Uganda have. By the end of this year, Africell says it intends to have 11 million subscribers.
Africell Sierra Leone is the biggest operator in that country, with the company pointing out that it has 62 per cent of the market, according to the information on the company website.
"As with Africell Gambia, the secret recipe behind this success was a strategy of aggressive marketing and network roll-out. Aside from the growth in the subscriber base, Africell Sierra Leone's major success was in winning the hearts and minds of the people in record time and to become an inherent part of the Sierra Leonean society," says a statement on its website.
But Uganda's economy is different and bigger than Sierra Leone's. With the likes of MTN and Airtel, Orange Uganda has struggled to attract customers in Uganda, who are more willing to fall for the charms that come with lower tariff fees than a good-quality network. According to Uganda Commissions Commission's latest quality survey, Orange Uganda has the best network, with fewer dropped and blocked calls than its peers. But the company has the smallest subscriber base.
Even in the data market where Orange is thought to have captured a niche, some people had been turned away by higher prices. Africell is reported to be looking to expand to two new countries as it seeks to reach a target of 15 million active users by 2015. Uganda could be its fourth entry point in Africa.
In terms of numbers, Africell's biggest subscriber base is in DRC, where it launched services two years ago. The company says it has 3.5 million active customers in DRC. It has 2.2 million in Sierra Leon and 1.1 million in The Gambia.
In all the three countries, Africell provides both voice and data services.
Orange Uganda's 620,000 clients, if the deal is approved, will be Africell's smallest base. Africell might have to come up with a better strategy than Orange Uganda's if it is to choke up the numbers. The entry of new players like Smile Telecom, which is thought to have one of the fastest internet speeds in the market, further added to the competition in Orange's data market.
Earlier this year, a new player, Smart telecom, owned by the Agha Khan group, entered the market and is vying for a fair share of the data market. Warid telecom, which launched in Uganda pretty much the same time as Orange in 2008, had in just five years registered 2.8 million subscribers for both voice and data. Airtel bought Warid last year.
Does Africell have a chance?
Yes, some experts think so. They argue that each company can employ its unique strategy and succeed where others have failed. Speaking to The Observer recently, Dr Peter Turyakira, a senior lecturer in the department of Marketing at the college of Business and Management Studies at Makerere University, said the telecom market in Uganda was still open.
He said subscribers would always shift posts to whoever offered cheaper prices and a stable network.
"Customers have no permanent places," Turyakira said. "Today you have them, tomorrow they have moved to someone else. It really depends on the marketing strategy of [a player]; they will have to study the market and know whether Ugandans are price-sensitive or quality-sensitive."
Besides competition from other telecoms here, more challenges are in infrastructure. Telecom companies have long complained about the high costs of putting up masts. They have blamed government for failing to pave roads and provide reliable electricity. Anthony Katamba, the MTN Uganda corporate affairs manager, said recently that the environment they operated in was too difficult to be perfectly efficient.
"You can't expect someone to be efficient when there is always no power and you have to run a generator. Our base stations are vandalised every day and fuel stolen. That's the environment we operate in," Katamba said.
And analysts believe, like other players in Uganda, Africell would face it tough; the difference would be on how it manoeuvres around these challenges. Grace Kamulegeya, a market analyst and computer science lecturer at Makerere University, said if Africell wants to further Orange's focus on data, it must appeal to the small pool of people using internet.
"The pool of internet users in Uganda is still small. Every player must fight for a share of this pool," Kamulegeya said.
Figures from Uganda Communications Commission as of last August indicated that 2.7 million people have subscribed for mobile internet (accessed through mobile phones). Only 98,334 are registered for fixed internet. Kamulegeya said Africell must do more - employ an aggressive marketing strategy - and let people know that internet usage goes beyond Facebook and Twitter.
"Let them [Africell] market applications that use more data; they can even decide to offer them at a subsidized price, and then people can be able to buy internet."