Uganda to take over UTL after negotiations with Libya collapse

The government is taking over the management of Uganda Telecom Limited after its majority shareholders, Libya Posts Telecommunications & IT Company, said they would no longer fund the cash-strapped telecom.

The takeover, announced by finance minister Matia Kasaija on Wednesday, is the latest development in a process initiated by the MP for Budadiri West, Nandala Mafabi, who asked parliament last November to investigate UTL’s activities to prevent it from “sinking.”

In a petition tabled before parliament, Mr Mafabi said the company was heavily indebted and was not meeting its obligations. In a response to the petition, UTL’s board chair agreed that the company had “significant levels of debt” that “will be addressed by shareholder capital.”

But the finance ministry says the Libyan government will not be providing any more capital. It also adds that it has been in “protracted negotiations” with the Libyans since 2014 to capitalise the company, without any success.

LPTIC, which is wholly owned by the Libyan government, was UTL’s majority shareholder with a 61% stake. The other shareholder was the Uganda government.

The development comes less than two weeks after LPTIC’s chairman, Faisel Gergab, told parliament’s select committee that the Libyan government was working with Uganda to transform UTL. The committee had travelled to Dubai to meet the company’s majority shareholders on a fact-finding mission.

Asked if they were still interested in running UTL, the Libyan intimated that they would still be in charge at the end of 2017.

“UTL’s performance since 2007 has been characterised by heavy indebtedness, and a decline in market share and losses,” a statement signed by Mr Kasaija said. “This was due to inadequate investment, competitive pressure, a dilapidated network, and governance challenges.”

The Libyan government was unable to fund the company from 2011, according to Mr Kasaija, “owing to the political turmoil in Libya and UN/EU sanctions” that froze the majority shareholder’s assets.

But the Uganda government has also been blamed for some of the troubles the company is going through. Stephen Kaboyo, UTL’s board chair, told the select committee that the government’s bureaucracy and failure to remit Shs16 billion to the company had contributed its problems.

“UTL demands a lot of money in terms of services offered to government entities,” Mr Kaboyo said. “We are now working with the Secretary to the Treasury to start deducting this money at source and we shall also disconnect those who haven’t paid just like we have done to Uganda Police.”

The finance minister said government took over because it “considers UTL to be of strategic importance.” The telecom is the main provider of fixed line and data services to the government, Mr Kasaija said. It also employs 500 people directly and thousands more indirectly.

The minister added: “Between 2006 and 2017, UTL has paid approximately Shs217 billion in taxes and Shs53.3 billion in regulatory fees to Uganda Communications Commission.”

Mr Kasaija said the company will remain operational during the takeover period.

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