Monday, May 25, 2009

Uganda: The Regulator proposes to require mobile operator to list a proportion of shares on the national stock exchange

[business week] All telecom operators in Uganda could be required to list a given percentage of their shares on the Uganda Securities Exchange (USE).

This follows a study on interconnection, retail costing and pricing that was carried out by PricewaterhouseCoopers (PWC) London on behalf of the Uganda Communications Commission (UCC). The study recommended a review of the Uganda Communications Commission Act.

"Subsequent to the proposed review, the issue of Ugandans owning shares in the companies that operate in this market will be talked about because there is real concern," Mr. Patrick Masambu, the Executive Director UCC, told a stakeholders' meeting recently.

Should UCC require players MTN, Zain, Warid and Orange to sell shares to the public, Uganda will be following in the footsteps of neighbours Kenya and Tanzania who require the telecoms to list on their respective stock exchanges.

It is also a policy requirement by the South African government for the mobile telephone companies that operate in that market to offer shares to the public. Just last week, Vodacom, the largest mobile phone company in South Africa listed on the Johannesburg stock exchange.

In Uganda today, it is only Uganda Telecom that is required by law to float a percentage of the company stock on the local bourse.

According to the sale agreement between government and Ucom, the first major owners (51%) of Uganda Telecom, the company was supposed to list 49% or part of that stock five years after its sale but this is yet to happen.

It has been complicated by the fact that Ucom sold its stake in Uganda Telecom to another investor.

Ucom's stake in Uganda Telecom was in 2006 acquired by Libyan company Greencom through Libya Africa Investment Portfolio (LAP) - a billion dollar Libyan government instrument through, which that government is spreading investment and influence across Africa.

Greencom took over UTL in 2006 after acquiring Ucom and it has since emerged that the Uganda government sold an additional 18% to Greencom.

Today, the Libyan company holds 69% of Uganda Telecom with only 31% available to be sold to the public on the USE.

It is not clear how the foreign players would react to a move like this but most of the players are listed on stock exchanges in their home markets. In the past, there have been rumours that MTN Uganda, the biggest of all the five players was considering a floatation of some of its shares on the USE.

The review of UCC Act will also see interconnection rates become uniform and on July 1, 2009 UCC is set to issue the fixed rates.

Call rates for Uganda's more than eight million mobile phone users are expected to reduce when UCC puts a cap on interconnections fees that players in the telecom sector pay each other when they carry traffic back and forth.

Interconnection is a salient feature in the price of a call going across another network.

A fixed interconnection rate is international practice, which the Uganda market has yet to adopt. Today, every one of the five players in the Uganda industry charges a high rate to maximize profit and in the past this has resulted in multi-billion suits among the players.

New players coming into the Uganda market have in the past been critical of the existing policy of leaving interconnection to the players. The argument is that if interconnectivity is not regulated, it stifles completion, kills innovation, reduces penetration and users get cheated. A competition law for the telecoms and a tribunal to hear cases involving all players in the communications sector are also in the offing.

Telecoms Asked to List Stake On Bourse

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