A big chunk of its debt is unpaid interconnection fees that the company owes other operators, MTN and Airtel, as well as some of the smaller telecoms in the market.
Officials at MTN, Airtel and the tower companies all told The EastAfrican that Africell is yet to clear the money it owes but would not divulge the amounts or how long they have not been paid.
The regulator says the company must comply with Data Protection and Privacy Act while it transfers customers to Blue Crane.
Africell Uganda is not only seeking to end its loss making and debt-ridden business, it has less than a month to come up with money to fulfil the tough exit conditions set by the sector regulator, including paying its creditors before the company formally winds up operations on October 7.
The EastAfrican has learnt that in June, the troubled telecom operator approached the Uganda Communications Commission (UCC), seeking guidance on how to exit the market after seven years of operation.
“We have discussed the exit plan since June,” says UCC spokesman Ibrahim Bbosa. “The commission guided the process, but gave them conditioned approval.”
UCC says that top of the conditions is that Africell starts to pay its creditors and submit a status report of the company’s accumulated debt and liabilities to the regulator, at least 30 days before the agreed exit date.
But with creditors still not paid less than a month to Africell winding up its business operations, the regulator now wants Africell – already heavily indebted by its own debt and that which it inherited — to take letters of credit to clear all arrears not settled by the day of exit.
A big chunk of its debt is unpaid interconnection fees that the company owes other operators, MTN and Airtel, as well as some of the smaller telecoms in the market. The other significant portion of the debt is its unpaid user levies to American Tower Company and Eaton Towers, the main telecoms network operators who in 2019 threatened to disconnect Africell over unpaid arrears amounting to billions of shillings.
Officials at MTN, Airtel and the tower companies all told The EastAfrican that Africell is yet to clear the money it owes but would not divulge the amounts or how long they have not been paid, citing non-disclosure clauses in the contracts.
Sources say the telecom started approaching local banks in July for money but due to its wiry balance sheet, it failed to make any headway, and turned to its parent company to secure the letters of credit. However, they say this has not yielded much as the Central Bank has not received any letters of credit.
Just four years into its operations in Uganda, the company had a debt of Ush258.3 billion ($72.7 million), more than twice its total turnover in 2018, according to its audited financials for the year. At the same time, the firm had accumulated losses amounting to Ush1.5 trillion ($427 million), most of which was inherited from the French mobile operator Orange, the company whose operation it acquired in 2014.
Not a going concern
In mid-2019, Africell Holdings secured a $100 million credit line from the US Overseas Private Investment Corporation (OPIC), to fund infrastructure investment for its operations in Uganda, Democratic Republic of Congo, Gambia and Sierra Leone, Reuters reported.
Africell founder, group CEO and Chairman Ziad Dalloul said that the money from OPIC would be used to expand fintech services such as mobile payments, micro-insurance and micro-finance.
A subsidiary of Lebanese company Africell Holdings, Africell Uganda acquired majority stake in Orange Uganda and took over its operations in 2014, inheriting about 620,000 customers. The firm has since grown its subscriber base to 1.2 million, according to UCC records.
The 1.2 million customers, however, represent just 4.2 percent of the mobile phone subscriber base in Uganda, which reflects a stagnant share of the market and Africell’s inability to shake the stranglehold duopoly of MTN and Airtel.
Africell sought a buyer to take over its business and ease its exit, but could not attract local rivals or offers from foreign-based operators because “the business is no longer a going concern”.
It also failed to migrate its customers to an established operator’s platform, and on October 7, its 1.2 million subscribers will be handed over to internet service provider Blue Crane Communications to manage their transition.
Meanwhile, after shutdown of its operations, Africell’s mobile frequency and spectrum will be returned to UCC, while the network tower sites will be returned to third parties from whom they are leased, the company announced.
The regulator says the company must comply with Data Protection and Privacy Act while it transfers customers to Blue Crane, and also dismantle its network in compliance with the National Environment Protection Act.
“Our network technology equipment will be transferred where possible within Africell group, maximising value for Africell’s pan-African customer base and minimising waste,” the company said.
Speculator trouble
With a spectrum licence and a stable corporate clientele for fixed internet, Africell’s exit and failure to find a buyer has confounded industry experts who say the sector still has room for operators with strong niche products.
“We have all sorts of services in the sector, and in excess of 5,000 towers but these are not enough for the growing demand for cellular services,” says Charles Nsamba, public affairs manager at ATC.
Africell Uganda acquired and took over the telecom operations of Orange Uganda in 2014, in a $12 million deal but the firm announced on September 7 that it was exiting the market.
“Africell UG is ending all mobile network services in Uganda. By October 7, current Africell UG subscribers must close their accounts and switch to alternative mobile providers. Africell UG is providing support and guidance throughout this process,” the company’s website announced.
In a statement to its employees, Africell said that in a country with a mature and competitive telecoms sector – an inference to the market’s big players MTN and Airtel – there is little capacity for smaller players to jostle for customers and provide a digitally-led transformation of society.
“We believe that the opportunity to achieve this impact is increasingly limited. We have therefore taken the difficult decision to permanently end Africell UG’s operations in Uganda.”
Analysts say that apart from the established players such as MTN and Airtel or even Uganda Telecom Ltd – until it ran into operational and management headwinds after 2011 – the smaller operators that came into the market in the mid-2000s were victims of speculators.
“Influential people got allocated spectrum they hoped to sell off and went hunting for buyers at a time the big players were still investing. That called for big money since everyone was building their own infrastructure,” said an analyst, who preferred anonymity.
