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CUTS 7Up3 Project Launch
Performance of the Telecommunications
Sector and the Need for a National
Competition Authority
BY
Ssemboga Ann Rita Namyalo
[email protected]
Economist UCC.
22nd March 2005
1
Competition in the Telecoms sector

The 1996 telecoms policy
– Unbundling of Uganda Post and
telecommunications
– Introduction of private investors MTN in 1998 and
prior Celtel in 1995
– Divestiture of Uganda telecoms in 2001, 51% of
shares to strategic private investor
– Rural Communications Development Fund in 2001
•
•
•
•
2 National telecoms operators offering fixed services
3 Mobile service Providers
1 National Post operators UPL
Full Competition in the Postal Courier sector, 19 service
Providers
• Full Competition in ISP 18 Licensed, 12 operation
• International Data Gateway IDG’s 8
• Liberal Internet cafes etc
2
Economic Performance of the Sector since
reforms
1. Contribution to GDP
Communications Sector Contribution to National
Growth
35
30
25
20
15
10
5
0
29.7
32.3
22.1
20.5
0.9
1.1
1.2
1.4
1999/00
2000/01
2001/2002
2002/2003
Communication sector Percentage contribution to GDP*
Communication Sector GDP % growth rate*
3
Economic Performance of the Sector
Cont.
2.
Investment in the telecoms sector.
Annual Telecom investment in 000s shillings 1999-2003
150,000,000
100,000,000
50,000,000
0
1999
Annual Telecom investment 27941077.7
1999-2003
2000
2001
2002
2003
48609138 95701216.2 131023641 133486424
4
Economic Performance of the Sector
Cont.
3. Turn-over/ revenue generated from the sector
Total telecom turnover in 000s Ug. Shillings 1999-2003
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
Total telecom turnover
1999
2000
2001
2002
2003
27120387
112783225
364830473
494311583
546759060.8
5
Economic Performance of the Sector
Cont.
4. Taxes

Government’s tax reforms to support sector have
included:
1.
2.

1997 waived taxes on all telecommunications imports
except to VAT
FY 2002, waived all taxes on computers.
However Government introduced excise tax on airtime as
follows;
1.
2.
3.
Financial year 2002 – 5% excise duty (collected Ug. Shs
7 billion)
Financial year 2003 – 7% excise duty (collected Ug. Shs
10 billion)
Financial year 2004 – 10% excise duty
6
Economic Performance of the Sector
Cont.
Tax Cont.
There are some consequential negative effects to the
sector
1.
Affordability
2.
Negative Impact on revenues generated by
operating firms
3.
Negative impact on Investment in the sector.
7
Economic Performance of the Sector Cont.
5. Job Creation.
8
Access to services





All 56 districts of the country have a Point of
Coverage with either GSM or fixed
technology
Fixed rollout has not been as robust
More optical fiber linking Kampala to Entebbe
and Jinja.
VSAT have been deployed where terrain or
security doesn't permit but this has also been
limited.
Limited backbone infrastructure has had a
negative impact on the internet and data
markets
9
Voice telephony Market
1.Customer growth
10
Tariffs
Fixed line tariffs
Figure 1: Connection and Monthly fees
1993-2003
200000
Value USH
150000
100000
50000
0
connect ion
1995
1998
2000
2001
2002
2003
137000 157000 170000 110000 110000 120,000
charge
mont hly
6000
10000
10000
20000 20000
10000
subscript ion
11
Tariffs
Mobile tariffs
Movement of Local Mobile Rates (On
nett work, Off network & M2F)PREPAID
Movement of Mobile Connection and
Subscription rates 1995- 2003 PREPAID
600000
500
500000
400
400000
300000
300
200000
200
100000
100
0
1995 1996 2000 2001 2002 2003
Years
Connection Charge
Monthly Subscription
0
1995 1996 2000 2001 2002 2003
Within Ow n NetwYears
ork
Other netw orks (Mob)
Mobile 2 Fixed
12
Internet and Data Market
Unlimited competition for ISP excluding
IDG services
 18 Licensed ISPs; 12 operational
 Estimated internet users 120,000
 Estimated bandwidth uplink and down
link combined is 60MPs

13
Internet Cont.

Limitations to internet growth include:
– Limited competition/ exclusivity in
backbone infrastructure and International
services
– Limited access/ rollout of broadband
infrastructure
– High costs of services. High infrastructure
and access costs e.g computers and
software
– Lack of awareness of internet services
resulting to low demand for services
14
Strategies for managing Competition within the
Sector

Tools for monitoring competition within the sector:
– Price Regulation: Price cap regulation (CPI-X) uncompetitive
services; Current policy fixed services are subject to price cap ( few
operators and defined basic services)
– Mobile and Internet pricing is not a strict Price cap regime, tariff
notification procedure
– Regulation of Interconnection: MANDATORY. Access to essential
facilities/ bottleneck services, Developed Communication
(Interconnection) Regulation
– UCC has developed guidelines for interconnection, developed a
default interconnection model, has since its establishment made 1
interconnection determination.
– Market Power Definition and Obligations; Based on Market
Share, subscribers, volume of traffic, revenue etc,
– Account separation, cost based interconnection Reference
interconnection offers some of obligations for operators with SMP
– Developed regulation on fair competition; The Communications
(Fair Competition) regulation
Objectives of the Fair Competition Regulation include;
– Efficiency, Access, facilitate investment, protection of consumers,
promote self regulation among others
15
Challenges in the era of a fully
Competitive environment






Convergence of technology; One platform can offer a range of
services e.g. VIOP,
A still large illiterate consumer force, not aware of their rights
and obligations
Service coverage and distribution still skewed; Rural vs Urban
distribution of services, the need to protect and ensure
universality
Affordability, low levels of income, more than 50% of population
live below a dollar a day (UNDP HD report 2004).
The increasing interface between technology and other sectors
e.g Agriculture, health etc worldwide ICTs are being used as a
tool for development Malaysia, India, China
Limited Competition Duopoly ends in July 2005, licensing of
more service providers is expected, need to ensure fair
competition within the sector vis a vis the fact that some
operators have enjoyed exclusivity
16
Challenges in the era of a fully
Competitive environment
Effective management of competition in
the next era shall be the most
paramount factor in achieving
sustainable growth not only within the
sector but as a tool for Uganda’s social
economic development
 In the new era, Regulations should be
based on the Competition law and
Practice of the Country
 This calls for an urgent need to set
up a National competition body.
17

Thank you for your attention