Libya, Uganda finalise plans to rescue Uganda Telecom

Mergers, Acquisitions and Financial Results

The uncertainty over the future of Uganda Telecom (Utl) may be all but over, after the shareholders approved cash injection of about $65m (Shs217b).

After two days of meetings concluded last week, the major shareholders, Lap Green Networks – a Libyan Government investment arm – and the Uganda Government agreed to a rescue plan for the telecom, which according to a statement released by Utl, would revitalise operations of the firm by September 2015.

The crisis talks included President Museveni, the Libyan Foreign minister, Mr Mohamed Al-Dairi, Uganda’s State minister for Privatisation, Mr Aston Kajara, Mr Wafik Al-Shater, Group chief executive officer of Lap Green and Utl chairman, Mr Stephen Kaboyo.

The closed-door meeting focused on how to raise money to pull Utl from the over Shs160b debt sinkhole it is currently in.

“Utl is at a critical stage of the business where we have embarked on the process of rehabilitating the business, refocusing our strategy and improving profitability of the company. All the interventions by the shareholders are aimed at creating conditions to reestablish Utl’s credibility as a truly Ugandan brand, repositioning to compete strongly and reclaim our once respectable market share,” said Mr Kaboyo yesterday in a statement.

Utl almost had its licence revoked by the Uganda Communications Commission for defaulting on various obligations – including non-payment of interconnection fees to MTN and Airtel. Utl’s liabilities had also outstripped assets by about Shs146b with UCC describing it as being in a state of “financial collapse.”

Lap Green owns a 69 per cent stake in Utl, with the Uganda Government holding 31 per cent.

“In terms of Utl cash requirements, let me say that telecoms require a threshold in millions of dollars on a consistent basis to get investment up, rebrand, fully optimise, achieve economies of scale and remain competitive. The business case and financial solution for Utl that mentions $65m is the baseline that will enable us shift into a capitalised turnaround,” Mr Kaboyo said, adding Utl needs more than that to recover fully.

One of the major sticking points was whether Lap Green should continue to load Utl with debt (about Shs150b) yet they haven’t been contributing any cash.
Source: Asoko Insight 16 July 2015