INTERVIEW: MTN Uganda speaks out future plans after getting new license

The discussions took quite long. We started the process by applying for a license extension in October 2017 and we concluded in June 2020 so that's basically two and half years of a process so they were fairly difficult discussions.

 

So the first emotion that comes out is relief. If you have been in such a long discussion and you finally conclude, there is relief and joy and I know that is on both sides. For UCC and ourselves, there is happiness that we have been able to bring this discussion to a fruitful conclusion. 

It also means for us that we are here for at least another twelve years. After 22 years here already, after the twelve it means we will have been here for 33 or 34 years. That way we can say we are really part of Uganda. If you have been in a country that long it means you are really part of the country, its history and its success story. 

But also, we feel recognised, appreciated and trusted. If after 22 years you get your licensed renewed, it means there is renewed trust. After 22 years by now the government, people, and authorities know what MTN is all about and what we stand for. This is very encouraging for us as investors that we are allowed to continue. In some places people get kicked out after 5 years for new people. So we are very happy that this has been concluded.

Now that you have began a new phase of this relationship, what should Ugandans expect in the first 5 years and then 12 years?

Twelve years is a bit too far to project because the industry is very dynamic and the country is also very dynamic. So many things will change. So let me focus on the first five years because all of our obligations especially the network obligations are supposed to be fulfilled within the first five years. For the first five years we have a very good roadmap of what we are going to do and how this is going to change the experience and the life of our customers.

With this license, there is an investment plan that goes with it. And that investment plan is worth about $70million a year. So we are talking about $350million for the next five years. That is the investment plan that we had presented and I believe that's part of the reason UCC and everybody else were comfortable continuing with us. The plan is very solid that will increase the coverage of our network coverage and also the capacity. Both geographical coverage and enhancing data capacity. 

It's as much an investment widening the geographical coverage and improving data experience. So those are the two main things we shall do over the next five years. That's what we have committed to do. Today we have about 200 sites all over the country. Over the next five years, we shall go from 2000 to about 3000 towers. So we have taken 20 years to build 2000 sites, and now we are going to take five years to build another 1000 sites. 

That shows you the acceleration in terms of network expansion. This is needed because the population is still growing, the villages, the urban centres are all expanding. We have many more areas to cover as urbanisation continues to grow and the data traffic is further going to grow phenomenally. Today data is big but give it three to five years data consumption. 

The number of people using data today is about 30% of our customer base using data regularly. But give it a few years from now it will be 50% to even 100%. So you will have 3 to 4 times people sing data and they will be using much more than they are right now. SO the growth in data traffic is going to be phenomenal. That's really why this big envelope of investment is going to go to ensure 90% of the coverage that we are required to do. 

Today we have about 70% of the landmass. So they take the 2400 square kilometres of Uganda and they say you need to cover 90% of that surface. So it's not just the people. We need to cover national parks, over the lakes. We need to cover 90% of the landmass. At the moment 95% of the people have been covered but only 70% of the landmass is covered. We need to move from just covering the people to covering the land. So we are going from 70 to 90% and that's why we need those extra 1000 sites.

The other thing is the data. 3G, 4G and even 5G, which will also come in another 2 to 3 years? So there will also be some plans around 5G because data is just growing at an exponential rate and it requires a lot of investment to cope with that pace. So with these plans, customers will stand to benefit because they will have coverage literally everywhere they go. You will be moving anywhere in the country and you will have our signal. 

Today it's largely covered but not 100% so that's going to be a major advantage for our customers and of courses the customers will feel the enhancement in the data experience. You will have a similar kind of data experience everywhere you go in the country which is not the case today. 

We have been focusing on covering people, which is logical from a business perspective. You want to bring network where there are people/ customers. But there is now a shift in mindset to focus on landmass. It's a bit of a shift from purely a commercial approach to now giving service even where the returns may be very low. But that is part of the deal we have gotten with the regulator that we shall invest even in areas that are not commercially viable. But it's okay, it's part of the package. 

All the 3,000 sites will be profitable but if most of them are profitable that's fine. We have accepted to bring network to areas that you would never go to on your own. But as an obligation, we shall go to those areas. It's part of our contribution to the development of the country.

When we talk about quality of service, it originally started with voice. Over the next few years, the whole industry is moving towards data. So as much as they are still a quality of service parameters for voice, they have also now been moved to data. Speeds, latency etc. 

These are measured and monitored regularly by the regulator to determine the quality of service you are delivering. Unfortunately, we have not been able so far to get more spectrum resources allocated. The quality that you can get from a wireless network at the end of the day is waves. The connection between the phone and mast is wireless and for this, you need more spectrum. 

The more spectrum you have the better the connection. Unfortunately, we still feel that we haven't been allocated a sufficient spectrum. If we could get more spectrum allocated to MTN we would be able to enhance our quality even further. We are still hopeful that over the next few months or years we will be able to get more spectrum allocated to us which will enable us to deliver more enhanced quality.

   

Let me give you a picture of how Spectrum has been allocated today. 800 bands, 900 bands, 1800, 2100 and, 2600. If you look at those five bands, we have less than 20% of the spectrum from each of those five bands together. Now we are serving more than 50% of customers. Our market share is more than 50% but we have less than 20% of the Spectrum resources. The other 80% have been allocated to all the other players which is fine. 

But it's a challenge that an operator who is serving less than 100,000 customers would be entitled to use as much spectrum as somebody who is serving over 313 million customers. There is a bit of a discrepancy here. But am not saying we should be getting 50% of the Spectrum but serving 50% of the market with only 20% of the resources is a bit of a challenge.

  

We hope that we can get at least 25% of the resources and that will improve the quality of our network. If we got more Spectrum today and it is activated tomorrow, it will immediately enhance the quality of our network. 

Listing is a unique once in a lifetime opportunity. It's also exciting to do. I have been in this industry for more than 20 years and I have never done an IPO. A lot of CEO's will never get that opportunity of bringing an IPO to the stick exchange. We look at it as an opportunity because you can turn your customers into shareholders. At the same time, it's not an easy one it's not something you wake up in the morning and next week it's done. 

We have started preparing ourselves. In 2021, most of this will happen, can't say when in 2021 but it will happen, it requires a lot of preparation knowing that it was going to happen. A lot of time and effort will go into this to get it right because you only have one chance. There is no room for mistakes. 

This is going to be a public listing. It will be open to everyone and every institution that is interested. 

COVID has impacted our business.  We experienced a 30% decline in Mobile Money. Voice also went down. People have no money. People live day-to-day. And yet they were locked down. However, Data has grown especially in April. But what we have gained in data is less than what we lost in Mobile Money and voice. But compared to other industries, we shall not complain too much. We are among the lucky ones. The teleco industry is a good place. The two trends that were already growing have accelerated. Data usage went up because people had to work from home and we also saw an increase in the cashless society. We have seen a higher appetite from the public to do cashless. Those two have been accelerated because of this. But these were already there. But people now see the greater need for it. 

We have been growing on average about 12% every year for the last few years. The Blended average growth on revenue has been 12% and we expect to continue. So this is a very valuable company to buy into when the time comes.