[2007-11-21]  Telecom Prepares for USE Listing
Uganda Telecom Ltd is being restructured to meet audit demands for the expected Initial Public Offering, The EastAfrican has learnt.

It is not known how many of the 850 employees of the company will be laid off but sources say the number "will be considerable."


When contacted last week, chief commercial officer Hans Paulsen said the company was in a "business transformation" phase, which might involve staff reduction or creation of other positions "in order to ensure that the company is ready for the market."

Several firms are already on board to advise the government on the company's stock market entry.

Africa Analysis, a South African specialist firm in telecoms analysis, is doing due diligence to see whether UTL is ready to list.

UTL company secretary Donald Nyakairu told The EastAfrican that at the earliest the IPO could happen was January 2009.

Having been privatised in 2000, UTL was supposed to list within two years.

Privatisation Unit spokesman Jim Mugunga said the government has never demanded that the company lay off staff as a condition to issuing an IPO, adding that if Uganda Telecom wanted to make redundancies, it was its own decision.

"Our structure of IPO is to spread shares out to the Ugandan public but not to create redundancies," said Mr Mugunga.

Uganda Telecom was carved out of the former Uganda Posts and Telecommunication Corporation, whose telecom department employed well over 3,000, according to Mr Nyakairu.

UTL is now one of the well-established telecom companies in the mobile, landline, Internet and data services.

It was sold to Ucom, a consortium that is 60 per cent owned by Swiss registered Telecel International, with Germany's Detecon and Orascom of Egypt holding 20 per cent each. Ucom paid $33 million for 51 per cent stake on the parastatal.

In April, the Libyan government investment arm - the Libya Africa Portfolio (LAP) - bought out Ucom's stake in the telecom company. At the same time, the Uganda government ceded 18 per cent of its shares to LAP, to bring its stake to 31 against 69 per cent of LAP.

It also emerges that UTL's delayed its entrance on the stock market is because it has not been determined how many of the shares will be floated after a change in the structure of UTL's shareholding.

Before it ceded 18 per cent of its shares, the government had been hard pressed to find new equity to inject into the company to make UTL's mobile brand competitive.

With only 700,000 subscribers, UTL lags being its competitors - MTN and Celtel - whose subscriber numbers are 1.5 million and one million respectively.

Part of the restructuring is to allocate the government its due equity in the company. LAP's new shareholding, according to Mr Paulsen, has pushed the company's capex to $80 million to spend on investments.

Only two months ago, UTL signed a Ush20 billion ($11.7 million) deal with French network builder Alcatel-Lucent to deploy 3G Network. This was in addition to Ush50 billion ($29.4 million) already invested in network upgrade a few months earlier.

Ideally, divested companies are required to float shares to the public within two years, as long as they have been duly audited and are turning in a healthy profit.

UTL's income last year was well over Ush114 billion ($67.4 million) judging from the mandatory one per cent of gross income that telecom companies are annually required to submit to Uganda Communications Commission. According to UCC records, UTL paid Ush1.14 billion ($674,463) to the regulator.

In terms of taxation last year, UTL was behind MTN in the telecom sector, paying Ush32 billion ($18 million) compared with MTN's Ush174 billion ($99.4 million).

So far, all privatised companies have failed to meet the requirement to list within two years, with the exception of National Insurance Corporation, which has come closer to issuing an IPO in under 30 months.

If the UTL IPO takes off, the company will have changed hands four times in less than six years - from government to a majority shareholder Ucom in 2001, then to LAP and now to the public.

As one of the two operators that enjoyed protection of the sector's regulator during the duopoly policy, UTL took advantage of the cushioning, but now faces competition from four other operators in a fully liberalised sector. These are MTN and Celtel as well as Hits Telecom and Warid who are yet to start operations.

Uganda Telecom will need to consolidate its lead in landlines but also improve other services to fend of competition. Middle East based Hits Telecom and Warid are to roll out soon, in a small but competitive market.

Mobile services pioneer Celtel started five years before MTN came in, but is now playing catch-up.


MTN paid $5 million for the second national operator licence and started operations in the Ugandan market in 1999 with a market design that served down market but also had up market products.

The South African company has in the past mooted plans to join the Ugandan stock market as a listed entity but this has not materialised.

At takeover, Ucom was obliged to install 100,000 new lines within five years - a target that the telecom giant is yet to achieve.

According to Mr Paulsen, UTL has increased landlines from under 60,000 to 120,000 since 2000.



Source: Copyright © 2007 The East African.