Home EMEAEMEA 2005 What mobile telephony brings to Uganda?

What mobile telephony brings to Uganda?

by david.nunes
Noel MeierIssue:EMEA 2005
Article no.:13
Topic:What mobile telephony brings to Uganda?
Author:Noel Meier
Organisation:MTN Uganda
PDF size:60KB

About author

Noel Meier is the Chief Executive Officer of MTN Uganda. He served previously as the CEO of MTN Swaziland, and headed the implementation teams that established MTN’s GSM operations in Rwanda and Uganda. Acting as CEO for both operations, Mr Meier initiated the start up process until handover to permanent CEO appointees. He began his career at MTN as Regional General Manager, responsible for operations in KwaZulu-Natal and the Eastern Cape. Noel Meier started his career with the Department of Posts & Telecommunications where he gained a wealth of experience in the Telecommunications industry.

Article abstract

Ninety per cent of Uganda’s 1,200,000 telephones are mobile. Seven years ago, fewer than 10 per cent of Ugandans had ever made a phone call. Today, access is available throughout the country and, despite the low, five per cent penetration, almost 90 per cent of Uganda’s inhabitants have access to and use the system. This remarkable turnaround is due mainly to wireless technology. Today, the competitive mobile operator, which began operations just seven years ago, is now the second greatest single tax payer in Uganda.

Full Article

Uganda has approximately 26 million people and a GDP per Capita of some US$330. Its tele-density of five per cent is impressive given that it grew from 0.2 per 100 people in 1998 when its telecom sector was liberalised. That mobile subscribers account for 90 per cent of the 1,200,000 connections highlights the importance of mobile telephony in Uganda. The revolution in communications that has cut across Africa, giving it the reputation as the fastest growing mobile market in the world, has transformed Uganda, its people and their way of life, economically, socially and politically Seven years ago, no more than 10 per cent of Ugandans had ever made a call. Today, the reverse holds. Back then, telecommunication services were only available, almost exclusively in urban areas of the country, while today, all the 56 districts in the country have access to telecom services that make GSM coverage available in 70 per cent of the country. Although wire-line telecom services were available before 1998, access to services was difficult and the number of people waiting to get a connection was twice the number of those connected. Today, the many distribution points set up by mobile operators sell GSM SIM packs across the counter. The growth of Uganda’s telecommunications in recent years is due predominantly to mobile technology. Whilst the number of fixed line phones has grown 45 per cent since 1998, to about 80,000 lines, mobile phones have grown almost 100 per cent per year in the same period. In Uganda, mobile technology has an enormous advantage compared to fixed wire line services, given the ability of wireless technology to reach remote populations with a smaller investment than landline systems. The strength of mobility and wireless The key to the success of mobile telephony in Uganda lies in the wireless nature of the technology. This has spurred fast rollout of the services even to the remotest parts of the country. Looking back, we see that the lack of telecommunications growth that African countries faced during the monopoly era was due mainly to the high cost and difficulty of rolling out fixed wire-line services. Mobile technology has changed all this. Improved policy and regulatory environments and the focus of these on promoting competition have played an important role in the sector’s growth. Although mobile telephony was introduced in Uganda in 1994, by 1998 the country only had about 10,000 GSM subscribers. This was mainly because the high prices adopted by the, then, sole GSM operator kept the service as a preserve of a few rich. Increased liberalisation, which brought in two additional GSM licenses, led to increased competition in the market, increased coverage and lower prices. Acquisition costs fell from over US$1,500 to less than US$60 including the cost of the handset. Similarly, as the result of competition, retail user tariffs have fallen significantly. Today Uganda is probably the country with the lowest tariffs anywhere on the African continent. Equally important has been the increase in Uganda’s public access services. Initially, the telecoms operators’ Universal Access obligations spurred the growth of public access. Subsequently public access evolved into a small-investor opportunity as individual Ugandans began to offer paid public access using their own phones. The country now has an estimated 50,000 public access points located in grocery stores, barbershops and on the streets. GSM mobile phones provide most of this access and, on average, each serves ten to 50 users a day, depending on the location. Mobile telephony benefits in Uganda Mobile telephony has enabled Uganda and other countries to leapfrog several generations of communications technology. Today, Ugandans have access to services that previously were the exclusive preserve of those with access to fixed line services. The financing of telephone service rollout in rural areas was once considered way beyond the means of developing countries such as Uganda. As an example, the competitive mobile operator’s licence in Uganda required it to install 89,000 lines in a five-year period beginning in 1998. At the time, all thought this a formidable, difficult to achieve, target. They based this assumption on the fixed wire-line model. Taking a developmental approach, using international development grants and loans, was thought the only way to address the challenges of a natural monopoly and of developing a nationwide telecommunications infrastructure. However, liberalisation, based upon a progressive regulatory regime, stimulated a mobile explosion. To date, the market has slightly over 1,000,000 mobile users, 65 per cent of these are on the competitive operator’s network alone. Mobile Telephony has had a great impact on Ugandan systems of governance. Because of widespread GSM deployment, e-Government is rapidly becoming a reality. The country’s recently approved ICT policy points to e-Government as a specific goal to be achieved in addition to the goal of effectively employing ICT to better Uganda’s economic situation. Mobile technology The economic success that Uganda has enjoyed, with GDP growth of over five per cent per annum, might never have been realised, might never have reached the same level, without the exponential growth of telecommunication services made possible by mobile technology. Indeed, the competitive mobile operator, a company that started operations in Uganda just seven years ago, is now the second greatest single tax payer in Uganda. Businesses of all sizes comprise the country’s diverse economic sectors and mobile telephony has connected them all, from the small farm dealer checking the price of produce, to the stranded fisherman contacting the collection van at his dock, to businessmen negotiating off-shore investments, and all have benefited as a result. Social interaction in Uganda has not been the same since the advent of mobile telephony. In a land where social bonds are highly regarded, accessible and affordable communication, a text messaging or a quick phone call, is a welcome addition any day. Future challenges In spite of its rapid growth in mobile telephony, Uganda’s five per cent mobile penetration lags behind its neighbours Kenya with 12 per cent, Tanzania with 10 per cent, and many other African countries. Still Uganda’s prices are the lowest in the East African region and steady growth is expected. Uganda’s policy makers want to keep increasing competition, hence the new telecom policy, upon the expiry of the initial exclusivity period in July 2005, will probably aim high and call for the growth of tele-density to 20 per cent by the year 2010. Mobile and fixed wireless telephony seem to be the only ways to meet such an ambitious target, given the time and investment needed to rollout wireline capacity in rural areas. There are, however, certain macro factors holding back the growth in demand that need to be addressed to meet Uganda’s ambitious goals. The high taxes charged users for mobile services are among the most important inhibiting factors. These taxes, including a 12 per cent excise duty charged only for mobile services, total approximately 30 per cent. Low demand is also a direct result of the country’s US$330 per capita income. The low penetration of ICT, including the lack of residential PCs, greatly limits the use of enhanced non-voice mobile telephony services. Mobile technology can deliver some of these services and are being considered by mobile service providers who will soon introduce GPRS services to both the pre-paid and post-paid customer base. Mobile operators are also driving the convergence of fixed and mobile telephony by introducing more advanced technologies such as CDMA and fibre optic for connections to the network.

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