Connection problem: MTN runs into trouble in Uganda

MTN's latest legal skirmish part of a wider war between governments and telecoms providers in Uganda.


The renewal of MTN’s licence in Uganda is proving a bumpy ride. Liam Taylor reports on this latest clash in the war between governments and telecoms providers.

There was no candlelit dinner for Wim Vanhelleputte on Valentine’s Day.

Instead, the chief executive of MTN Uganda was grilled by a senior policeman and the country’s head of military intelligence.

Then, according to his own affidavit, he was handcuffed and bundled into a vehicle, squeezed between two security officers.

They drove him at high speed to the airport and put him on a plane to his native Belgium.

Vanhelleputte was the fourth manager at MTN, a telecoms giant, to be deported from Uganda this year.

Police spoke vaguely about “national security”.

The company was also in prolonged discussions to renew its licence, including pressure to list shares locally.

The relationship with government was at a low ebb.

The South African group, which operates in 22 countries across Africa and the Middle East, is a veteran of regulatory battles.

Last year it paid $53m to settle a dispute in Nigeria after being accused of illegally repatriating $8.1bn.

In February a former South African ambassador was arrested on charges of taking bribes to help MTN win a licence in Iran (allegations that MTN denies).

By comparison, MTN’s troubles in Uganda pose little risk to the bottom line: the country contributes just 4% of group revenues and earnings.

But it is one intriguing skirmish in a wider war, as governments and telecoms providers wrestle for profits and power.

Licence battle 

In 1998 Uganda had only one wireless operator, Celtel, which had mustered just 8,000 subscribers after four years of trying.

Then MTN arrived. Its new service was cheap, reliable and welcoming – designed for “Maama, Taata, Nange” (mother, father and me), ran a popular slogan. Today MTN is the leading operator, with 46% of the market. It is one of Uganda’s biggest taxpayers and runs the country’s largest mobile money network. It sponsors marathons, football clubs and festivals.

Yet its dominance has also bred resentment, about everything from customer service to the paucity of Ugandans in top positions.

“MTN helped bring services to the masses,” says James Wire, a tech blogger and consultant in Kampala.

“It’s just a pity that along the way there was some sort of big-headedness which came up.”

Those grievances have risen to the surface as MTN has tried to renew its licence, which expired last October after 20 years.

In September, cabinet said it had no objections to a renewal.

But how much was MTN to pay?

“We had put down a figure of $100m,” says Godfrey Mutabazi, executive director of the Uganda Communications Commission, which regulates the sector, “but then government came up with a new broadband policy which affects the whole industry.”

MTN argued that to comply with the requirements – including network modernisation and expanded coverage – it would have to make $200m of investments.

The regulator therefore set a revised licence fee of $58m, which MTN says is still “far higher” than its business case can support.

It was then that the president, Yoweri Museveni, intervened.

In a letter to the communications minister, quoted by Reuters, he wrote that he was “astonished” by the decision to cut the fee.

He added that MTN had “reaped vast profits, most of which have obviously been repatriated”.

Officials at the regulator said two options were on the table as African Business went to press: a 10-year licence for $119m, or a 15-year one for $150m.

“It is taking a while,” says Rob Shuter, the MTN group CEO, speaking in mid-March.

“I’m encouraged by the progress.”

MTN has been given temporary licences to allow it to keep operating.

As for the communications minister, he went on two months of annual leave in early February, according to his staff. 

Kicked out

Meanwhile MTN was attracting unwelcome attention from security agencies.

Last July the company complained that intelligence officers had raided its data centre in Kampala. No reason was given.

The incident took on new significance in January, when two MTN managers – the chief marketing officer, who is French, and the Rwandan head of sales – were deported from the country.

A police statement said that the pair “were using their employment as tools to achieve their ill motives” and that they had “plans of compromising our national security”.

That was followed by the deportation of the Italian head of mobile financial services and, in February, of Vanhelleputte himself.

Government officials are cagey about the deportations, but have raised two concerns. First, Museveni has said that “we have issues of people cheating our taxes and underdeclaring calls”.

A government spokesman also accused MTN officials of “providing backend access [to data] to unauthorised persons”, perhaps for economic sabotage or espionage.

He named no foreign countries, but in Kampala any mention of spying and subterfuge instantly invokes Rwanda – a country with which Ugandan elites have a prickly, paranoid and deeply personal relationship.

“Apparently walking and working in Uganda while Rwandan have become a crime,” tweeted one Rwandan minister, reacting to the deportation of his compatriot.

“It’s a very upsetting situation,” Shuter says of the deportations.

“It’s very difficult for us to comment on it or even act upon it when you don’t really have any insight into what the specific allegations were.”

He adds that nobody had improper access to MTN’s systems and the company is tax compliant.

There was also politics within MTN itself. Since arriving in 2016, Vanhelleputte had eased out some long-established staff.

“Wim wanted to change things about the company culture and infuse new life,” says someone close to the company, speaking on condition of anonymity.

“I think there is a power struggle between the old and the new. The old resisted change.”

It was a delicate balance: the older staff had regulatory knowhow and useful connections.

With the licence expiring, says the person, “you needed the old guys who knew how to renew to help you”. 

The government is also demanding that MTN list shares.

The new broadband policy says that local listing should be a licensing requirement for all telecoms operators.

“[MTN] Uganda has a 4% shareholding of Ugandans, which is low,” says Shuter. “We’d be very much prepared to move that up to 20%.”

In the short-term a share sale to the state pension fund may be more feasible than a public listing. Shuter says he has an “open mind”, but notes that localisation “will also perhaps be limited by the demand itself”.

Keith Kalyegira, who heads the Capital Markets Authority of Uganda, would welcome a listing:

“This is a public interest company, it’s not an ordinary company. It has a huge impact on the overall current account position of the economy.

Yes, it contributes by paying taxes and employing Ugandans, but I think it can contribute more if Ugandans own into this company.”

But boosting local ownership is not straightforward.

In 2017 Tanzania ordered telcos to list on its stock exchange but later let foreign investors participate due to a lack of local demand.

When MTN held an initial public offering in Ghana last year, 61% of shares went to non-Ghanaians.

Nor has the government yet issued a clear deadline for a listing to take place.

It often takes years for firms to come to market, says Catherine Namujjuzi of Crested Capital, a brokerage in Kampala.

“There are very many companies that should have listed by now,” she says, “but even then we have not seen a lot of action or enforcement from government.”

Tussling for power

Telecoms companies are behemoths, raking in revenues that dwarf most local firms.

For governments, technology is sometimes a threat, sometimes a cash-cow, and sometimes both at once – a logic which underpins Uganda’s controversial tax on social media, introduced last year.

Shuter remains positive. “I think we’ve been a good partner to the people of Uganda for two decades and we’ve put a lot of investment into the network.

These economies really need modern communication systems to expand and grow and compete. We have every intention of providing that.”

There are no signs that MTN will quit Uganda.

But if there is a single thread that runs through this story it is power: the clash between a multinational company, bolstered by social and technological change, and Museveni, determined to show who is boss.

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