UTL board chairman Stephen Kaboyo told The EastAfrican there are ongoing discussions between LAP Green and the Ugandan government on a rescue plan for the company. Uganda’s Attorney-General Fred Ruhindi is guiding the process.
“The shareholders are discussing an immediate rescue plan that will help UTL regain its solvency, restore business confidence and develop a forward-looking investment plan,” said Mr Kaboyo.
LAP Green is a Libyan telecom investment firm and holds a 69 per cent stake in UTL, while the Uganda government owns the remaining 31 per cent.
The telco’s troubles are attributed to its inability to maintain sound liquidity and failure to meet its licence obligations.
According to licensing requirements, operators are expected to provide the latest technology to consumers but UTL still offers 2G technology, while its competitors are operating 4G.
The Uganda Communication Commission conducted a monitoring exercise between January and February this year, which showed that UTL’s liabilities valued at Ush366 billion ($120.5 million) exceed its total assets base of Ush220 billion ($72.5 million) as of December 31, 2013.
The move to explore external funding comes at a time when legislators have unanimously agreed that the government should fully repossess UTL and inject money to keep it afloat as its demise will have an adverse effect on the telecoms sector and the economy.
Mr Kaboyo is optimistic that the company is developing a business plan that will reassure statutory creditors, trade creditors, staff and customers.
“The business rescue plan is a mix of aggressive cost reduction, investment in the network, optimisation of business processes, and debt settlement that will involve restructuring and should improve cash flow,” said Mr Kaboyo.
Cost reduction and restructuring could result in loss of jobs for some UTL employees.
Loss of jobs
Market leader MTN is the latest telco to adopt this method, which saw 143 employees lose their jobs. MTN hired Chinese telecommunication equipment manufacturer and service vendor ZTE to operate and maintain its network.
The challenges facing UTL started years ago when the company’s market share started dropping in 2007, from about 30 per cent to below six per cent now.
In addition to technological challenges, UTL is also suffering from a backlog of unpaid interconnection fees owed to its competitors. This worsened when the company’s assets were frozen after the United Nations Security Council imposed sanctions on Libya in 2011 due to internal strife.
“Since there has been no major reinvestment in the network, a substantial capital injection is required to create future value through technology upgrade and expansion,” said Mr Kaboyo.
The East African
No comments:
Post a Comment