Uganda Telecommunications Corporation Limited (UTCL)—the newly formed government-owned telco is expected to, this Friday, November 18th, 2022, take over the assets of the now insolvent Uganda Telecom.
Uganda Telecom was previously owned by the governments of Libya and Uganda.
UTCL the new owner of Uganda Telecom is 60% owned by the Ministry of Finance, Planning and Economic Development (MoFPED) and 40% by the Ministry of ICT and National Guidance (MoICT&NG).
UTCL was incorporated on 8th April 2021 and on 23rd February 2022, entered into an Asset Sale and Purchase Agreement to buy the assets- and not debts and or liabilities of Uganda Telecom.
Full transfer of the assets to the new owner has been pending UTCL’s payment of the full purchase price.
According to the agreement signed by city lawyer, Ruth Sebatindira (SC), Uganda Telecom’s Administrator and Ramathan Ggoobi, the MoFPED of Finance Permanent Secretary/Secretary to the Treasury and Dr. Aminah Zawedde the Permanent Secretary, for MoICT&NG, UTCL is supposed to pay UGX256,892,142,642 over and USD15,643,151.25. The total sale price, converted into Uganda Shillings, is roughly equivalent to UGX UGX316.4 billion.
The purchase price was supposed to be paid as per the schedule below:
Within 10 days of signing the agreement (5th March 2022):
- Pay UGX13,886,681,657, inclusive of taxes, to Ruth Sebatindira, the administrator, as administration fees.
- Pay UGX1,380,319,669 as terminal benefits of UTL employees, but only covering the period of administration
- Pay USD11,650,000 to the Trade and Development Bank- money borrowed by Uganda Telecom
- Pay USD3,993,151.25 to the West Indian Ocean Cable Company (WIOCC) to exercise preferential rights to acquire more shareholding in the internet sea cable company
By 30th September 2022, UTCL should also have paid the remaining balance, composed of:
- UGX 12,389,198,801 being money owed to suppliers, during the administration period
- UGX16,311,992,461 National Social Security Fund (NSSF) arrears
- UGX2,353,904,321 Uganda Communications Employees Contributory Pension Scheme (UCECPS) arrears
- UGX165,048,246,917 as arrears for UTL Pension arrears for former Uganda Posts and Telecommunications Corporation (UPTC) employees
- UGX38,184,355,021 being money owed to the sector regulator, the Uganda Communications Commission
- UGX2,730,073,380 being arrears owed to Uganda Revenue Authority only covering the period UTL was in administration.
- UGX3,399,302,267, being money owed to Uganda Electricity Transmission Company Ltd (UETCL)
- UGX1,208,068,148 owed to the National Forestry Authority (NFA)
According to the insolvency law, once there had been any proceeds from liquidating an entity under administration, preference is given to paying outstanding loans, employee-related debts, administrator fees and any debts accrued during administration.
UTCL is yet to complete paying for Uganda Telecom
To date, the government has only been able to pay, the USD11,650,000 owed to TDB, and the USD3,993,151.25 for the acquisition of more shares in WIOCC. The government has also paid UGX13,886,681,657 to the administrator and UGX1,380,319,669 in terminal benefits for Uganda Telecom employees, during the administration. This means, there is UGX241,625,141,316 that is unpaid.
We do understand that the Ministry of Finance, will offer a letter of comfort to the Administrator, which will in turn be taken to court, so the court can formally end the Administration process and allow the handover to UTCL.
According to a letter seen by this reporter, Hon. Evelyne Anite, the State Finance Minister for Investment and Privatisation, has summoned a handover meeting to take place, tomorrow, Friday 18th of November 2022 at 10:00 am at the Uganda Telecom Building offices on Speke Road.
The 9th November 2022 letter invited the Cabinet Ministers, State Ministers And Permanent Secretaries of the MoICT&NG and MoFPED, as well as the Attorney General. Also invited to attend was the Undersecretary/Accounting Officer, Ministry of Finance, Planning and Economic Development; The Executive Director, Uganda Communication Commission, The Administrator, Uganda Telecom Limited (In Administration), The Chairman and all Board Members of the newly established Uganda Telecommunication Corporation Limited.
Full payment of the purchase price is critical to the ending of the Administration period, Uganda Telecom has been under since 22nd May 2017. But more importantly, the payment is vital to ending the misery of some of the lucky few creditors who are meant to benefit from the sale price. Lucky, because of the sale price- just about a 3rd of Uganda Telecom’s total indebtedness.
Some of the creditors like the former workers of the defunct Uganda Posts and Telecommunications Corporation (UPTC) have waited for over 20 years to be paid. We understand, that despite the government committing to pay by the end of September 2022, it has now changed positions and instead said, it will give a letter of comfort to allow so that court can be able to allow the transfer of assets to go ahead.
How long it will take for the government to fulfil its commitment- your guess is as good as mine, given that it is the same government that was a part shareholder in Uganda Telecom that has taken nearly 25 years without paying these pension arrears.
Over 100 companies, whom Uganda Telecom owes over 300 billion are left in tears
Uganda Telecom was spun-off Uganda Posts and Telecommunications Corporation (UPTC) in 1999 unbundling that also created Post Bank Uganda and Posta Uganda Limited.
In June 2000, the government divested 51% for USD33 million to Ucom, a consortium backed by Swiss-registered Telecel International, Germany’s Detecon and Orascom of Egypt. To catch up with the rest of the players at the time, Uganda Telecom in 2000 launched a mobile telephony service, dubbed Mango, but would later rebrand its mobile, fixed and data offering under one brand- Uganda Telecom.
In April 2007, the Libyan government‘s investment arm — the Libya Africa Portfolio (LAP) — bought out Ucom’s stake. Due to the investment needed at the time, which the government of Uganda was not able to make, a further 18% shareholding was ceded, raising LAP’s holding to 69%, leaving GoU with 31%.
In March 2011, Uganda Telecom was part of the Libyan government’s assets, worth some USSD375 million that the GoU reluctantly agreed to freeze as part of the UN Sanctions against Libya and Gadhaffi at the time. Uganda would in 2012 release the assets back to LAP- after the death of Gadhafi. By this time, the marketplace, although the big boys of the day- MTN Uganda, Airtel and Warid Telecom, had an edge over Uganda Telecom in the mobile telephony space, Uganda Telecom had quite some good footing in the fixed internet and fixed lines space.
Widening market share gaps between Uganda Telecom and its competitors was worsened by the Government of Uganda’s failure and or refusal to pay UGX165,048,246,917 in pensions to former UPTC employees. Secondly, Government continued to be one of Uganda Telecom’s stubborn clients that refused to pay up for services and also failed attempts to disconnect them- racking up an estimated 30% of the UGX133 billion in uncollected receivables. Thirdly even when it was apparent that the shareholders of the company needed to inject more capital to upgrade the networks and matchup to competitor power- the government refused and or failed to inject capital. It also used its powers as the government refused to have its shares diluted in favour of LAPGreenN who was willing to make the required investment.
Deepening indebtedness, obsolete technology, reducing market share and lack of fresh capital coupled with poor governance and uncollected receivables, continued to choke Uganda Telecom.
Uganda Telecom then petitioned the High Court of Uganda for an Interim Protection Order vide Companies Cause No. 173 of 2017 to enter into a settlement with all its creditors. The Company and its creditors subsequently executed an Administration Deed dated 22nd May 2017 in the above Cause under which the Official Receiver was appointed Administrator of the Company with the mandate to administer the Company or sell its assets and settle creditors per the Insolvency Act, 2011 within a period of 6 (six) months.
The mandate of the Official Receiver was extended initially through an Addendum to the Administration Deed dated 12th December 2017 under an Order of the High Court dated 24th November 2017 vide Miscellaneous Cause No. 48 of 2017 and subsequently through Orders of the High Court given on 15th May 2018, 21st November 2018 and 11th November 2019 vide Miscellaneous Cause No. 107 of 2018, Miscellaneous Cause No. 317 of 2018 and Miscellaneous Cause No. 411 of 2019 respectively.
Between 2018 and 2019, the then Administrator, Twebaze Bemanya, the then Uganda Registration Services Bureau (URSB) head, tried to sell off the assets of the company but the process came to nil as Teleology Holdings Ltd, the best bidder, eventually failed to pay. The bruising spat between the administrator and various government officials, ended in Bemanya stepping down.
On 2nd January 2020, the High Court of Uganda issued orders vide Company Cause No. 30 of 2019 appointing Ruth Sebatindira (SC) as administrator to replace the Official Receiver and administer the Company per the terms of the Administration Deed for a period of 12 months.
The mandate given to the Sebatindira, was extended by subsequent High Court Orders on 10th November 2020 and 29th October 2021 respectively.
Following the failed sell-off of Uganda Telecom, the Administrator conducted a fresh assessment of the Company and concluded that Uganda Telecom was beyond saving as a going concern and therefore the only option left, was to dispose of its assets so as to settle its liabilities.
According to the Auditor General’s report into Uganda Telecom’s indebtedness, the telco was indebted to the tune of UGX 668 billion as of 30th June 2021. Therefore, the UGX316.4 billion combined sale would be at least UGX351.6 billion short of the required UGX668 billion to pay all its creditors.