Government through Ministry of Finance has Wednesday announced takeover of Uganda Telecom Ltd (UTL).
The development which was announced by Minister Matia Kasaija came after the company’s major share holders Ucom Ltd decided at to stop funding the struggling telecom.
According to Minister Kasaija, Ucom, a Libyan based company informed government of their decision to stop financing UTL.
They also ordered resignation of all five of their Libyan representatives on the UTL Board of Directors.
To this effect, the minister said government had “decided to take over the affairs and management of UTL with immediate effect and will engage Ucom to ensure an orderly transition.”
The minister also went on to reassure the public and UTL customers that the company will remain operative with full government support.
Ucom is a subsidiary of LAP Greencom Network which is part of Libya Post Telecommunications, fully owned by the Libyan government.
The majority share holders have since 2014 been involved in discussions on how to revamp the sinking company.
Government was soon to approve a draft shareholder’s agreement providing for a turnaround strategy.
Ucom’s decision to bow out of UTL follows allegations which are being investigated by Parliament, that the company was being grossly mismanaged by its top managers.
Ucom has been responsible for the management of the telecom.
Parliament was recently told in a report by Budadiri West MP Nathan Nandala Mafabi that top Managers at UTL were paying themselves huge salaries and allowances on top of other benefits.
“The Top Four; MD, CFO, Chief Legal Officer and Chief Human Resource Officer earn a total salary of Shs 420 m/month. The lowest gets Shs 60 m/month and the highest Shs 150 m/month. This is 1/3 of the salary bill for the about 500 UTL workers. These salaries are indeed the highest for such staff in any company in Uganda,” read part of Mafabi’s report.
“Over the past few years, this company has continuously been on a free fall that has reached alarming levels. If nothing is done to rescue it, it could soon cease to exist,” said Nandala Mafabi.
Since 2007, UTL’s performance has been characterized by heavy indebtedness, decline in market share and losses.
Recently, a frustrated Airtel Uganda canceled its interconnect agreement with UTL after the latter failed to pay up to Shs 10 billion in outstanding fees and court fines. This meant that customers of both telecoms would be unable to call each other.
After the intervention of the regulator UCC and mutual deliberations, the agreement was reinstated.
Government stake
Government of Uganda which initially had a 51% stake in the company, was unable in 2006 to contribute to the required 26million US Dollars as additional equity to finance the network, and was compelled to reduce its shareholding to only 31%. Ucom raised the entire amount and upped its share to 61%.
UTL, up to now remains a key provider of fixed line services to most of government’s ministries, departments and agencies.
The company directly employs 500 Ugandans and thousands indirectly, and is also a major contributor to the national coffers in tax revenue and fees to UCC.