Monday, May 24, 2010

Uganda - Regulator has agreed that retail charges by mobile operators be raised

[the monitor] Telecommunication companies have struck a deal with the Uganda Communications Commission (UCC) to increase charges for calls made by mobile phone users, Sunday Monitor has learnt.

According to sources that attended the meeting between UCC and the telecom industry leaders last week, the latter, by consensus, agreed to push the inter-connectivity charges up from Shs103 to Shs131 per minute before tax. In addition, the government levies a 30 per cent excise tax per minute.

What this means

This means that the higher or lower charges per minute when calling from one network say UTL to a Zain line - are determined by what Zain will be charging the UTL customer.

So for example if the cost for the call is 400 shillings - with a lower interconnect rate of 91 shillings the customer will have paid only 299 shillings. The higher the interconnect rate - the higher the call charges. Companies have resorted to expanding promotions focused on calls within their network- partly because it's cheaper for them and their customers.

"Ideally government policy is meant to promote the dispersal of mobile telephonry but high rates means that access is limited and people do not use the service. There is a study that in some cases close to 50 percent of our income is spent on airtime" said the cabinet source.

The call rates have crept up gradually since last year, putting the industry regular [UCC] at war with the telecom giants. But in the meeting at UCC headquarters in Bugolobi, last Friday, the regulator reportedly agreed to the new increased inter-connectivity fee, signalling that it had lost the war to lower the tariffs.

Initially UCC decided to lower the interconnection rate [the charge for calling across networks] and commissioned a study from the UK based Price Waterhouse Coopers.

The study recommended a rate of Shs91 per minute which was revised to Shs103 when some companies asked the UCC to include new costs in the evaluation.

However, despite its own study- the rate has now moved up to Shs131 and according to UCC acting director Patrick Mwesigwa - this is not the final position either.

Demanding higher rates

"Some of the larger companies want the rate to go up to Shs140 but we are resisting," he said. UCC's track record on resisting the push from mobile companies some of which in the words of Mr Mwesigwa had "significant market power" has already been called to question by smaller players, senior government officials and members of the parliament.

A source in cabinet who declined to be named because cabinet discussions are confidential told this paper that the matter had been raised. "The companies seem to be dictating the direction. The regulator must do more," the source said. Yesterday Prime Minister Apolo Nsibambi said the matter was for the Finance and ICT ministries to handle.

"These companies are reaping us off certainly. We need a Ugandan debate with a view to keeping the rates low and affordable," said MP Chris Baryomunsi, a member of the social services committee in Parliament. Another lawmaker said the companies and UCC were hiding behind a lack of scrutiny by the public.

Thus far why UCC did not hold its ground- even after an internal study recommending lower rate will likely be brought up.

Some studies seen by Sunday Monitor show that the charge for calling across networks is twice or even three times the cost of calling within networks.

The road to this high rate followed a lawsuit against the UCC by South African mobile phone giant MTN which questioned the regulators powers to fix an interconnect rate.

The suit was withdrawn by MTN after "consultations" ensued leading to last week's meeting to push the rates higher. In a Thursday interview Mr Mwesigwa said while the policy was that there should be no profit-making from charges for calling across networks- it nonetheless is an important revenue stream for the larger companies.

"We have to strike a balance between the companies and the public. It's our role to protect individual consumers against unfair practices" he said insisting that no final decision had been taken on the new rate.

He added that a lower rate was in the interest of the companies and the public as it would allow more people to use airtime expanding the spectrum for profits.

Those who attended the meeting, however, said UCC had pushed an agreement on the rate of Shs131 to start at the beginning of next year.

Mr Mwesigwa also said Uganda had one of the best regulatory regimes in the region but could not explain why despite its advantages UCC had not managed a lower rate.

"Increased competition will help lower the rates," he said adding that several transactions were pending in the sector after large Indian companies have taken an interest in the Ugandan telecom market.

They include Bharti and Essar, both big players in India. "The Indians have the cheapest rates in the world and their model will help here," he said.

However, industry sources have said UCC has not acted strongly against high rates which favour bigger companies with large subscriber bases and punish smaller firms and new entrants including providers of internet services.

The Communications Commission Act, the law that sets up UCC, specifically provides for the agency to regulate competition. Mr Mwesigwa concedes that some players like MTN "have 50 to 60 per cent" market share which gives them considerable influence.

Some of the smaller players pay hundreds of millions of shillings in interconnect fees to MTN every day [Shs300 million and above] according to some sources that declined to be identified as their complaints may become a possible fresh lawsuit against UCC over the rates.

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