Friday, July 17, 2009

Uganda: MTN and Telecom have increased charges by 8-10% as a result of the recession

[the weekly observer] Two telecommunication giants in Uganda have increased their call tariffs, in a move signaling that the global economic recession is beginning to take a heavier toll on the developing world. MTN Uganda and Uganda Telecom have pushed their call rates up by at least 8% - 10% - the first time the public will be experiencing an increment in more than five years.

Hans Paulsen, Chief Commercial Officer at utl, said in a statement that the upward revision of their tariffs is "a response to the unfortunate economic circumstances in which the telecom industry finds itself operating in today. The economic pressures have impacted heavily on our operations and we have had no choice but to adjust to meet the changes in the market environment."

Different international forecasts had been predicting an ease in the current global recession.

There had also been prediction that the entry of Orange Telecom early this year, which brought the number of mobile phone companies to five, would increase competition in the market thereby keeping call tariffs down. But it appears it takes more than having many players in the market to have cheaper calling fees.

MTN customers, who now have to pay more to talk, include those on Yello Go, MTN Zone, Yello Max, Pay As You Go, Yello Max, just to mention a few.

The increase in tariffs is also a swipe at the country's tax regime, which has for long drawn complaints from the telecom companies. The companies have for long urged the government to reduce excise duty on airtime from the current 12%, arguing that this would enhance mobile phone penetration. But the government has resisted this proposal.

"Over the past few years, we saw movements in the telecom tariffs, but these were mainly downward movements. We have been holding down in anticipation that our lobbying with government would lead to a reduction in excise duty. While we appreciate no increase in the last budget, we are left with no choice but to increase the tariffs, because the current rates are no longer sustainable," said Paulsen. Besides excise duty of 12%, there is Value Added Tax of18%. Analysts believe that this relatively high taxation has kept mobile phone tariffs in Uganda among the highest in sub-Sahara Africa.

Utl also attributes the increase in their tariffs to the high rate of inflation, which remains stuck in double digits. Headline inflation is currently estimated at about 13%. The company says that the rise in fuel and electricity costs are also partly to blame.

Uganda: Telecom Companies Increase Call Tariffs

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