Uganda: Museveni Orders UCC to Explain MTN Licence Fees

(file photo).
15 January 2019

Kampala — President Museveni tasked the Uganda Communications Commission (UCC) to explain why they reduced the fees for renewal of MTN Uganda's licence to far less than the originally proposed amount and noted that the reduction was unjustified.

"You ought to be aware that over the 20 years span during which MTN has been operating in Uganda, it has reaped vast profits most of which have obviously been repatriated. This is common knowledge derived from the company's own declarations and from our own sources," the President wrote to UCC and ministry of ICT on October 28, 2018.

"Accordingly, the company's obligation to sow where it intends to reap for the next 10 years as well as its ability to do so are and cannot be in doubt," he added.

After the expiry of MTN Uganda licence last year, the UCC proposed $100m (about Shs375b) for renewal, but during the ensuing negotiations, the figure was brought down to $58m (about Shs217b) for 10 years.

Mr Museveni ordered UCC to explain why MTN Uganda would be charged a paltry figure of $58m.

Mr Museveni wondered why the Finance ministry and Uganda Revenue Authority were not included in determining the final figure.

"I am, therefore, astonished by UCC's proposal of a renewal fee of $58m, far less than the $100m it has originally set. I am even more intrigued by UCC's decision to abandon original market expansion multiplier formula of 2.64 for 1.69, which obviously leads to a different result. What is the reason for this change of heart?" the President asked.

"I am hereby directing both of you to protect the interest of both the country and investor by ensuring that you scrutinise the process and involve Finance and the tax matters. I expect a quick resolution and an update in 14 days," Mr Museveni added.

The UCC confirmed receiving the President's directive and said they have since responded and given him an explanation. Mr Abdu Salaam, the UCC head of legal department, said in 1997 when MTN signed the agreement with Ministry of Works, government did not provide a fixed figure for licence, leaving room for both parties to negotiate after expiry of the agreement.

Mr Salaam said based on the agreement provisions, UCC looked at what MTN Uganda paid in 1997 and considered all the changes that have since happened in the economy and the customer base and reached an initial proposal of $100m.

However, he said during negotiations for renewal of licence, MTN raised the issue of the cost of the National Broadband Policy which occasioned extra costs on the telecommunication company and it objected to the $100m figure as prohibitive.

"At the time, we presented this figure to MTN, government also approved the National Broadband Policy that required all the national operators to provide high speed internet to all parts of the country, particularly the highways and the sub-county headquarters.

This put extra cost of investment on the telecom companies and MTN wrote back to us and said they were only ready to pay $22m (Shs81b) since they would be investing up to $200m annually to roll out the infrastructure needed to implement the new policy. We eventually changed the formula and finally agreed on $58m," Mr Salaam said.

He said by regional comparison at the current rate, Uganda's charges for licence renewal are the highest for a national telecom operator.

In Nigeria, MTN pays $200m (Shs740b) while in Benin it pays $170m (Shs628b) and in Kenya $27m (Shs99.8b).

In Ivory Coast where it has 8 million subscribers, MTN paid $124m (Shs458b) as licence fee for 17 years starting in 2015. The firm operates in 22 countries in Africa and the Middle East, with more than 230 million subscribers.

On Mr Museveni's complaint about repatriation of huge profits by MTN, Mr Salaam said government must enact a law that will put a cap on the maximum percentage of profit a company can take out of the country.

"Government needs to come up with a legislation. All these [multinational] companies repatriate profits and UCC cannot act on MTN alone when even banks and other sectors are doing the same. This will attract a legal challenge and we don't want to be a government agency whose decisions can be challenged in court," Mr Salaam said.

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