Wednesday, July 07, 2010

Uganda - Telecoms companies expected but did not get reductions in taxes and duties

[the monitor] Telecommunications companies expected elimination of VAT on phones and the reduction of excise duty on airtime, which is at 12 per cent to encourage penetration and further growth of the sector. However, Finance Minister Syda Bbumba neither reduced nor abolished taxes in the 2010/11 financial year budget. Warid telecom's Chief Executive Officer Madhur Taneja spoke to Faridah Kulabako about the challenges facing the industry.

Uganda has a population of over 30 million people, however, the mobile penetration rate is about 30 per cent. To what do you attribute this scenario?

The VAT charged on mobile phone handsets and the excise duty on airtime are too high inhibiting many Ugandans to own mobile phones. People are paying 30 per cent in VAT and excise duty airtime on phones and airtime, which is a huge amount.

We expected reductions in taxes in the 2010/11 budget because it's the only way the government could widen its tax base by enabling more people own mobile phones and make money in the long run.

If you reduce the taxes, service providers will also pass on the benefit to the consumer through cheap calls.

What should the government do to save the sector?

It should reduce taxes and artificial barriers in the industry. Being an open market, calling from one network to another in Uganda is too expensive as opposed to other countries.

The government should fix the interconnection fee to create a level playing field between operators and an environment in which fair competition can thrive for the benefit of Ugandans.

The government has done a good job by issuing new licenses in the industry but it should also work on sustainability of the companies licensed by letting all of them have a level playing field.

Some customers are stuck with a particular service provider not because they want, but because they were the first ones in the market and yet they charge high interconnection fees making it too expensive for people to call on other networks.

Those artificial barriers have to be dealt with so that we get more people making calls.

You have been in Uganda for less than three months, how would you describe Uganda's telecom industry so far?

The industry is still young but with huge room for growth.

What is Warid doing to boost the sector?

We have to adopt the best practices and best automated tools to bring about efficiency in our service delivery. Once that is done, our business and industry in general will prosper.

Bharti Airtel is coming to Uganda after buying Zain African assets, what should we expect in the industry?

I don't think there will be so many happenings in price wars; it will be about what offerings in terms of services you bring to the consumer. That will determine whether you remain competitive or not.

What new product should we expect from Warid this year?

The only thing we promise is the best network quality. We want to do everything to the satisfaction of our customers to make them feel that they are using the best network.

For products, we don't want to build expectation but our customers should just watch the space. Things are going to happen.

We only have to understand the youth and the general Ugandan consumer market to be able to package products which are pro-customer and pro-Ugandan market. We also feel that there is a huge potential in mobile money services that has not yet been properly tapped, we will venture into that soon.

E-money and recharge are efficient and profitable services that reduce investment costs and increase returns on investments.

July 1, marks the official elimination of internal borders between East African partner states, how prepared is Warid to tap into that wider market?

I don't think the Common Market will bring about a major game change in the telecommunications perspective, we don't manufacture goods.

The Common Market will benefit industries which are dependent on inputs coming from other markets outside Uganda.

Uganda: High Taxes Impede Mobile Phone Access

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