Airtel Uganda to incur more operational costs as new broadband policy takes effect

Airtel Uganda to incur more operational costs as new broadband policy takes effect

This move comes after it emerged that Airtel has been paying less in license fees compared to its competitors, giving leeway in terms of profits. (Airtel Head offices in Kampala as pictured by Daily Monitor)

Telecommunication giant Airtel’s Ugandan unit is set to incur higher operating costs as authorities move to implement new changes in the telecom sector.

This move comes after it emerged that Airtel has been paying less in license fees compared to its competitors, giving leeway in terms of profits.

Airtel has enjoyed a market advantage over rivals because, while its operating licenses are valued in millions of dollars, the telco has been paying just $100,000 for its public service provider license every five years, reports the East African newspaper.

That translates into an annual license cost of just $20,000, compared with $5.8 million for its nearest competitor.

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But  the new Broadband Policy adopted by the Cabinet in September 2018, among others, introduces  a “use or lose it” approach to management of spectrum that will make it mandatory for sector regulator Uganda Communications Commission to repossess unused spectrum.

Vincent Bagiire, the Permanent Secretary in the Ministry for Information and Communications Technology, is quoted by the East African newspaper as saying that efforts will also be made to whip into line operators that have exploited gaps in the law to operate businesses beyond the scope of their classification while skimping on license fees.

National operators will also be required to have a national footprint as opposed to the current arrangement where they can choose where to provide services, as long as they meet the minimum rollout threshold.

All these developments put Airtel Uganda directly in the firing line. Although it held 37 percent of the market by September 2018, Airtel controls 60 percent of the spectrum, thanks to mergers and acquisitions over time.

Should it be reclassified as a national operator, Airtel would not only have to fork out more money in license fees but would also be required to provide for more capital expenditure, to meet the new geographical requirements.

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Uganda has been the only profitable unit among Bharti Airtel’s regional operations, posting a net profit of $62.12 million in 2017.

That compared with the $44.9 million profit the unit reported for 2016 as its Tanzanian and Kenyan siblings struggled with a combined loss of $135.6 million for 2017.

That pushed the two operations’ cumulative loss to $1.07 billion. Although lower than the $79.4 million loss it posted in 2016, the Kenyan unit still closed 2017 at $59.5 million in the red.

Airtel Tanzania narrowed its loss to $48.06 million, down from 56.4 million the previous year.

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