THE REGULATION OF TELECOMMUNICATION OPERATORS IN UGANDA

20 February 2017

Industry Overview

The telecom industry in Uganda was originally comprised of a sole operator by way of a state owned company that provided fixed telephone connectivity and other services. This was the Uganda Posts and Telecommunications Corporation (UPTC). After decades in operation, the first steps towards liberalisation arose in 1995, when Uganda’s telecom industry saw the entry of its first mobile network operator, Celtel Uganda (currently Airtel Uganda).

The above step was soon followed by the enactment of the Communications Act 1997 which split the then government owned Uganda Posts Telecommunications Company creating four entities that comprised of a postal services provider, a post bank, Uganda Telecom Limited (as a telecommunications operator) and lastly, the Uganda Communications Commission as a regulator of the industry.

With the establishment of a distinct regulator for telecom services, there was growth in the market with the entry of additional operators shortly thereafter. The industry saw the entry of MTN Uganda in 1998, followed by Uganda Telecom in the added capacity of a mobile telephone service provider in 2001, Warid Telecom in 2008, Orange Telecom in 2009 (as a successor to HiTs telecom). The operations of Warid Telecom and Orange Telecom have since then been taken over by Airtel Uganda and Africell Uganda respectively in 2013 and 2014. The latest players in the market have been K2 Telecom, Vodafone Uganda and Smart Telecom in addition to a number of other operators that are primarily focused on broadband services.

The Legal Framework

The activities of mobile telecommunications operators are primarily regulated by the Uganda Communications Commission (the UCC), a body established by the Uganda Communications Act of 2013 (the UCC Act), which came into force in 2014 repealing the Communications Act of 2012. Among the primary changes introduced by the Act was the dissolution of the Uganda Broadcasting Council (the UBC) and placement of activities previously regulated by the UBC under the regulatory ambit of the UCC. This was done in a bid to establish a single regulator for all forms of regulated communication services (including broadcasters). The UCC Act also provided for an increase in the scope of the levy that the UCC is authorised to impose on licensed operators.

The UCC’s regulatory mandate is exercised though the UCC Act, the various regulations issued thereunder as well as terms and conditions of licenses and license agreements. On the part of the mobile operator, depending on the scope of its activities, it may expect to interface with several other regulatory authorities such as municipal or district authorities and the national environmental management agency, to mention but a few.

Licensing

The primary sector authorisations that a telecom operator may obtain from the UCC, would include the following:

1. A Public Service Provider Licence (PSP Licence), which authorises the provision of voice and data services. This license is also issued to authorise capacity re-sale services in respect of operators seeking to resell leased capacity such as telecommunications bandwidths and calling cards.
2. A Public Infrastructure Provider Licence (PIP Licence), which authorises the holder to establish and maintain infrastructure for the delivery of communications services.
3. An operator that wishes to use wireless means to deliver service has to apply for a frequency spectrum.
4. An operator that requires authorisation for international gateway facilities does also have to apply for an assignment of rights.
5. A General license is also provided by the UCC in respect of public pay communications networks such as payphones and internet cafes.

The UCC may on issuance of a licence also execute a license agreement, which would set out any further terms and conditions applicable.

Criteria for Licencing

 

The UCC Act outlines the criteria for issuance of a licence. This includes consideration of: the applicant’s capacity to operate the system, public interest, the objectives of the Act and the applicant comprising an eligible person. The UCC is required to grant the license within 60 days and where a grant is denied, a written explanation must be provided to the applicant within 14 days.

Fees and Scope of Licenses

Operators holding a PSP and PIP licence are required to pay an annual licence fee and additionally an annual levy, the latter being a percentage of the gross annual revenue. The Uganda Communications Act 2013 increased the latitude the UCC has in determining the said fee, which fee has since been increased to 2% from 1%.  No fees are payable in respect of a general license, while the fees applicable to frequency and gateway rights are periodically published by the UCC.

Whereas License Agreements run for a relatively long period (for instance five years in the case of a PSP license and 15 years in respect of a PIP license), the operator is required to pay annual fees for the renewal of the licence.

Modification, Suspension and Revocation of Licence

The Act grants the UCC authority to modify a licence upon issuance of 60 days’ notice on grounds that such modification is necessary in order to achieve the objectives of the Act or in public interest. The UCC should in taking such decision also consider the justified interests of the operator, principles of fair competition and equality of treatment.

The UCC has authority to suspend or revoke a licence on certain grounds, which include: serious and repeated breach, misrepresentation by the operator in the course of application, engaging in treasonable offences or ceasing to be an eligible person.

 

Renewal of Licence

An application for renewal of the licence must be made at least 2 months before its expiry. The UCC is required to renew a licence within 30 days of application and where UCC decides not to renew the licence, it must furnish the refusal with written reasons within 14 days.

Transfer of Licenses

The transfer or assignment of a license requires the approval of the UCC. The acquisition of control of a licence holder would amount to amount to a transfer of a licence. ‘Control’ is defined by the law to include the possession, directly or indirectly, of the power to direct or cause the direction of the management of that person, whether through the ownership of shares, voting, securities, partnership or other ownership interests, agreement or otherwise.

The application for consent to transfer must be accompanied by an application for a license by the transferee. The UCC is required to respond to an application for transfer within 45 (forty five) days from the date of the application.

Tower Infrastructure Providers

Whereas a telecom company would be expected to hold certain infrastructure, several operators have over the recent years opted to share or sell and lease back such infrastructure. This has led to an emergence of market participants that primarily focus on providing telecom tower infrastructure services. Among the current players in this industry are Eaton Towers Limited and American Towers Limited.

A company that is involved in the provision of infrastructure leasing or sharing services has to primarily hold a PIP license issued by the UCC. In addition to this, such companies (as would telecom operators), have to consider the need for additional permits from other authorities such as (inter-alia) local government and environmental authorities.

Mobile Money Transfers

A number of telecom operators are involved in the provision of mobile money transfer services. The regulation of mobile money transfers has for some time relied on the oversight exercised by the central bank of Uganda (“BOU”) over the financial institutions that may partner with a telecom operator of such product. The provision of such services would consequently be regulated though any contractual arrangements put in place as well as the terms and conditions issued by BOU in approving such product.

The growth in mobile money transfer services has seen a number of players outside the mainstream telecom operators emerge with primary focus on using the telecom platforms to provide money transfer and payment services spurring further growth in the delivery of such products.

Conclusion

There is no doubt that the telecom industry in Uganda has experienced immense growth over the recent years. The growth has been in the range of products, services as well as number and diversity of players drawn to the industry. Whereas one may anticipate an advent of further regulatory reforms as the UCC seeks to keep up to speed with industry developments, one would hope that such reforms will maintain the innovative space that has been an engine for such growth.

The information contained in this review is for general guidance and not a substitute for the need to get appropriate professional advice. If you require further information, please write to your usual contact person at Mukumbya Musoke Advocates or Julius M. Musoke