2010 uganda communications statistics

2009/10 Post and Telecommunications Market Review

IntroductionIt is yet again that time of the year that the UCC, takes time to review the industry performance, key developments and challenges for the previous Financial year.

This review is for the period June 2009 to June 2010. It takes a look at:

1. The sector performance at a macro economic level in terms of growth and contribution to GDP as well as a cross sector performance comparison

2. Industry financial performance with a year to year revenue and investment comparisons

3. Trends in post and telecommunications service growth ad penetration4. Post and telecommunications price trends and service comparisons5. Key regulatory developments

09/10 Annual Review 2

Macro Economic Performance

• Following the global financial melt down of 2008, with GDP contraction of more than 3.2% in advanced economies and a paltry 2.6% growth in developing economies, the FY 2009/10 saw a resumption in growth with an average of 4.7% in the sub Saharan Africa . (Source: IMF)

• Uganda in particular posted a growth rates of 5.8%, a score only second to Tanzania in the East African region.

• In terms of composition, services accounted for 50.7% of GDP while industry and agriculture contributed 25% and 15% respectively in Uganda.


Uganda South Africa

Kenya Burundi Rwanda Tanzania

5.8

2.6

4.1 3.9

5.4

6.4

Economic Growth Rates (%) for Select Economies

GDP Vs Post & Telecommunication Growth Rates

In a reversal of declining growth rates posted in the previous two financial years, the post & telecommunications subsector posted a 30% growth rate in 2009/10 up from the 19.8% growth realised in 2008/09

More important to note is that this growth was realised amidst declining GDP growth rates in the aftermath of the global economic crisis

The growth rate is attributed to increased investment in the telecommunications subsector and the diversification of product (data and Value added services) in the market.


26 29

23

20

30

10.80 8.40

8.70 7.20 5.80

2005/06 2006/07 2007/08 2008/09 2009/10

GDP and Communications Sector % Growth Rates, 2009/10

Post & Telecommunications GDP Growth Rate

Inflation

The transport & communication sector realised relative price stability with only 1.57% increase compared to the 9.4% in the overall country CPI as shown in the adjacent figure

Specific to the Communications sector, price drops were realised in the broadband and voice telephone segments on the account of drop in cost of international bandwidth and increasing competition in the market.


9.06

5.61

1.57

7.4 7.3

14.1

9.4

2006/07 2007/08 2008/09 2009/10

Annual %age Price Change% price change transport & comm

Annual Overall price % change

Financial Performance Mergers & Acquisition

2009/10 has seen the industry post record financial activity characterised by takeovers, mergers and acquisitions. Below are some highlights;

In Oct 2009, MTN (Group) increased its stake in MTN Uganda from 95% to 96% at a consideration of USD 6.5 Million

In Nov 2009, Essar Group acquired 51% equity in Warid Telecom Uganda from the Dhabi Group for a reported consideration of USD 160 Million. Essar Telecom is a subsidiary of India’s Essar group with 33% interest in Vodafone Essar of India and a controlling stake in YU telecom in Kenya

In Nov 2009, MTN Group acquired 20% interest in Belgacom International Carrier Services a company offering wholesale carrier services for voice and data. This may have advance implications in the international market in Uganda and the region as whole.

Bharti Airtel acquired control of Celtel Uganda Ltd following Mobile Telecommunications Company of Kuwait’s 100% sale of its Zain Africa BV subsidiary to Bharti for a reported consideration of USD 10.7 Billion

Bharti Airtel now has a footprint in 15 African countries including Kenya and Tanzania


Financial Performance

Credit FinancingAside from takeovers, the industry has continued to attract investment in the form of credit financing. Below are some highlights in telecom finance;

In the first half of the year, MTN Uganda secured a USD 100 Million credit facility from a syndicate of local banks that included Barclays bank, KCB, Standard Chartered and Stanbic bank as the designated Lead Arranger.

ZTE a provider of network solutions for a number of licensees entered into a strategic partnership with the Export –Import bank of China for a USD 10 Billion credit line. This is in addition to an earlier USD 15 Billion from the China development Bank

The credit line is to partly assist ZTE in financing roll out projects in emerging markets like Uganda.

To date ZTE has partnered to provide network solutions to the following licensees;

TMP Uganda Ltd (T.A Broadband Company)Sure TelecomAnupam Globalsoft Uganda LtdSmartel Uganda LtdAugere Uganda Ltd


Financial Performance

Credit FinancingHuawei, another infrastructure and network solutions provider in the market secured a USD 30 Billion credit line from the China development Bank.

This facility is to help in the financing of projects by extension of low interest project loans to its customers in emerging markets and those economies adversely affected by the credit crunch.

To date, Huawei’s clientele in the Uganda communications market include;

MTN Uganda LtdSmile CommunicationsUganda Telecom LtdWarid Telecom Uganda Ltd

The availability of these credit lines should help solve financing bottlenecks for newly licensed providers as well network enhancement by the incumbents.


Financial Performance -Capital Investment

An estimated USD 270 million was invested in the sector during the period under review.The bulk of the investment expenditure was in the roll out of mobile broadband solutions and other internet related infrastructure.Investment in the sector is expected to grow in the new FY as the new service provider expand their networks coupled with expenditure for the 3rd phase of the national backbone infrastructure network


2005 2006 2007 2008 2009

49,859,493 73,499,693

367,809,156

326,563,198

270,751,740

Industry Investment Expenditure, 2009, USD

Financial Performance –Industry Revenues


2005 2006 2007 2008 2009Industry Revenues 303,735,325 364,530,942 582,781,898 640,490,217 669,030,885

-

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

Axi

s Ti

tle

Industry Revenues, USD 2009

Financial Performance – Industry Revenues

The industry realised an estimated UGX 1.4 trillion in revenues which translates into a 7.7% increase in total earnings.

However the depreciation of the Shs against the dollar during the year implies a year on year growth rate of 4.5% compared to the 9.9% growth realised in the preceding year


Gross margins increased for all operators. A look at the profitability ratios however show that the some major cellular operators registered negative profitability.

This is mainly the due to the heavy capital expenditure by these operators and new entrants as they continue to rolled out and upgrade their networks.

Revenue DriversThe mobile market accounted for 63% of the telecommunications revenue followed by the fixed line segment.

Of emerging importance are the handset revenues as operators have aggressively entered the handset market with each retailing own brand of low cost handsets.Value added Services are also growing in importance

The entry of new operators has resulted in the emergency of a whole sale infrastructure market as new entrants adopt the infrastructure leasing approach to market entry


Fixed line Revenue

14%

Cellular Operations Revenue

63%

Domestic interconnec

t16%

Internet Services Revenue

4%

Intnl termination,

telefax & Roaming

2%

Other revenues

1%

Telco Revenue Distribution, 2009

Telecommunications Tax Contribution


3Q09 4Q09 1Q10 2Q10

24,330,735,544 24,450,436,583

23,782,098,114

25,437,844,363

20,675,185,490

23,717,674,968 25,705,730,094

24,179,688,192

2,937,017,905 5,356,760,284 5,661,146,412

8,607,292,416

Telecommunications Tax Revenue, 09/10

Excise VAT PAYE

There was a total increase in tax revenue realised from the communications sector in FY 2009/ 2010 with close to 215 billion shillings collected from the sector. This means that the communications sector remains the number 1 tax revenue for government. Collection where largely from VAT and Excise duty.

PERFORMANCE AT MICRO LEVEL THE TELECOMMUNICATIONS SUB-

SECTOR


Service Providers

The biggest highlight in the period under review was the launch of commercial services by Smile Communications Uganda Ltd.Smile Communications Ltd, a subsidiary of Smile Telecoms Holdings Ltd offers IP based wireless solutions. They are presently offering Fixed wireless services in Kampala and expanding to the outcast.An additional 3 companies were issued PIP licences, 4 in the PSP Voice and Data category. A list of all licensed providers can be obtained from the link below;www.ucc.co.ug/licensing

LicenseCategory

June 07

June 08

June 09

June10

NTO 2 2 2 2

PIP 1 13 23 26

PSP Voice and Data

14 19 32 36

PSP Capacity Resale

4 5 3 8


http://www.ucc.co.ug/licensing

Customer Growth962,311 new subscribers registered in 2009/10 compared to 3,377,209 new connections realised in 2008/09. The decline in rate of subscriber add-ons may be an early indication of market saturation.Market penetration for voice is currently at 33.5% with a population coverage of close to 100%.Like in the preceding years, the mobile accounted for more than 90% of new connections with 910,000 new subs in the period under reviewIn the fixed line segment most noticeable development is the continued growth of fixed wireless terminals accounting for more than 60% of total fixed lines at the end of the review period.


2005/06 2006/07 2007/08 2008/09 2009/10

108,140 154,382 160,768 213,820 265,890

2,008,818

3,575,263

6,140,822

9,464,979 10,375,220

Fixed and Mobile Subscriptions, 2009/10

Fixed Mobile

Annual Subscriptions Growth & Penetration


2005/06 2006/07 2007/08 2008/09 2009/10Subscribers 2,116,958 3,729,645 6,301,590 9,678,799 10,641,110 Penetration 7.7 13.2 21.2 31.6 33.5

0

5

10

15

20

25

30

35

40

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Axi

s Ti

tle

Annual Telephone Subscriptions Growth & Penetration, 2009/10

Telephone Subscriber Growth & Penetration Rates


‐9.8

7.2

‐1.3

6.5 6.5

31.6 31.8 31.4 32.7 33.5

2Q09 3Q09 4Q09 1Q10 2Q10

Quarterly Subscriber Growth Rates and Penetration, June 2010

Growth Rate Penetration

On a quarter to quarter comparison, the industry posted an average quarterly customer growth rate of 4.7% with 6.5% customer growth registered the last two quarters of the year.The slight quarter to quarter improvement is attributed to the increase in competitive pricing strategies spearheaded by the new entrants.

Annual Traffic Growth

6.6 billion minutes were posted in the FY 2009/10 compared to 5.5 billion minutes posted in 2008/09

The growth in traffic was the result of increased service penetration and usage resulting from increased promotions and the introduction of unlimited calling pricing schemes.


-

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

2006/07 2007/08 2008/09 2009/10On net 1,639,952,358 2,492,959,210 5,413,033,985 6,500,467,142 Off net 531,748,110 846,328,764 1,065,219,839 827,570,668 Intl Outgoing 73,481,695 111,220,349 147,318,146 107,229,800

Min

utes

Telephone Traffic, Minutes 2006/7 -2009/10

Traffic Growth – By SegmentOverall there was a 12.2% increase in total telephone traffic with the on net traffic segment posting 20.1% growthHowever there were 22 & 27% volume drops in the off net and internal outgoing segments respectively.The drop in off net traffic specifically the result of off net/ on net tariff disparity which create a clubbing effect and encourage multiple sim ownership.This disparity shall be reducing as a result of the announcement of uniform default interconnection rate by the UCC.


53.7

92.0

12.2

52.0

117.1

20.1

59.2

25.9

-22.3

51.4

32.5

-27.2

2007/08 2008/09 2009/10

Traffic Growth Rates by SegmentOverall Traffic Growth Onnet Traffic Growth

Offnet Traffic Growth Intl Outgoing Traffic Growth

Traffic Distribution


82%

16%

2%

Domestic Traffic Distribution, 08/09

On net Off net Intl Out

On net87%

Off net11%

Intl Outgoing2%

Domestic Traffic Distribution, 09/10

Tariff Movements

The first quarter of the year saw slight hikes in permanent tariffs with Warid, UTL & MTN raising on net and off net prices by 20 – 30/=. These hikes were a result of sustained depreciation of the UGX against the USD as well as fuel increments

These were however countered by a series of promotional campaigns and new tariff plans that included;- Reintroduction of Warid’s Double the Fun with revised weekly rental- Zain’s Spend and Win- Zain’s Kika

New tariff permanent tariff plans launched included;- Warid’s Pakalast offering (July 2009)- Orange Gyekiri (March 2010)- Zain Flexxy

Profile Destination

June 09 June 10

UTL UT Std On net 280 310

Off net 490 440

Warid Per Minute On net 299 329

Off net 299 329

Zain Zain 39 On net 400 400

Off net 400 400

MTN PayGo Std On net 320 340

Off net 480 500

Orange Per Minute On net 310 290

Off net 310 290


Tariff Movements - Contd


UTL Std Warid Per Minute

Zain 39 MTN PayGo Std

Orange

280299

400

320 310310329

400

340

290

On net Tariff Movts June 09 - June 10

Jun-09 Jun-10

UTL Std Warid Per Minute

Zain 39 MTN PayGo Std

Orange

490

299

400

480

310

440

329

400

500

290

Off net Tariff Movts, June 09 - June 10

Jun-09 Jun-10

Year on Year Tariff Movement


433487

730

334

395

512

322

396

540

334

392

504

On net Off net Intnl

Average Tariff Movements 06/07 - 09/1006/07 07/08 08/09 09/10

Internet and Data Services


Service Providers

New entrants in data / internet market segment during the period under review included;

Foris Telecom, a subsidiary of Israel based Foris telecom Group offering Wimax broadband solutions.Maisha Networks a purely indigenous PSP licensee offering VSAT and wireless broadband solutionsRoke Telecom a PSP provider previously offering carrier services now offering broadband on metro fibre and the Gigabit Passive Optical Network (GPON) architecture


Service Providers


Technology Platform Service Providers3G, GPRS and CDMA • UTL

• MTN• Zain• Warid• Orange Uganda Ltd

Fibre and DSL • UTL• MTN• Kampala Siti Cable• Infocom• Roke Telecom

ISDN and Leased Lines • UTL• MTN

VSAT • Afsat Communications U Ltd• UTL• MTN• Africa Online U Ltd• Maisha Networks Uganda

Other Wireless (including Wimax) • Foris Telecom (In)• Datanet• Infocom• Nomad Communications (Tangerine)• TMP (Broadband Company)• All Telcos

Broadband Capacity Growth

The landing of the cable systems at the East African coast has been probably the single most important event in the broad market in recent years.

Resulting from this has been the spurt in growth of capacity with international bandwidth growing more than 5 fold during the review period.


Dec-09 Mar-10 Jun-10

1,200.00

1,650.00

2,505.27

850.00

1,990.00

2,640.66

International Bandwith Growth, 2009/10

Down Link Uplink

Internet Subscriptions and Users

The entry of new service providers, increased capacity investment in broadband by the telcos and have resulted in increased internet penetration and changes in the methods of access.

By the end of the year fixed internet subscriptions had climbed to 29,800 from 27,600 users at the beginning of the review period while mobile broadband connections were at an estimated 520,000 connections from 310,000 subscriptions


Consequently this translates an estimated 3.5 million internet users countywide

Internet Subscriptions & Usage

2006 2007 2008 June - 09 June - 10

11,000 15,500 22,000 27,590 31,000

310,058

510,000

Internet Subscriptions, 2008/09

Fixed Internet Subscriptions Mobile Internet Subscriptions


287,600

1,000,000

2,500,000 2,800,000

3,500,000

2006 2007 2008 June - 09 June - 10

Estimated Internet UsersEstimated Internet Users

Mobile Internet Prices


165,000

25,000

110,000

45,000

80,000 60,000

90,000

200,000

UTL Warid MTN Zain

Unlimited Internet Monthly Fees and Modem Prices

Dongle Monthly Charge

25,000 15,000

24,000

45,000

150,000

25,000

39,200

90,000 85,000

49,000

68,000

Orange Foris MTN Zain

Mobile Internet Capacity Based Pricing, June 2010

500 MB 1GB 3GB


POST AND COURIER SERVICES

Post and Courier Service Providers

June 07 June 08 June 09 June 10

Major Postal 1 1 1 1

International Courier

5 6 6 7

Regional Courier 6 6 8 8

Domestic Courier 6 8 8 17


Post & Courier Licensees

1 new International Courier license was issued to Pax Courier Services which was subsequently awarded by the local FedEx courier franchise previously held by the East African Courier Ltd

In the Regional Courier segment, Easy Coach, regional bus service was issued a regional license

In the domestic Courier market, the following were issued domestic licenses;- Homeland Courier Services- KK Coaches Ltd- Country Safaris- East African Parcel Handling U Ltd- Mubende Boda Boda Transport Industry Cooperative & Credit Society Ltd- Interstate Logistics- United Local Courier- M & A Courier


Courier Rates for Select Destinations, June 2010

License Kampala Mbarara Nairobi UK India USA

Globex Express Courier

Intnl 3,500 15,000 N/A 45,000 60,000 68,000

DHL Intnl 5,000 15,000 39,000 75,500 132,000 104,000

EMS/UPL Intnl 3,000 5,000 10,000 45,000 45,000 88,000

Nation Carrier

Regional 3,000 N/A 10,000 45,000 45,000 88,000

Skynet U Ltd

Intnl 5,000 31,000 33,000

Easy Coach

Regional N/A N/A 10,000 N/A N/A N/A

TNT Intnl 55,000 60,000 60,000

DaksCourier

Intnl 4,000 12,000 44,000 58,000 102,000 88,000

PAX Intnl 5,000 10,000 44,000 56,000 83,000


2010 uganda communications statistics

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