Uganda: Museveni Writes Off Shs200b UTL Debts

Uganda Telecom offices
29 January 2018

Kampala — President Museveni has stopped government from recovering more than Shs200b from Uganda Telecom Limited (UTL) and instead directed that the debts be converted into shares in the debt-ridden telecommunication company.

Following its precarious financial status, UTL was put under receivership last year.

Uganda Revenue Authority is demanding about Shs58b from UTL, Uganda Communications wants Shs22b while National Social Security Fund is seeking to recover more than Shs16b unremitted workers' savings to the pension fund.

The National Forestry Authority demands an undisclosed amount from UTL for leases on its land and other debts include PTA loan, shareholder loans from Libyans, trade creditors such as MTN, Huawei, Nokia, Umeme, TOTAL, among others.

Government is still searching for an investment partner to take over UTL.

The UTL debts to various government agencies have been accumulating interest and the total indebtedness stands at a staggering Shs209b currently.

The government pushed through a resolution that eventually placed the company under receivership last year after it failed to pay debts of about Shs900b.

The debt has since been brought down to at least Shs533 billion. Most of the government agencies that UTL owes money declined to comment on the President's directive on the debts, claiming they had not seen it.

The President gave the directive in a January 9 letter. In the letter, Mr Museveni also ordered all government institutions to procure all Internet and other related services from UTL.

He said this will save the company from what he called a group of corrupt officials who 'sucked' UTL dry through self-enrichment with huge salaries and had plotted to devalue its assets worth Shs148 billion.

"I have been informed that there had been a scheme to devalue the assets of UTL by corrupt officials that had been sucking that company and paying themselves huge salaries," the President's states in his letter titled: "Revamping Uganda Telecom Ltd".

The letter is copied to Vice President Edward Ssekandi, Finance Minister Matia Kasaija, ICT Minister Frank Tumwebaze and other ministers.

Mr Museveni also directed that UTL network be revamped and used to restore government data.

Other directives

He also directed UTL to expeditiously conclude talks with a Chinese state-owned IT company- China National Electronics Import & Export Corp (CEIEC) which was selected to establish a Smartphone factory in Uganda.

Mr Museveni also asked UTL managers to ensure the Chinese company uses local minerals such as Coltan to manufacture the telephones.

Daily Monitor understands that a government team is currently in China to assess CEIEC capability.

This is the same company a government team led by the Privatisation and Investment Minister, Ms Evelyn Anite, visited in July last year and requested it for a comprehensive cyber-security solution, including technical capacity to monitor and prevent social media abuse.

Although UTL remains under receivership, the President explained that it has a lot of assets, including a shareholding of 9.13 per cent in West Indian Ocean Sub-Marine Cable Company (WIOCC) and that they have infrastructure to transmit and restore electronic data.

"Therefore, I direct that there should be no more sales of the assets of the company... instead I fully accept Hon Anite's proposal and direct as follows: All debt owed to government departments and agencies should be converted into shares held by UDC [Uganda Development Corporation] on behalf of government," the letter reads in part.

When contacted at the weekend, Ms Anite said she had already forwarded the President's directives to UTL administrator, Mr Bemanya Twebaze, who also doubles as the chief executive officer of Uganda Registration Services Bureau (URSB).

Ms Anite said she asked him to immediately implement the President's directives and submit regular progress reports.

Ms Anite described the directive to write off UTL debts as "a strategic government decision" to breathe life into UTL and that the affected government agencies were properly briefed.

"Availability of affordable Internet and locally manufactured affordable Smart phones answers the government desire to increase Internet penetration that is below 50 per cent in Uganda to over 80 per cent just like Kenya," Ms Anite told Daily Monitor.

"What many declared dead and a write-off is now a hot cake for investors. We are confident to sign a good partnership with a reputable partner in the second quarter of this financial year. We want UTL to lower the cost of a 3G bundle to as low as Shs20 per month from Shs60 currently... Ugandans should be able to use Shs500 to access internet," she added.

Mr Bemanya at the weekend confirmed receiving the directive and said it confirms UTL potential.

"The influence we caused in reduction of Internet prices for MDAs by over 70 per cent from $300/Mbps to $70/Mbps with a promise for further reduction to $50/Mbps is exactly the same we are going to do for the general public under the new mandate so that Internet is affordable and accessible," Mr Bemanya said.

"Working with our partners, WIOCC, we have installed new transmission equipment between Tororo and Kampala to enable us backhaul sufficient volumes of internet of up to 10 Gigabits per second (Gbps) to meet the current and anticipated demand," he added.

UTL Vs NITA-U

The directive ends months of fighting between UTL and the National Information Technology Authority-Uganda (NITA-U) over who should supply data to government offices.

NITA-U, an autonomous statutory body under Ministry of ICT, has been accused of overpricing Internet services and looking on as foreign companies fleece taxpayers. It was established under the NITA-U Act 2009 to regulate Information Technology services in Uganda.

On the other hand, UTL was a government parastatal and controlled 100 per cent of telecommunication business in Uganda before the liberalisation of the sector.

However, years of mismanagement and lack of government attention alongside a mountain of debt to Shs700b against company assets of Shs148b, distressed the company.

The Libyans withdrew last year and the government immediately placed Utl under receivership.

Daily Monitor learnt that Mr Museveni wrote to the Prime Minister, Dr Ruhakana Rugunda, who was not available for comment after he received intelligence briefing on what sources called unfavourable internet contract NITA-U officials signed with Soliton Telmec, a Kenyan company.

The briefing indicated loss of public funds to three foreign companies doing business with unidentified government officials.

For instance, for every Mbps of Internet delivered to any government agency through a cable owned by government through NITA-U, Soliton charges NITA-U $200 (Shs725,400) as transport charges.

The President was told that this cost cannot be explained since it is akin to a government being charged a toll free on a tarmac road it built, owns and maintains.

This according to sources at ICT ministry is what has kept the cost of internet in Uganda six times higher than in other states in the region.

Available data shows that for the quarter of April to June 2017, Soliton invoiced NITA-U $800,775.848 (about Shs3b) for transport charges and was paid as per the disputed contract. This translates into $3,203,103.39 (about Shs12 billion) per year.

Inflated prices

The President was also informed that Soliton, with knowledge officials at NITA-U, charges government $26 per metre of laying the fibre cable while the same activity costs between $10 and $15 on the open market.

While this might appear insignificant, a difference of $10 per metre of the fibre cable, translates into $10,000 (Shs36.2m) per kilometre and the company has so far built thousands of kilometres.

Soliton, under the NITA-U contract, again charges government for a manhole (point where fibres are interconnected) $1,300 (Shs4.7m) while the same company charges MTN Uganda only Shs400,000, the average price on the market.

A 24-port cisco switch (data equipment) is charged at $2600 (Shs9.4m) and the same is at around Shs1.2m on open market.

Although UTL owns free data centres at Telecom House, Mengo and Wandegeya, NITA-U outsourced the management of data centres to Computer Point/ Sybyl, an Indian firm and is in the process of outsourcing the E-Payment Gateway facility yet such sensitive security information should not be in the hands of foreigners.

In one of the meetings at State House, Mr Museveni was told that this is like outsourcing the inter-bank money exchange role of Bank of Uganda because the Indian company will be monitoring all government financial transactions.

Although the primary role of NITA-U is to license IT operators in the country, this newspaper understands this core function has also been outsourced to an IT player, called Comtel.

Comtel is owned by a former NITA-U board member in what sources have called an apparent conflict of interest.

Dr James Saaka, the executive director of NITA-U, at the weekend said he had not received the directive and was therefore unable to comment.

"When I get it, I will study what it says and work with it," he said.

Background on huge salary

Investigation: In March last year, Daily Monitor investigation into the collapse of Utl pointed to the fact that for years, Libyans and other senior managers at Utl, with the knowledge of ministry of Finance officials, paid themselves handsomely and enjoyed free water and electricity, schools fees for their children and housing allowances.

Salary breakdown: For instance, Utl staff payroll for October 2016 shows that the top four managers - the MD, the chief finance officer, the chief legal officer and chief commercial officer - earn a combined salary of $95,583 (almost Shs400 million) per month. Realising that the company was about to collapse, the Libyans withdrew their money and returned the debt-ridden company to government. The MD used to earn a gross salary of Shs121m per month, followed by the chief finance officer, Mr James Wilde, who earned Shs95.2m per month. Mr David Nambale, the chief legal officer, took Shs90.5m, and Mr Ameer Kamal Arif, the chief commercial officer, walked away with Shs76.4m per month.

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