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Govt supports Muhakanizi proposals on UTL revamp

 

Frank Tumwebaze and Keith Muhakanizi

Muhakanizi pushes for cheaper internet for Govt

The new move, he said then, aimed to help revamp the struggling telecom firm but also provide internet service to government and the general public at a lower price. It is also hoped that this will drive a surge in the country’s internet penetration.

Muhakanizi could not state the amount of money that the government spends annually on the telecom services including internet.

But the development did not go well with Tumwebaze, the minister for ICT and National Guidance.

In a letter dated Sep.19 to Ruhakana Rugunda, the prime minister, Tumwebaze said the new directive does usurp the mandate of his ministry which is in charge of implementing the broadband strategy among other aspects of ICT development in addition to reversing the cabinet decision made in 2012 recommending the use of the National Backbone Infrastructure (NBI) for all government internet under the management of the NITA-U.

UTL’s old troubles

Muhakanizi’s fight last year came a few  months after the government took over the affairs and management of UTL after UCom, a subsidiary of Lap Green Network of Libya, which is the majority shareholder announced that it will not avail any more funds to the telecom firm.

LAP Green, a Libyan government firm, owns a 69 % stake in UTL with the Uganda government holding the remaining 31 % stake.

But as companies that are owed millions of shillings threatened to sue the telecom firm, the government placed it under receivership in April to keep it in operation.

Since 2007, UTL’s performance has been characterised by heavy indebtedness, decline in market share and losses as a result of inadequate investment, competitive pressure, dilapidated network and governance challenges.

The situation worsened when UN imposed sanctions on the Libyan assets at the height of political turmoil in the West African state in 2011 affecting capital inflow to the company.

Though UCOM resumed control of the company two years later following lifting of international sanctions against Libya, Libyan Post, Telecommunications & IT Holding Company (LPTIC), the parent company of UCOM, was not able to inject more capital into the company citing disagreement with the Ugandan government.

According to LIPTIC’s proposed turnaround plan, the Ugandan government was to convert the debt it owes to UTL into LPTIC equity.

Also, the government was to accept to erase the liabilities for actuarial amounts of pensions which exceeded the statutory contributions of 10% for the company’s former workers during the time of privatisation arguing that these additional liabilities were never for UTL but for the government under the privatisation law.

Agreeing on these two issues was to enable shareholders raise about US$48million through the sale of towers and funding from the LPTIC to revamp UTL.

The money involved was said to be about Shs18 billion owed to UTL and its portion of 31% of the US$48 million capital call under the LPTIC-proposed salvage plan.

Meanwhile, UTL has been sinking from the dominant position of major player in the nascent privatised telecom sector, to relegation as a cash-strapped company operating decadent 2G and 3G technology with the government as its main client.

The telecom’s strength was in the fixed line connection to government ministries, departments and agencies, with a significant fibre infrastructure and wireless broadband facilities.

It has been unable to upgrade its technology to match competitors operating latest 4G technology, a scenario that has forced a mass exodus of its customers to rival networks. This has led to decline in company’s clients from about 2 million in the 2000’s to around 700,000 late last year.

 

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