Uganda: Big Shifts in the Ugandan Market Bring New Opportunities - Roke Telecom Sees FTTH As Having Retail Potential

31 January 2020

London — Africa's telecoms and internet markets are seeing big shifts. The number of MNOs are declining and the digital life is becoming a reality. Michael Mukasa, Chief Commercial Officer, Roke Telecom talked to Russell Southwood about how these shifts are affecting Uganda.

Roke Telecom's initial business model was based on selling minutes using VoIP termination:"There was some liberalization on call termination between 2006-2009. Initially we were a wholesale minutes using VoIP termination. Most people now use Skype or WhatsApp so there's a falling demand for international calling. Then we started to provide infrastructure to ourselves and fibre to the premises. We've shifted business model slightly and now (fibre) makes up 90% of the business.

It started with small fibre builds, like a link from its offices to where the international cable landed:"As we started picking up demand from SMEs, we built out 3,000 kms of metro fibre, mainly outside Kampala. We started to build FTTX in these areas. The first metro build was in the industrial town of Jinja about 100 kms from Kampala in 2011 and we've been adding more as demand scales. We've also got major towns in the south, west and north of the country".

Roke Telecom started with a lot of SME customers because the mobile companies thought that fibre was too costly for them initially. There were also a lot of international carriers needing last mile connectivity. Its latest move has been piloting fibre connections to residences but "it's slow moving."

He estimates that there are less than 5,000 FTTH subscribers across all providers but the number of potential households being around 100,000, with a smaller figure of 20-30,000 who might afford a service now.

Roke Telecom itself has 10,000 data services customers and 4,000 mobile hot spot subscribers. The latter are spread all over the city in Kampala and to start with were built in partnership with CSquared:"We're doing it ourselves now and we have 600 hot-spots. There's a lot of demand in regional towns. There are still challenges with 3G and 4G coverage".

Its competitors depend on which market segment you are looking at. For retail customers, it's the MNOs and for corporate clients, it's Liquid Telecom, Wananchi and some other local companies. Some have their own infrastructure so Roke Telecom both uses their infrastructure and supplies links to them.

The current market dynamic is driven by falling voice margins which means that the MNOs are relying more on data to make up the gap:"People want fixed fibre connections at home or the office to get a certain capacity. Some people like Wananchi are using fibre. The real battle is over who services the home".

The market dynamic between MNOs has changed:"utl is not felt in the market any more. MTN and Airtel have divided the retail market equally. There are some moves to regulate their market dominance. Some prices will be controlled - like interconnect - in the latest regulation".

So has the dispute over the local IXP been resolved?:"Things are still up in the air. There is no clear way forward. They have an IXP company registered. Some make payments on a voluntary basis. We've got a lot of value from the IXP. Something has to change in terms of how it is managed, whether it is commercially managed or not".

Cloud services that were once hype are now becoming a reality:"The market's starting to mature. Companies like Microsoft have forced people on to the cloud and it has started to get acceptance. Corporates are doing a big shift to the cloud to save on infrastructure:.

But there is no carrier neutral data centre yet:"One is coming and this will revolutionize the space. It will be launched in Q1, 2020 and we are committed to installing there. It gives cost savings and is an enabler. Previously the Facebook cache was in MTN data centre but once it is available to whole market it gives us a competitive chance".

So how is Uganda's digital life?:"It's the international apps that are a big part of what drives usage:"Facebook, WhatsApp, TikTok. The drivers for use are access to information and news. With entertainment, there's a huge demand for things like VoD and IPTV and it's taking subscribers away from the Pay TV operators." He says that it's hard to estimate the number of Netflix subscribers but the Pay TV providers have 100,000 subscribers across the country:"Netflix is eating at the top end of the market for those who can afford US$50 a month. It's probably 5-10% of the overall market but you need a credit card".

In terms of e-commerce, Jumia seems to be doing quite well within Uganda:"It seems to be getting quite a bit of business. Also its wholesale business - the platform for sellers - is going quite well. It's easy for me to shop on Jumia. Things get delivered to the office so there's a convenience factor. A lot of corporate people use it".

There are a lot of locally developed apps that have come out of the Ugandan start-up ecosystem:"They seem quite prevalent in information gathering apps. You've also got people leveraging off bigger platforms like Instagram and building local celebrity status. These are the influencers with 1-2 million followers. Telcos will approach the influencers and pay them to plug their brand".

So what has Roke Telecom got planned in the next 12-18 months?:"We're still seeing the retail market as having a lot of untapped potential. In addition like to see a shift from ISPs just selling connectivity to end-to-end solutions., things traditionally done by systems integrators".

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