Uganda renews MTN’s SNO license at a fee of US $100m

After long negotiations, MTN Uganda paid the US $100m, appropriately Ugx. 371 billion, in full to Uganda Government for license renewal.

Download: MTN to list Experts puxh for innoation fund (37 downloads)

MTN is Uganda’s Second National Operator (SNO), and the license took effect on July 1st, 2020.  For some time over the years, MTN experienced some run-ins with the government which culminated in the infamous raid of the MTN’s data center in Mutundwe by Uganda’s Internal Security Organisation on July 2nd, 2018, exactly two years ago, on allegations of a tax dispute. The license renewal is a vote of confidence by the government on the operations of Uganda’s leading telecom, and the top taxpayer. This is a welcome development considering the impact of MTN on the market through innovations support, corporate social investment, and lots of direct and indirect contribution to the economy through employment, and many others.

Two of the key conditions for the renewal by the government is that MTN must list on the Uganda Stock Exchange within the next 24 months as well as increase network penetration across the country by expanding coverage to at least 905 of Uganda’s geographical boundary.

When contacted to comment on this transaction by New Vision business, Summit Consulting Ltd CEO, Mustapha B Mugisa, said “This is a long overdue and welcome development. It now allows the local investors to own a stake of one of the most vibrant sectors in Uganda, telecoms.  As you may know, any telecom with about 10m subscribers makes an average of Ugx. 4-6 billion in gross revenue daily. Telecoms have a huge cost structure. But assuming a 15% profit before tax margin, that is a profit of about Ugx. 600m daily. That is good money.”

Summit Consulting Ltd is a long-time partner of MTN since 2015 when MTN conducted country-wide training of small and medium-sized businesses in governance, risk management, and financial planning for sustainable growth. The training was sponsored by MTN and conducted to entrepreneurs in all regions of Uganda, as part of the MTN business social investment.

There are few companies, if any, like MTN which have transformed the innovations landscape in Uganda. MTN’s mobile value-added services like mobile money and the anticipated further investment in fin-techs to power banking, insurance, hospitality, and commerce require less capex and low operation costs – these give great prospects for the economy.

MTN is a major telecom giant.

Download: MTN to list Experts puxh for innoation fund (37 downloads)

You would expect the government to buy some stocks for representation on the board. The challenge for listed companies being majority foreign-owned has been high transfer pricing and capital flight. There is a need for establishing an R&D fund to support innovation on a sustainable basis.  Telecoms are critical for cyber weaponry and cyberwarfare management.

Listing on the local stock market by MTN provides the required local involvement and technology transfer. But it should not stop there. Such companies should establish a fund for innovators, worth at least US $10m annually so that money that is usually spent in imported technology and software is sourced locally to reduce transfer pricing and operating costs.

The comments by Mustapha B Mugisa first appeared in a New Vision article published on 13th July 2020, page 42. Click here to download the article.

Copyright Mustapha B Mugisa, 2020. All rights reserved.

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