Uganda - Mobile Market - Overview, Statistics and Forecasts.

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Paul Budde Communication Pty Ltd.

Uganda - Mobile Market - Overview, Statistics and Forecasts

Table of Contents
1. 2. Synopsis .............................................................................................................................................2 Overview of Ugandas mobile market...............................................................................................3 2.1 Mobile statistics .......................................................................................................................4 3. Regulatory issues ...............................................................................................................................5 3.1 Licensing ..................................................................................................................................5 3.2 Taxes ........................................................................................................................................5 3.3 Infrastructure sharing ...............................................................................................................6 3.4 SIM card registration................................................................................................................6 4. Major mobile operators......................................................................................................................6 4.1 MTN Uganda ...........................................................................................................................6 4.1.1 Major equity transactions.....................................................................................................7 4.1.2 Network infrastructure and services ....................................................................................7 4.1.3 ARPU...................................................................................................................................8 4.1.4 MTN villagePhone project...................................................................................................9 4.1.5 Services in refugee camps....................................................................................................9 4.2 Bharti Airtel Uganda (formerly Zain, Celtel)...........................................................................9 4.2.1 Major equity transactions...................................................................................................10 4.2.2 Network infrastructure .......................................................................................................10 4.2.3 Services..............................................................................................................................11 4.2.4 ARPU.................................................................................................................................12 4.3 Uganda Telecom Ltd (UTL) ..................................................................................................12 4.4 Warid Telecom.......................................................................................................................13 4.5 Orange Uganda (HiTS Telecom) ...........................................................................................14 4.6 i-Tel ........................................................................................................................................14 5. Tariffs and price war........................................................................................................................15 5.1 Per-second billing...................................................................................................................15 5.2 Free calls ................................................................................................................................16 5.3 Flat rates .................................................................................................................................16 5.4 MTN Zone..............................................................................................................................16 5.5 Free international roaming .....................................................................................................16 6. Mobile traffic ...................................................................................................................................17 7. Mobile data services ........................................................................................................................18 7.1 SMS........................................................................................................................................18 7.2 MMS ......................................................................................................................................18 7.3 WAP, GPRS and EDGE ........................................................................................................18 7.4 BlackBerry .............................................................................................................................20 8. 3G and 4G mobile broadband..........................................................................................................21 8.1 Mobile broadband statistics....................................................................................................21 8.2 3G, HSPA...............................................................................................................................21 8.3 LTE (4G) ................................................................................................................................23 9. Mobile money transfer, m-banking .................................................................................................23 9.1 Traditional bank charges and international remittances.........................................................23 9.2 Regulation ..............................................................................................................................24 9.3 MTN Mobile Money ..............................................................................................................24 9.4 Airtel Money (ZAP) ...............................................................................................................24 9.5 M-Sente (UTL).......................................................................................................................25 9.6 Other services.........................................................................................................................25 10. Mobile TV ..................................................................................................................................26 11. Forecasts .....................................................................................................................................26 11.1 Forecasts mobile market 2014; 2017 ..................................................................................26 11.2 Notes on scenario forecasts ....................................................................................................26

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Related reports ............................................................................................................................26

Key developments: ....................................................................................................................................2 Companies covered in this report: .............................................................................................................2 Table 1 Mobile subscribers and penetration rate in Uganda 1996 - 2012 ...........................................4 Chart 1 Mobile subscribers and penetration rate in Uganda 2002 - 2012 ...........................................4 Chart 2 Telecommunications tax revenue in Uganda by tax type 2008 - 2011...................................5 Table 2 MTN Uganda subscribers 2000 - 2012...................................................................................6 Table 3 MTN Uganda ARPU 2002 - 2012 ..........................................................................................8 Table 4 Zain Uganda subscribers 2002 - 2009 ....................................................................................9 Exhibit 1 Emergency rescue scheme for Lake Victoria .......................................................................11 Table 5 Zain Uganda ARPU 2006 - 2009..........................................................................................12 Table 6 Orange Uganda mobile subscribers 2009 2012 .................................................................14 Chart 3 Mobile tariffs in Uganda, on-net and off-net 2009 - 2011....................................................15 Chart 4 Mobile traffic in Uganda by traffic type 2008 - 2011...........................................................17 Chart 5 Mobile vs. fixed internet subscriptions in Uganda 2007 - 2011 ...........................................18 Table 7 Warid Telecom (Uganda) GPRS/EDGE pricing 2012 .........................................................19 Table 8 Uganda Telecom GPRS/EDGE pricing 2012.......................................................................20 Table 9 MTN Uganda Blackberry pricing 2012 ................................................................................20 Table 10 Active mobile broadband penetration in Uganda 2009 - 2011...........................................21 Table 11 Uganda Telecom 3G mobile broadband pricing 2012........................................................21 Table 12 Orange Uganda 3G/HSDPA mobile broadband pricing 2012............................................21 Table 13 MTN Uganda 3G/HSDPA mobile broadband pricing 2012...............................................22 Table 14 Airtel Uganda HSPA+ pricing 2012...................................................................................23 Table 15 Warid Telecom (Uganda) unlimited HSPA+ pricing 2012 ................................................23 Table 16 Forecast mobile subscribers in Uganda 2014; 2017 ...........................................................26

1.

SYNOPSIS

The introduction of mobile telephony has revolutionised Ugandas telecommunications industry since Celtel/Zain (now Bharti Airtel) launched the first network in 1995, followed by MTN in 1998, Uganda Telecom in 2001, Warid Telecom in 2008 and HiTS Telecom, in which France Telecoms mobile unit Orange bought a majority stake in 2009. The intensified competition led to a price war which has accelerated subscriber growth but also reduced the average revenue per user (ARPU). The network operators started raising their tariffs again in 2011 and are trying to find ways of generating additional revenue streams. Mobile data and 3G broadband services as well as mobile money transfer and mbanking services are at the forefront of this development in a country where less than 20% of the population currently has internet access or holds a traditional bank account. Key developments: More than 90% of internet connections are mobile; 3G mobile broadband pricing varies widely, consolidation expected; First 4G (LTE) network launched; Major tower outsourcing deal signed; Libyan government back in control of Uganda Telecom; New regulations for SIM card registration may put temporary pressure on subscriber growth.

Companies covered in this report: MTN Uganda (Telia); Bharti Airtel (Zain, Celtel); Uganda Telecom (UTL, LAP Green, Telecel, Orascom, Deutsche Telekom); Warid Telecom (Essar); Orange (HiTS Telecom); i-Tel; Simba Telecoms; Standard Chartered Bank; Monitise; American Tower Corporation (ATC), Smile Telecom.

2.

OVERVIEW OF UGANDAS MOBILE MARKET

Cellular mobile services have enjoyed outstanding growth in Uganda since the first network was launched by Celtel Uganda (now Bharti Airtel) in 1995 and competition was introduced by a second

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network, MTN Uganda in 1998. In 1999, Uganda became the first country on the continent where the number of mobile subscribers passed the number of fixed-line users, and the telephone market is now virtually 100% mobile. In 2001, UTL Telecel, the mobile division of Uganda Telecom Ltd, commenced operation of the third GSM network. However, prices remained high mainly due to high taxes and high interconnection fees, to the extent that it cost as much to call a local mobile phone as it did to call neighbouring Kenya. A price war broke out when a fourth network (Warid Telecom) launched in early 2008 and a fifth one (HiTS Telecom, which was taken over by Orange) launched in early 2009. The increased competition has forced the operators to undertake costly promotions, including offering connections for new subscribers at lower rates, free airtime and lower tariffs at certain times of the day. However, facing the additional problem of the local currency losing value against the US$, the operators increased their tariffs in 2011. The market is almost entirely prepaid. After paying US$3 million in licence fees, Indias Essar Telecom received Ugandas sixth mobile licence in mid-2009, but instead of rolling out its own network, the company took a majority stake in Warid Telecom. In addition, i-Tel operates a CDMA-based network. MTN quickly became the market leader after entering the country in 1998 and has remained in this position with a market share of around 50%, although this has dropped to around 40% temporarily under the intensified competition. New regulations requiring the registration of SIM cards have led to a drop in subscriptions in the first half of 2012. However, growth is expected to return to the market after the 2013 deadline for registration. A major problem for the operators in rolling out their networks is the lack of access to the electricity grid in many rural areas. This can add operational costs of up to US$200,000 per year per site. As a result, the major operators formed a consortium in 2009 to share costs of connecting their sites to the grid. Operating conditions in the country are difficult in general, with network operators depending on diesel generator power for more than 40% of their sites. As the number of antenna towers dotting Ugandas landscape increases, the government is working on regulations to encourage infrastructure sharing among the network operators. This has also created opportunities for third-party tower companies. Since 2008, a local company has been offering a solution to the problem of recharging phone batteries in areas without electricity, by means of a charger powered by a bicycle dynamo. The introduction of mobile data and 3G broadband services has catapulted the mobile network operators into the position of leading internet service providers (ISPs) as well, due to Ugandas poor fixed-line infrastructure. In addition, the emergence of mobile money transfer and m-banking solutions is revolutionising the countrys banking sector and generating additional revenues for the mobile operators who are plagued by rapidly decreasing Average Revenue per User (ARPU) levels in the voice market.

2.1
Year 1996 1997

MOBILE STATISTICS
Subscribers (thousand) 3.5 7 Penetration <0.1% <0.1%

Table 1 Mobile subscribers and penetration rate in Uganda 1996 - 2012

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Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (e)

Subscribers (thousand) 40 72 243 323 472 778 1,165 1,525 2,698 5,163 8,555 9,384 12,828 16,697 17,000

Penetration 0.2% 0.3% 1.0% 1.3% 1.8% 2.9% 4.2% 5.3% 9.1% 17% 27% 29% 38% 47% 47%

(Source: BuddeComm based on ITU, UCC, company and industry data)

Chart 1 Mobile subscribers and penetration rate in Uganda 2002 - 2012

(Source: BuddeComm based on ITU, UCC, company and industry data)

For operator subscriber statistics, see chapter 4. There is a considerable amount of multiple SIM card ownership in Uganda. Many users have SIM cards for several networks in order to take advantage of lower on-net call tariffs or free calls (see chapter 5). As a result, dual-SIM phones are popular in Uganda.

3. 3.1

REGULATORY ISSUES LICENSING

Since 2007 mobile licences in Uganda have been awarded under a new simplified and converged licensing regime which distinguishes between only three licence types, irrespective of geographical coverage or technology used public infrastructure provider (PIP) licences, public service provider

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(PSP) licences, and general licence permits. It requires an application fee of only US$2,500, a one-time fee of US$100,000 and an annual licence fee of US$10,000 for a PIP licence. The licences to Warid Telecom (see chapter 4.4) and HiTS Telecom (see chapter 4.5) were issued under the new regime. A political dispute erupted about the alleged waiving of licence fees by the Uganda Communications Commission (UCC), the industry regulator. The licences allow the companies to provide mobile services, fixed voice services, Global Mobile Personal Communications by Satellite (GMPCS) services and Internet access services, which include IP Telephony and Virtual Private Networks, as well as Internet Exchange Services. UT and MTN hold full National Telecom Operator (NTO) licences under the old licensing regime, allowing them to offer all kinds of services. Zain (now Airtel) has converted its old mobile licence into a PIP and PSP licence.

3.2

TAXES

A GSM Association survey has shown that Ugandan mobile users are the second most taxed in the world, and that this was slowing growth. The introduction of a 7% excise duty on mobile telephone calls in 2001 has impacted negatively on the sector. The duty went up to 10% in 2004 and to 12% in 2005 (compared to Kenya's 10% and Tanzania's 7%), along with an increase of Value Added Tax (VAT) by 1% to 18%. The mobile operators have all increased their tariffs accordingly. In addition, there is a 27% import tax. The scrapping of the duty is among the regulators recommendations for a new telecommunications policy. Excise duty on fixed-line calls and public payphones was reduced from 5% to 3% in 2006. A proposal to scrap VAT on mobile phones was voted down in 2009 following concerns from the government that it needs the revenues. However, the government stated that it will reconsider the issue at a later date. Phone dealers have long argued for the tax to be scrapped, citing increased levels of grey imports and smuggling from neighbouring countries. These concerns were heightened when neighbouring Kenya lowered its taxes on mobile phone handsets earlier that year. Chart 2 Telecommunications tax revenue in Uganda by tax type 2008 - 2011

(Source: BuddeComm based on UCC data)

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3.3

INFRASTRUCTURE SHARING

As the number of antenna towers dotting Ugandas landscape increases, the government is working on regulations to encourage infrastructure sharing among the network operators. A major problem is the lack of access to the electricity grid in many rural areas. The network operators depend on diesel generator power for more than 40% of their sites, which can add operational costs of up to US$200,000 per year per site. As a result, MTN, Zain, UTL and Warid formed a consortium in 2009 to share costs of connecting their sites to the grid. ATC Uganda, a joint venture between MTN and American Tower Corporation (ATC) took over MTNs towers in Uganda in December 2011. ATC paid US$89 million for a 51% stake in the new company. It plans to roll out more than 280 new sites in the country over the next three years.

3.4

SIM CARD REGISTRATION

The UCC launched regulations in March 2012 that require all SIM cards in the country to be registered by their owners. Network operators will be obliged to block unregistered SIM cards after a March 2013 deadline. It is expected that some customers will not go through the registration process with all SIM cards they hold for different networks. MTN Uganda registered a drop in subscriptions in the first half of 2012 and changed its net additions guidance from +400,000 to -300,000 for the year (see chapter 4.1).

4. 4.1

MAJOR MOBILE OPERATORS MTN UGANDA

Started as a 50:50 joint venture between South Africas MTN Group and Telia Overseas AB, MTN Uganda is the countrys largest telecom operator offering mobile, fixed-line and data services with a market share of more than 50%. MTN operates mobile networks in 21 countries in Africa and the Middle East. Table 2 MTN Uganda subscribers 2000 - 2012 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (Jun) Subscribers (thousand) 81 220 336 468 683 982 1,595 2,363 3,523 5,222 6,463 7,629 7,228

(Source: BuddeComm based on company data)

MTN Uganda claimed a market share of 50% in June 2012, down from 52% at the beginning of the year. The drop is partly due to newly introduced SIM registration regulations (see chapter 3.4). The establishment of sales channels such as Simba Telecom and MTN kiosks provides access to the companys services from more than 600 outlets.

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Owned by the chairman of MTN Uganda, NileCom operates seven MTN-branded retail outlets and controls 1,200 sub-dealers. In early 2008, South Africa-based Celcom acquired a 50.5% interest in the company for US$1.3 million.

4.1.1

Major equity transactions

Telia sold a 32% stake to MTN for US$166 million in mid-2006, taking MTNs stake in the Ugandan operation to 84.44%. A few weeks later MTN increased its stake further to 97.34% following the successful acquisition of the 12.89% stake held by Rwanda-based Tri-Star Investments for US$55 million in cash. A Ugandan businessman holds the minority stake which he increased to 5% in mid2007. The 5% stake was valued at US$52 million at the time. In 2009 MTN increased its stake from 95% to 97%.

4.1.2

Network infrastructure and services

After paying US$5.8 million for its licence, the companys GSM 900 network in Uganda launched in late 1998, offering significantly lower tariffs than its competitor MSI (now Zain/Bharti). Its lowerpricing policy resulted in more than half of its subscribers being from areas outside of the countrys main urban centres. MTNs GSM platform was built using Ericsson equipment, supporting valueadded services including voicemail, SMS, fax and data (see chapter 7), international roaming, conference calls and a who called service showing calls missed while the phone was switched off or out of reach. In little over one year, MTN emerged as the largest mobile operator in Uganda in terms of subscribers. MTN has not limited its network expansion to only the district capitals as stipulated in its licence, but has also been aggressive in expanding into rural areas. Hundreds of millions of US dollars in investment led to the expansion of services to all of the countrys 38 districts. Coverage is provided to more than 80% of the population in over 70% of the land area, including over 700 towns and villages and 5,700 km of highways. MTN owns and operates its own transmission infrastructure and has built direct transmission links to neighbouring countries Rwanda and Kenya. It operates two international gateways. In 2001 MTN launched the continents first dual-band GSM network in Kampala. It installed 23 base stations operating in the 1800MHz frequency band to increase capacity in the area. MTN has also expanded its offerings to include fixed-line, VSAT (satellite telephony) and ISP services. Internet Easy launched in 2002 a dial-up Internet solution for small and medium enterprises (SMEs) that requires no contract with an ISP. To access the service, customers must have an MTN fixed or postpaid mobile line and obtain an email address from either One2net or Africa Online. Users pay a per-minute dial-up rate and no initial connection fee or additional costs are involved. Internet Easy is supplemented with various additional services such as free SMS notification on a users mobile handset when they receive an email. An Information Service introduced in 2003 allows subscribers to access news, sport, foreign currency and exchange information, commodity prices, movie news, TV schedules, radio station frequencies, inspiration, chat and email, with a choice of two content providers. A service called Me2U launched in 2004 allowing users to transfer prepaid airtime up to UGS50,000 between different mobile phone accounts by sending an SMS to a special number, specifying the amount to be transferred and the phone number of the recipient. Ugandan company Digital Solutions Ltd petitioned the countrys Commercial Court to stop MTN from using the service until a copyright suit it filed against the operator is resolved. MTN Web2U allows users to purchase and send airtime over the Internet, including Ugandans living abroad purchasing airtime for their less affluent relatives at home.

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The Publicom Quad Bike is a mobile payphone mounted on a four-wheel bike. Thousands of these units are in operation around the country, especially in rural areas. A special tariff was introduced in 2006, allowing customers to make national and international calls from as little as UGS100. In 2006 MTN was also awarded a government contract to provide infrastructure for universal service in the eastern and western regions of Uganda. The initiative would bring Internet access to some of the most remote areas of the country. Ericsson carried out a US$52 million network upgrade in 2007, taking the networks capacity to 10 million subscribers. In total, MTN invested more than US$100 million in Uganda during that year. Capital expenditure (capex) almost tripled in 2008, adding over 100 base stations to take the total to 573. Many base stations are in rural areas with no grid power and have to run on generators or solar panels. In 2009 MTN Uganda spent around US$135 million on network expansion, capacity and quality improvement. In late 2009 MTN Uganda raised US$100 million in debt from 11 local and regional banks, denominated in Uganda Shillings to reduce exposure to foreign exchange fluctuations. The new credit line took the companys total capital investment in the country to US$678million.

4.1.3

ARPU

Around 98% of the companys service is on a prepaid basis, reflecting Ugandas predominantly cashbased economy. Typical for most African mobile operations, ARPU has declined steadily in recent years as competition intensified and the subscriber base expanded into lower income groups. Table 3 MTN Uganda ARPU 2002 - 2012 Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (H1) ARPU (US$/month) 30 24 20 16 12 10 8 6 5 3.50 3.80

(Source: BuddeComm based on company data)

4.1.4

MTN villagePhone project

A joint venture between MTN Uganda and the Grameen Foundation of the USA, MTN villagePhone is an initiative aimed at bringing affordable telecom services to rural villages across Uganda in partnership with microfinance institutions by creating opportunities for individuals living in impoverished rural areas to become villagePhone Operators (VPOs). VPOs take a micro-loan for the equipment for as little as US$230 to be repaid over a period of up to 12 months. VillagePhone businesses can be established in areas where electricity is unavailable and in areas where the MTN network can only be accessed with a booster antenna. In addition to the antenna, the equipment package also includes a car battery or solar power panel, a handset, a VPO user manual and a fixed-line dedicated simcard that can be loaded with the prepaid airtime and requires no service fees. Based on the successful Grameen Village Phone program in Bangladesh, the MTN villagePhone officially launched in late 2003. Over 2,000 phones had been deployed in the first two years. The initial

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goal to establish 5,000 villagePhone businesses in five years was surpassed in just three years, with about 150 added every month. The 10,000 barrier was broken at the end of 2007, and by mid-2009 there were 50,000 villagePhones in operation.

4.1.5

Services in refugee camps

In partnership with the GSMA Development Fund, the United Nations High Commissioner for Refugees (UNHCR) and Ericsson, MTN is providing connectivity to refugee camps in northern Uganda, including the provision of phones. The initiative addresses the urgent need for access to affordable communication for refugees and humanitarian organisations to support refugee management, distribution of food, family reunification, education, health care and economic empowerment.

4.2

BHARTI AIRTEL UGANDA (FORMERLY ZAIN, CELTEL)

Celtel Uganda was the first private telecom operator to be licensed in Uganda in late 1994 following the decision to liberalise the telecom sector. It launched the countrys first mobile network in mid-1995 with Vodafone and Netherlands-based MSI Cellular Investments as major partners. MSI changed its name to Celtel International in 2004 and then to Zain in 2008. In 2010, most of Zains African operations were taken over by Bharti (see chapter 4.2.1). The original 15-year licence was extended in early 2008 after the Uganda Communications Commission (UCC) determined that the operator had met its licence obligations by virtually 100%. Celtel also claimed it had contributed UGS1 billion to the Rural Communications Development Fund (RCDF) since its inception in 2003. Under the new regulatory framework, Zain was given two licences: a Public Infrastructure Provider (PIP) licence for a renewable 15-year term, and a Public Service Provider (PSP) licence for a renewable five-year term. Table 4 Zain Uganda subscribers 2002 - 2009 Year 2002 2003 2004 2005 2006 2007 2008 2009 Subscribers (thousand) 34 78 152 291 470 1,435 2,078 1,925

(Source: BuddeComm based on company data)

Note: Bharti has not reported subscriber figures by country since the takeover. Airtel was reported to have around four million subscribers in early 2012. Over 99% of Airtel's subscribers in Uganda are prepaid customers. Products including SIM-packs and airtime cards are marketed and sold through a variety of channels, including chains of service stations and convenience stores. In 2007, Celtel entered into a partnership with Posta Uganda that would let the telecom company sell its products and services at all of Postas outlets countrywide. In late 2009, Nokia Siemens Networks (NSN) was awarded a five-year management contract for Zains networks in Kenya, Tanzania and Uganda, comprising over 3,000 multi-vendor base station sites serves more than nine million customers. Under the agreement, 350 Zain staff will be transferred to NSN.

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4.2.1

Major equity transactions

In 2000, Vodafone divested its 36.8% holdings to MSI, raising the latters stake to 90%, with the balance held by the World Banks private lending arm, the International Finance Corporation (IFC). In early 2005, Celtels then 13 African mobile operations, including Uganda, were acquired for US$3.4 billion in cash by Mobile Telecommunications Company (MTC) of Kuwait. MTN of South Africa initially disputed the takeover, claiming it had made an earlier (lower) bid that was legally binding, but then dropped its case. The company was rebranded Zain, with operations in 20 countries and more than 50 million managed subscribers in mid-2008. In March 2010, Zains African business (excluding the operations in Morocco and Sudan) were acquired by Bharti Airtel of India for US$10.7 billion.

4.2.2

Network infrastructure

Celtel Ugandas switching equipment was supplied by Siemens and transmission equipment by Digital Microwave Corporation. Intervoice Brite Systems was chosen to provide a prepaid and voicemail platform while LHS supplied the customer care and billing system. From an initial coverage in Kampala, Entebbe and Jinja, Celtel expanded its network to cover many other areas in most of Ugandas districts. In 2003, network coverage was extended to much of eastern Uganda. This was followed by expansion to the northern areas, some of which are ravaged by civil war. Unlike MTN, Celtel had no network rollout obligations attached to its licence. To meet its network coverage expansion and Internet plans, Celtel embarked on the roll-out of a national 16x2Mb/s microwave backbone, along the same routes as Uganda Telecom and MTN Uganda. A microwave link was established between Uganda and Tanzania in 2003 to improve connectivity between Celtel and other operators in the region. As part of its drive to expand services and penetrate under-serviced rural areas, Celtel installed Siemens GSM community phone units known as Sigi. These units offer a prepaid metering facility with basic call control functions for the phone shop operator as well as the network operator. The company also signed an agreement with the Uganda Taxi Operators and Drivers Association to install payphones in all commuter taxis. In response to MTNs villagePhone project (see chapter 4.1.4), Celtel came out with a SIM card-based mobile payphone service, All4One, in 2006. Developed by Xponcard from Denmark, the product enables small entrepreneurs to make personal calls on their mobile phone as well as making money from selling calls to other people. The tariffs are fully controlled by the Celtel billing platform which removes mistrust between the entrepreneur and the end-user, as the phone displays amount and duration used. At US$490 per SIM card, however, the entry level for the entrepreneur is relatively high. Celtel partnered with Venture Communications for a call centre infrastructure upgrade in 2006 which enabled the company to improve its service delivery to customers. Celtel Uganda was given a US$40 million loan from the IFC in mid-2007 to develop its mobile network as part of a wider US$320 million loan which also includes the companys operations in the Democratic Republic of Congo, Madagascar, Malawi and Sierra Leone. During the year, Celtel invested a total of US$80 million into its network in Uganda by installing two new switching centres and 60 new base station sites, as well as adding 1800MHz capability to existing sites in order to increase network capacity in urban areas. The expansion program increased the operators population coverage in Uganda from 78% to around 90% and took total network capacity to four million. Innovative coverage solutions also include a mobile base station on a truck providing service to remote oil fields in western Uganda. Bharti announced in mid-2010 it plans to invest US$100 million in network expansion.

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4.2.3

Services

Airtel's services include voicemail, SMS, Web2SMS, SMS information services, mobile fax and data (see chapter 7) and international roaming. For information on Zains One Network service, see chapter 5.5. The company's growth slowed following the introduction of competition in the mobile sector. Subsequently, new growth strategies were developed along with plans to significantly increase coverage and capacity. This strategy included entering the Internet market and various new service offerings. MSI acquired ISP Infocom in 2000, enabling Celtel to commence offering Internet services via a Very Small Aperture Terminal (VSAT) link to Intelsat and connections for remote rural customers via domestic VSAT networks. Unlike MTN, however, Celtel had no international voice licence. Celtel introduced the countrys first electronic airtime top-up service, Tembeya, in 2005. Previously, mobile users only available method of adding airtime credit was via physical recharge vouchers (referred to locally as scratch cards). Hundreds of dealers nationwide support the new service. Subscribers can transfer airtime between each other using the Me2U service. Exhibit 1 Emergency rescue scheme for Lake Victoria
In January 2010 Zain launched an emergency rescue scheme for Lake Victoria in the three countries bordering the lake: Kenya, Tanzania and Uganda. In a joint initiative with the GSM Association (GSMA) and Ericsson, a Mobile Positioning System will facilitate tracking of fleet movements and support search and rescue operations. The system should help to reduce the approximately 100 deaths on the lake each year. Lake Victoria is the second largest lake in the world with 35 million people living along its shores, including nearly 200,000 fishermen with a fishing fleet of more than 70,000 boats. Mobile networks now cover 80% of the fishing zones. Zain installed 21 new base station sites around the lake in areas where the majority of accidents occur. Nineteen automatic weather stations were installed on the towers, providing the national weather bureaus with up-to-date information.

4.2.4
Year 2006 2007 2008 2009

ARPU
Monthly ARPU (US$) 12 9 6 4

Table 5 Zain Uganda ARPU 2006 - 2009

(Source: BuddeComm based on company data)

Note: Bharti has not reported ARPU by country since the takeover.

4.3

UGANDA TELECOM LTD (UTL)

UTL Telecel, the mobile division of Uganda Telecom Ltd (UTL) went live in January 2001 as an affiliate of Geneva-based Telecel International, a pan-African mobile network spanning 13 countries. UTL was established in 1998 as a result of restructuring and preparation for privatisation within the formerly state-run Uganda Posts and Telecommunications Corporation (UPTC). It was partially privatised in 2000 with the sale of a 51% stake and management rights to the U-Com consortium,

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consisting of Switzerlands Telecel International, Egypts Orascom Telecom and Deutsche Telekom subsidiary Deutsche Telepost Consulting (Detecon). Since April 2007 UTL has been 69% owned by the Libyan governments investment arm, the Libya Africa Portfolio (LAP Green), with the Ugandan government holding the remaining 31%. LAP's assets were frozen under UN sanctions against Libya's Gaddafi regime in 2011, but in early 2012 the company stated its commitment to provide UTL's funding needs for the year, and in May 2012 its control over the 69% stake was reinstated. UTL Telecel became the mobile postpaid brand of Uganda Telecom while the prepaid service targeting the mass market was called Mango, but since mid-2006 all services have been rebranded under the name Uganda Telecom (UT), including the companys fixed-line and Internet offerings. International roaming and teleconferencing services were launched in 2003. Roaming is offered to both postpaid and prepaid customers (the latter in only a small number of countries). By 2004 the Alcatel-supplied network provided coverage to more than 100 cities and towns. In September 2005 UTL announced that it had connected the entire more remote northern region of the country to its mobile network, beating a government deadline that required it to cover the region by the end of the year. Coverage also extends into southern Sudan and the north-eastern part of the Democratic Republic of Congo, providing coverage to refugee camps across the borders. The entire network has been upgraded with Alcatels Evolium solution comprising base stations and switches, as well as an Intelligent Network (IN) platform. Since 2005 UTL has rolled out its public GSM payphone service SIMU 4 U at a total cost of US$3.1 million. Following the investment by Libyas LAP in 2007, UTL announced a US$90 million network expansion program using Huawei (US$50 million) and Alcatel equipment which increased population coverage to 70% by doubling the number of base station sites to around 250 within a year. In 2005 UTL launched a new service that enabled users to access a variety of data using a new Smart SIM Card, such as updates on breaking news, commodity prices, ring tones, weather, and exchange rates. UTL launched the first solar-powered mobile phone in Uganda in 2009, dubbed Kasana. Less than 10%of the country has access to the electricity grid. In early 2007 an interconnection deal between UTL and Gemtel, a mobile network operating in Southern Sudan, came under scrutiny. The Ugandan government alleged that under the deal calls were being made without paying taxes. UTL also allegedly blocked calls from MTN customers to Gemtel customers when MTN demanded to have the calls billed as national calls since they use the Ugandan +256 country code, while UTL was billing them as international calls. The Sudan government cleared Gemtel in August 2009 to continue using Ugandas country code despite continued protests from some members of parliament. In parallel to its GSM mobile network, UT operates a CDMA-based fixed-wireless service called TelesaverPlus. For more information on Uganda Telecoms fixed-line, fixed-wireless and Internet services, see separate reports: Uganda - Broadband and Internet Market, Digital Media; Uganda - Key Statistics, Regulatory and Fixed-line Telecoms Overviews.

4.4

WARID TELECOM

Ugandas fourth mobile licence was awarded to Abu Dhabi-based Warid Telecom in late 2006, along with a waiver of import tax on plant and machinery as an investment incentive. The company selected Huawei Technologies in late 2007 to deploy GSM base stations, a value-added service platform, an international gateway and an IP Multimedia Subsystem (IMS). More than 200 base station sites were

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deployed, covering around 70% of the population and the major highways in the country. The first test call was successfully completed at the end of 2007 and commercial services were launched in Kampala and other major cities in early 2008. A total of 150,000 customers signed up within three days in a pre-registration campaign, but actual take-up was estimated at only around 25,000 in the first two weeks of operation. However, on the back of extensive network coverage and good service quality due to the absence of congestion in the new network, the subscriber base passed the one million mark within less than one year and reached 1.6 million in July 2009. Market leader MTN reduced its tariffs by 14% prior to Warids launch, and the newcomer opened with even slightly lower tariffs which triggered a price war (see chapter 5). Through 36 customer centres, Prepaid starter kits were sold for UGS3,000 (US$2), and international calls were offered at the rate of a local call (US$0.27 per minute) for a three month promotional period. The operator also has four mobile customer service centres in vans travelling around the country, branded as WOW (Warid on Wheels). The company received the Best Investor award in 2008 for investing US$185 million within two years of being licensed. By this time the network had capacity for 1.5 million subscribers, with plans to increase this to four million with an additional investment of US$400 million over two to three years. In a bid to cut its operating costs by 30% in the long term, Warid announced a US$10 million investment in mid-2009 to extend power lines to all of its towers across the country and to construct perimeter walls around the sites. In parallel to its GSM mobile network, Warid is deploying a WiMAX network in Uganda. For more information, see separate report: Uganda - Broadband and Internet Market, Digital Media. The company has over seven million mobile subscribers in Pakistan and is also rolling out mobile networks in Bangladesh and Congo-Brazzaville. It is also planning to make investments in the banking, pharmaceutical and hotel sectors in Uganda. Shortly after receiving a mobile operator licence in Uganda in mid-2009, Indias Essar Group bought 51% of Warid Telecom from the Dhabi Group. The operation in Uganda was valued at US$310 million of which Essar bought 51% for nearly US$190 million, including a control premium. At the time, Warid was engaged in a UGS160 million tax dispute with the Uganda Revenue Authority (URA). Essar had outlined a US$200 million investment when it received its licence, which was now used for the acquisition. For 2010 Warid announced plans to set up more than 150 new base stations. In May of that year, six new Customer Care Centres were opened around the country.

4.5

ORANGE UGANDA (HITS TELECOM)

In early 2007 a fifth GSM licence was awarded to Saudi-based HiTS Telecom. The company has GSM operations in Saudi Arabia and Yemen, as well as a broadband service in Nigeria. It announced plans to invest US$343 million in GSM infrastructure in Uganda, US$200 million of which would be within the first 12 months, and to launch commercial services in the first quarter of 2008 with at least 60% population coverage. Alcatel-Lucent received a US$100 million contract from HiTS in mid-2007 for a turnkey GSM network and managed services. The network was successfully completed at the end of 2007. However, almost a year later the company had still not launched commercial services, sparking speculations about financial difficulties. In late 2008 France Telecoms mobile unit Orange bought a 53% stake in HiTS Uganda and pledged to invest US$375 million in addition to the US$150 million that HiTS had already invested in the network. The GSM 900/1800 network was finally launched in March 2009, claiming 200,000 subscribers three months later. Mobile broadband services (3G, see chapter 8) were launched in October. One year into

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operations, Orange Uganda had 358,000 subscribers at the end of March 2010, up by only 8,000 for the quarter. The network had 450 live base station sites in mid-2010. In October 2009 Orange Uganda signed a maintenance and repair contract with Alcatel-Lucent in a bid to improve operating efficiencies and reduce costs. Table 6 Orange Uganda mobile subscribers 2009 2012 Year 2009 2010 2011 2012 (Mar) 350 609 622 625 Subscribers (thousand)

(Source: BuddeComm based on company data)

I-TEL Following an initial investment of US$30 million and a friendly-user trial with 1,000 customers in Kampala, i-Tel launched a Code Division Multiple Access (CDMA) network in late 2009. The company offers call tariffs similar to fixed-line rates of around UGS150-250 (US$0.07-0.12) per minute. The lowest tariff at the time was UGS249 per minute, offered by Warid Telecom. i-Tel charges UGS350 per minute for international calls.

4.6

The friendly-user trial started in late 2008 with five base station sites in Kampala. The company then started to extend its network to the western districts of Rukungiri, Ntungamo and Mbarara. i-Tel plans to invest US$150 million over the next three years to expand its mobile network to 38 towns across the country and to add fixed-line telephony and data services to its portfolio. The network operates in the 450MHz frequency band and has been upgraded to EV-DO technology offering up to 2.4Mb/s. Unlimited internet access costs UGS90,000 per month.

5.

TARIFFS AND PRICE WAR

High mobile tariffs in Uganda were partly the result of high interconnect rates between the different networks which the UCC started regulating in 2009. An agreement with the operators was reached in 2010. For more information, see separate report: Uganda - Key Statistics, Regulatory and Fixed-line Telecoms Overviews. The years 2007 and 2008 were characterised by a price war among Ugandas mobile operators, following the market entry of Warid and HiTS/Orange, with some unsustainable tariffs and promotions being offered. In mid-2009 a turning point appeared to have been reached when MTN increased its tariffs by 9% across various calling plans. However, prices fell again sharply in the second half of 2010, but started to recover in 2011. Chart 3 Mobile tariffs in Uganda, on-net and off-net 2009 - 2011

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(Source: BuddeComm based on UCC data)

5.1

PER-SECOND BILLING

Celtel was the only operator offering any form of per-second billing for a number of years. Introduced as Rate Champion during 2003, per-second billing started only after the first minute of calling and did not apply to international calls. Users paid UGS5 per second during off-peak hours and UGS8 during peak hours. Calls on UTLs Mango network were charged in 15-second increments after the first minute. Celtel and MTN introduced true per second billing (from the first second) during 2005. By 2008, calls within the Zain network were available for as little as UGS3 per second, equivalent to US$0.10 per minute. The Ugandan Consumer Protection Association (UCPA) had been claiming for a long time that the high cost of mobile calls could be reduced, giving more Ugandans access to services, if mobile operators were willing to switch to per-second billing.

5.2

FREE CALLS

In mid-2007 MTN introduced a 50% airtime bonus to be used between 10pm and 7am. Celtel was offering free calls between 10pm and 8am. In a bid to keep up with its rivals, UTL started offering a similar service to those customers who top up their airtime credit daily. However, these schemes led to massive network congestion and prompted the regulator UCC to suspend the promotion of such offers. Warid Telecom launched a promotion in early 2008 under which calls are free after the first two minutes. Unlike previous free call offers, this one was valid around the clock. Then, in July of the same year, the operator introduced Mega Bonus, a plan under which Warid-to-Warid calls are free for a given number of days depending on how much airtime a customer recharges, eg, one day for UGS1,000 (US$0.60) and ten days for UGS10,000. UTL reacted by introducing Bonna Bogere, a lottery offering a chance for 17,000 customers per day to win free airtime worth between UGS500 and UGS100,000 if they recharge any amount of paid airtime. In late 2008 Warid Telecom introduced a scheme by which subscribers receive UGS50 worth of airtime per minute for calls they receive from other networks or from abroad.

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5.3

FLAT RATES

UTL introduced a Flat Rate product in early 2008 whereby customers get 50 minutes of UTL-to-UTL calls and 25 SMS text messages for only UGS2,000 (US$1.20). Using standard tariffs, the bundle would cost around UGS18,000.

MTN ZONE MTN launched its MTN Zone tariff in Uganda in mid-2008. Matching the huge success in MTNs home market South Africa, two million users signed up for MTN Zone in Uganda within two months.
Based on software developed in-house, the prepaid per-second billing product offers subscribers discounts of up to 99%, depending on the current traffic load of the base station carrying the call. Higher discounts apply at times of lower traffic load. The discounts are updated hourly and apply to MTN-to-MTN calls only. Customers are informed of the changing tariffs via the cell info display on their phones, and an automated message appears on their handsets as they set up a call. With the new feature, MTN has levelled out the traffic load distribution across the network, reduced congestion and churn, stimulated re-activation of dormant accounts, and increased total network traffic.

5.4

5.5

FREE INTERNATIONAL ROAMING

While the European Union was still talking about it, East Africa was doing it: Mobile networks in Kenya, Tanzania and Uganda introduced regional tariffs without international roaming charges, and it did miracles for their business. The three countries are members of the East African Community (EAC). The EAC was formed in 1999 and is in the process of implementing a common market by eliminating customs barriers, with the aim of a monetary union and ultimately a political federation of member states. Celtel was the first to introduce regional tariffs without international roaming charges in late 2006 and had the advantage of actually owning networks in each of the three countries, enabling it to merge the three networks into what is now known as 'One Network' without the need for external agreements. Prepaid and contract subscribers can make calls from anywhere to anywhere within the three countries at local rates and are not charged for incoming calls when they are outside of their home country. Prepaid customers can also top up their credit with airtime cards bought in any of the three countries, no matter where they are. The service was later extended to most of Zains African operations. Celtel was not the market leader in terms of subscriber numbers in any of the three countries. Those market leaders took almost half a year to come up with Home & Away, a similar offer which they launched in early 2007: MTN Uganda, Safaricom in Kenya and Vodacom in Tanzania (MTNs archrival in the home market of the two companies, South Africa). UTL launched borderless roaming with Safaricom in Kenya in mid-2007 with plans to include Tanzania (Vodacom) and other countries in the future as well. In late 2007, Redknee Solutions announced that an alliance of six East African mobile operators - Safaricom, MTN Uganda, UTL, Vodacom Tanzania, MTN Rwanda and UCom (Burundi) - had chosen its Mobile Money system for its international prepaid roaming top-up service. MTN launched One World in late 2008 in Nigeria, Ghana and Cameroon. Uganda, Zambia, Botswana and Swaziland joined in May 2010. The model is boosting subscriber numbers and traffic volumes for the operators. In Uganda, Celtel estimated that 40% of its subscriber growth since the launch of 'One Network' can be attributed to the new service, and MTN has seen a seven-fold increase of the number of roaming customers in the

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barely one month that the new service has been available. In Kenya, Celtels customer base reportedly jumped by 15% in the three months following the introduction of 'One Network', almost making up for the entire subscriber loss in the preceding quarter due to disconnections of inactive accounts. Under the name One Office, Zain plans to include free international data roaming in the future.

6.

MOBILE TRAFFIC

Chart 4 Mobile traffic in Uganda by traffic type 2008 - 2011

(Source: BuddeComm based on UCC data)

7. 7.1

MOBILE DATA SERVICES SMS

All GSM operators in Uganda offer Short Message Service (SMS) and the service is enjoying high popularity. During the Christmas and New Year season 2004/05, customers across all three networks spent nearly UGS1 billion on sending a total of more than seven million messages. More than 350 million SMS worth around US$21 million were sent in 2008. In 2012 an SMS costs around UGS80130 and about half that during off-peak times. International SMS cost between UGS80 and UGS220. All major operators also offer a range of SMS-based information and entertainment services, SMS2email and Web2SMS gateways, and Voice SMS. The Uganda Securities Exchange (USE) and SMS Media launched an SMS-based service in 2007 through which subscribers to any mobile phone network in Uganda can receive stock market updates. Warid introduced emergency calls to the police by SMS in 2008, using the established standard emergency numbers. A company called Be Mobile offers bulk SMS services in partnership with MTN and UTL, along with voice broadcast services, interactive voice response (IVR) services, and call centre solutions.

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7.2

MMS

MTN launched Multimedia Messaging (MMS) simultaneously with GPRS under the name YelloPix and made the service available to both prepaid and postpaid subscribers. The system runs on Ericssons Multimedia Messaging Centre (MMC) platform. Among other features, it allows subscribers without MMS-enabled devices to view their MMS on the Internet. MTN charges UGS300 per message to any destination. Warid Telecom has been offering MMS since launch.

7.3

WAP, GPRS AND EDGE

Uganda accounted for 7% of the usage of the BBCs Wireless Application Protocol (WAP) services in 2006. According to UCC statistics there were close to one million mobile Internet subscriptions in Uganda in early 2012 compared with only around 90,000 fixed Internet subscriptions. Chart 5 Mobile vs. fixed internet subscriptions in Uganda 2007 - 2011

(Source: BuddeComm based UCC data)

At a cost of US$4 million, MTN became the first network in Uganda to launch General Packet Radio Service (GPRS) in mid-2005. Under the brand name YelloLive, the service offered web surfing, WAP, email and e-commerce applications. An upgrade to Enhanced Data for GSM Evolution (EDGE) followed, and in early 2008 it was estimated that MTN had 65,000 broadband subscribers using either EDGE or the operators WiMAX network. In May 2010, MTN introduced new fixed line handsets at UGS 109,000 with Internet bundles ranging from UGS9,500 to 28,500 per month for between 50 and 180MB of data and 50 to 180 voice minutes included. Celtel Uganda launched GPRS at the end of 2006 following a trial with 1,000 users, followed by EDGE in mid-2007. A GPRS modem initially cost US$165, but by 2010 Zain was offering the cheapest mobile Internet modem in Uganda at UGS53,000, while Orange and Warid had the lowest monthly mobile Internet charges at UGS49,000 and UGS60,000, respectively. Warid rolled out GPRS across its entire network from the start. Monthly charges for unlimited Internet access were cut from UGS85,000 to UGS60,000 in May 2010, the daily charges from UGS5,000 to UGS4,000 and annual charges from UGS756,000 to UGS600,000.The cost of the modem remained at UGS150,000, which was already below the industry average of UGS180,000.

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Table 7 Warid Telecom (Uganda) GPRS/EDGE pricing 2012 Included data 50MB 100MB 250MB 500MB 1GB 2GB 5GB 10GB 12GB 20GB 24GB Unlimited Validity 1 day 1 day 30 days 1 day 7 days 30 days 30 days 30 days 30 days 30 days 6 months 30 days 12 months 30 days Price (UGS) 500 1,000 15,000 4,000 20,000 25,000 35,000 60,000 100,000 140,000 300,000 280,000 600,000 700,000

(Source: BuddeComm based on company data)

Warid's pay-as-you-go rate is UGS2 per KB. UTL operates GPRS and EDGE and became the first network in Uganda to launch third generation (3G) services in late 2007 (see chapter 8). Table 8 Uganda Telecom GPRS/EDGE pricing 2012 Included data 100MB 200MB 500MB 1GB 3GB 5GB 10GB 15GB Validity 1 day 1 week 1 month 1 month 1 month 1 month 1 month 1 month Price (UGS) 4,500 10,000 14,500 42,500 82,500 110,000 145,000 175,000

(Source: BuddeComm based on company data)

Note: Prices include VAT.

7.4

BLACKBERRY

MTN was the last of the major operators in Uganda to launch the BlackBerry mobile Internet solution in early 2008, following UTL and Celtel. UTL was initially offering the service at UGS85,000 (US$50) per month, Celtel and MTN were charging UGS88,000 and UGS110,000 per month, respectively. Table 9 MTN Uganda Blackberry pricing 2012 Validity 7 day 14 days 30 days Price (UGS) 15,000 30,000 60,000

(Source: BuddeComm based on company data)

MTN's offer includes unlimited internet access, unlimited BlackBerry Messenger and 10 email accounts.

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8. 8.1

3G AND 4G MOBILE BROADBAND MOBILE BROADBAND STATISTICS

Penetration rate (% of the population) 1.2 1.6 2.8

Table 10 Active mobile broadband penetration in Uganda 2009 - 2011 Year 2009 2010 2011

(Source: BuddeComm based on ITU data)

8.2

3G, HSPA

Following the launch of 3G mobile broadband services in Uganda, mobile internet subscriptions quickly outnumbered all other access methods. Their number skyrocketed from around 30,000 in mid2009 (about the same number as fixed-line internet subscriptions) to over half a million a year later. By the end of 2011 the number had reached 978,000, compared to 89,000 fixed subscriptions. As part of a 20 million contract awarded in 2007 for the extension of UTLs GSM/EDGE network, Alcatel-Lucent also began the installation of the first 3G network in Uganda using UMTS/HSPA technology. The network was launched in central Kampala in time for the Summit of the Commonwealth Heads of States in November 2007. By March 2008 it had been extended to Greater Kampala, Entebbe and Jinja. Internet access with up to 1.8Mb/s was offered at UGS1 per KB, unlimited access with 64Kb/s was available at UGS220,000 per month. Video calls cost UGS400 per minute. Table 11 Uganda Telecom 3G mobile broadband pricing 2012 Speed (Kb/s) 64 128 256 Price (US$/month) 130 250 430

(Source: BuddeComm based on company data)

The 3G modem costs UGS250,000 (down from UGS320,000 in 2008). Orange launched 3G services in late 2009, offering a modem with three months of unlimited Internet access for UGS350,000. The Apple 3G iPhone was introduced in early 2010. The company claimed 30,000 mobile Internet subscribers in August 2010, up from only 10,000 in May, and was offering the lowest price for mobile data in Uganda at UGS0.90 per KB. The cheapest bundle in May was a modem at US$102 and 1GB of data for US$25 per month. By August, 500MB were being offered at UGS25,000 per month. At the time it was estimated that Orange controls about 70%-80% of the mobile internet market while UTL was leading in the overall data market with a market share of about 80%. Table 12 Orange Uganda 3G/HSDPA mobile broadband pricing 2012 Validity 1 day Included data 30MB Price (UGS) 500

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Validity 1 week

1 month

3 months

6 months

12 months

Included data 75MB 150MB 375MB 600MB 1.25GB 3.6GB 12GB Unlimited 2.3GB 4.6GB 13.8GB 46GB Unlimited 4.1GB 8.2GB 24.6GB 82GB Unlimited 7.7GB 15.4GB 46.2GB 154GB Unlimited

Price (UGS) 2,500 5,000 15,000 25,000 45,000 85,000 150,000 299,000 75,000 130,000 250,000 450,000 859,000 150,000 250,000 490,000 880,000 1,619,000 300,000 500,000 950,000 1,750,000 3,049,000

(Source: BuddeComm based on company data)

In 2012, Orange was offering HSDPA services with up to 7.2Mb/s. Both Zain and MTN started installing 3G networks in early 2008. MTN launched 3.5G services in August 2010 in partnership with Huawei Technologies. In 2012, HSDPA services with up to 7.2Mb/s were available. Table 13 MTN Uganda 3G/HSDPA mobile broadband pricing 2012 Included data per month 20MB 50MB 100MB 200MB 300MB 500MB 1GB 3GB 5GB 10GB Validity 24 hours 30 days 30 days 30 days 30 days 30 days 90 days 30 days 90 days 30 days 90 days 30 days 90 days 30 days 90 days Price (UGS) PayAsYouGo Monthly 500 n/a n/a 4,700 5,000 8,300 n/a 13,900 15,000 n/a 25,000 17,350 67,500 n/a 49,000 34,000 132,300 n/a 85,000 58,900 229,500 n/a 120,000 83,100 324,000 n/a 150,000 115,400 405,000 n/a

(Source: BuddeComm based on company data)

Note: PayAsYouGo prices include VAT, monthly subscriptions do not. Airtel offers HSPA+ services under the name "3.75G" with 21MB/s downlink and 5.7MB/s uplink speed. Table 14 Airtel Uganda HSPA+ pricing 2012

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Included data 15MB 60MB 80MB 100MB 200MB 400MB 700MB 1.5GB 3.5GB 5GB 12GB 50GB 80GB 150GB

Validity 1 month 1 day 1 week 1 week 1 month 1 month 1 month 1 month 1 month 1 month 1 month 3 months 6 months 12 months

Price (UGS) 1,000 500 2,500 5,000 5,000 15,000 25,000 45,000 85,000 100,000 150,000 450,000 800,000 1,500,000

(Source: BuddeComm based on company data)

Table 15 Warid Telecom (Uganda) unlimited HSPA+ pricing 2012 Validity 1 day 1 week 1 month Price (UGS) 4,000 20,000 60,000

(Source: BuddeComm based on company data)

8.3

LTE (4G)

Traditionally a wireless broadband provider using WiMAX technology, Smile Telecom launched Uganda's first Long Term Evolution (LTE) network in May 2012. The company is sharing masts and other infrastructure with Warid Telecom. For more information, see separate report: Uganda Broadband and Internet Market, Digital Media.

9. 9.1

MOBILE MONEY TRANSFER, M-BANKING TRADITIONAL BANK CHARGES AND INTERNATIONAL REMITTANCES

It is estimated that less than 20% of Ugandas population has conventional bank accounts. Most people cannot afford the fees which range from UGS2,000 to 25,000 per transaction depending on the bank, the transfer service required, the destination and the amount to be transferred. International remittances to the country totalled US$724 million in 2008, down from US$786 million in 2007 as a result of the global economic crisis. However, 2008/09 saw a 37% increase again. Posta Uganda charges 5% of the amount of money to be sent via its Express Mail Service (EMS) which takes three days, plus UGS4,000 in postage. Western Union charges range from UGS5,000 to 35,000 depending on the amount to be sent and the destination. Moneygram charges between UGS3,000 and 30,000. Both companies charge only the sender. Mobile money transfer services are instantaneous and offer significantly lower fees. Both MTN and Zain launched services in 2009, allowing transactions of up to UGS1 million and a similar amount as the maximum account balance. UTL introduced a service in 2010. Stanbic Bank started offering its shareholders the option to receive their 2010 dividend payments via a mobile phone money transfer service of their choice. The bank stated that traditional payment methods such as cheques or bank transfer were not cost-effective for the amount of dividend earned by smaller shareholders.

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9.2

REGULATION

The Central Bank of Uganda has stated it does not regulate m-banking services because of the small amounts of money involved. However, a parliamentary committee on information technology concluded in May 2010 that regulation may be required and that services may even be stopped. The operators are required to gather identification documents from all users of mobile money services on grounds of concerns about money laundering and terrorism funding, but many potential users do not possess the necessary documentation. The additional administration also undermines the profit margins for the operators, so that they are questioning the necessity for registration of customers who make only small transactions.

9.3

MTN MOBILE MONEY

MTN Mobile Money, operated in partnership with Stanbic Bank, was launched in early 2009 after several months of testing and approval by the Bank of Uganda. It requires a new SIM card, which allows users to send money via SMS text message. Recipients can be subscribers to any network. 40,000 customers signed up within the first two months. A total of 180,000 transactions worth over UGS5 billion were processed during the first three months. MTN registered over 100,000 users of the service in less than the projected timeframe of six months. By this time, transactions worth UGS16 billion had been processed with a network of 800 authorised agents. By October 2009 there were 200,000 registered users moving an estimated UGS6.8 billion per month. At the end of the year the service had 680,000 subscribers. By June 2010 MTN claimed 890,000 Mobile Money users, corresponding to 16% of its subscriber base. The operator expects this to grow to more than two million by the end of the year. Initially the fee for a US$500 transaction had been UGS1,500 (US$0.75). The fee structure was then revised so that registered users now pay a transaction fee of UGS800 to send money irrespective of the amount, and between UGS700 and 9,000 to receive cash, depending on the amount. Non-registered users and those on other networks pay a withdrawal charge of between UGS1,000 and 19,000.

9.4

AIRTEL MONEY (ZAP) Zains ZAP mobile money service was introduced in Uganda in mid-2009, following launches in Kenya and Tanzania. In early 2010 it was extended to Niger, Sierra Leone, Malawi and Ghana. The service enables subscribers to use their phones to transfer money and to interact with their bank, pay bills, top up their airtime accounts and buy goods and services. Airtel has renamed the service Airtel Money.
In August 2009 Zain signed a deal with Western Union to make ZAP accessible in all Western Union outlets across Uganda. This was followed by an upgrade of ZAP in September 2009 that enables customers to receive money from any bank account around the world and send money to any bank in Uganda, Kenya and Tanzania. Shell, Total and Mogas entered into a partnership with Zain to enable their clients to use ZAP to pay for fuel and other goods at petrol stations and for getting their vehicles serviced. By October 2009 the service had 1.2 million customers carrying out over 10, 000 transactions per day. ZAP subscribers pay a flat fee of UGS250 to send and a similar amount to withdraw money. Nonregistered users pay between UGS200 and 2,000 to send and between UGS1,000 and 5,000 to withdraw money.

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In 2010 Zain unveiled an international airtime top-up service that enables people living in Europe, the US and Canada to purchase airtime for friends and family in countries where the firm has a presence. Uganda and Tanzania followed an initial launch in Kenya in February 2010. In May 2010 Zain set up a platform by which school fees can be paid using ZAP.

9.5

M-SENTE (UTL)

UTL selected Redknee in early 2009 to provide its Mobile Money 2.0 solution. Branded M-Sente, the service was launched in March 2010 in partnership with Mapswtich. UTL has partnered with DFCU bank for school fees payments using M-Sente.

9.6

OTHER SERVICES

In late 2007, local company Simba Telecoms introduced Simba Cash in Uganda, a mobile money transfer service based on open source software. In association with USAIDs Rural Savings Promotion and Enhancement of Enterprise Development (Rural SPEED), the service aims at the unbanked population in rural areas. Customers can deposit money at any of the Simba Telecoms branches across Uganda. A password is forwarded to the recipient of the money who can then collect the money at any other Simba branch. Transfers attract an average fee of 4%. Standard Chartered Bank launched an m-banking service in late 2008 that was initially available on the Warid network only, with plans to include Zain as well. Customers can check their bank balances, transfer funds to another Standard Chartered customer, and pay bills to water and electricity utilities. The bank charges UGS500 (US$0.26) per transaction while Warid Telecom charges a flat fee of UGS300 to access the service. Mobile banking services provider Monitise is using Uganda as the launch pad for its Monitise East Africa service, which will eventually also span Rwanda, Tanzania, Burundi, the Democratic Republic of Congo, Ethiopia, Kenya and Zambia. It formed a joint venture with Paynet in mid 2009, a company with a well established electronic payment network in Kenya, Tanzania and Uganda that connects to 35 regional financial institutions. Services are expected to be launched in 2010. Besides providing traditional mobile banking services to those with bank accounts, Monitise also enables people without a bank account to turn their mobile phones into 'mobile wallets' which can be loaded with money and used to pay bills, deposit and withdraw cash, and receive money transfers. MAPSwitch Uganda, a wholly-owned subsidiary of US-based MAP International, received a loan from the US Overseas Private Investment Corporation (OPIC) in 2009 to deploy infrastructure for the Uganda government that would bring banking and other financial services to the unbanked population, including auto teller machines (ATMs), Point of Sale (PoS) units, and mobile banking. The technology uses identification cards based on biometric user data. Nokia announced in October 2009 that it will roll its own money transfer service, Nokia Money in Uganda and Kenya in 2010 in partnership with Obopay. The company emphasised that it will complement and not compete with existing service providers, by enabling transactions from any network worldwide. The United Bank for Africa (UBA) announced plans for a mobile banking service in early 2010. In June it became the first financial institution to become an MTN Mobile Money agent. The Bank of Africa introduced a flat rate of UGS2,500 for 15 SMS-based transactions and UGS10,000 for 40 transactions in June 2010. Previously, the bank had been charging UGS500 per transaction like other players in the market. Barclays Bank has also announced plans for a mobile banking service in Uganda.

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10.

MOBILE TV

Users of UTLs 3G service (see chapter 8) can watch local free-to-air (FTA) stations at the same rate that is charged for Internet access. Negotiations are ongoing to include pay-TV stations GTV (now defunct) and DStv. For more information on these companies, see separate report: Uganda Broadband and Internet Market, Digital Media.

11. 11.1

FORECASTS FORECASTS MOBILE MARKET 2014; 2017

When the price war in Ugandas mobile market started easing off in 2009, subscriber growth slowed considerably, but it reaccelerated in 2010 and 2011 with a new wave of price cuts. 2012 is expected to see another considerable slowdown or even a net loss of subscribers due to the new SIM card registrations regulations (see chapter 3.4). After the 2013 deadline for registration, growth is expected to return to the market. At less than 50% in early 2012, market penetration is below the regional average. It is expected to reach between 60 and 70% by 2017. Table 16 Forecast mobile subscribers in Uganda 2014; 2017 Year 2014 2017 21 27 Lower growth Higher growth Subscribers (million) 25 31

(Source: BuddeComm, forecasts)

11.2

NOTES ON SCENARIO FORECASTS

The following notes provide some background to our scenario forecasting methodology: This report includes what we term scenario forecasts. By describing long-range scenarios we identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band. The projections shown in the tables in this report are based on our own historical information, as well as on telecommunication sector statistics from official and non-official, national and international sources. We assume a possible deviation of 15%-20% around this data. All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities.

12.

RELATED REPORTS

For information relating to the Ugandan telecommunications market, see separate reports: Uganda. For information relating to: Telecommunications in other African markets, see: Africa; Technical information relating to the telecommunications industry, see: Telecommunications Technologies Library; Technology - Terminology - Glossary of Abbreviations (free report); Worldwide activities in the telecommunications industry see: Global Overviews.

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