While mergers are nothing new in Uganda’s telecom sector, rumor-mill indicates that a Vodafone and Smart Telecom merger could be on the horizon in less than 2 years. Actually to put this in perspective, it would make sense for Vodafone Uganda to acquire Smart Telecom. According to our sources who have spoken to this blog and preferred to remain anonymous, over 12 senior staff at Smart Telecom have already called it quits and left the company including the company’s Chief Commercial Director, Omer Mahgoub.
With the existing Mobile Virtual Network Operator (MVNO) deal between the two carriers that allows Vodafone Uganda’s clients to roam onto Smart Telecom’s 2G and 3G network in Uganda, a possible merger won’t be much of a surprise. In fact, it seems like they already have most of the hard part figured out technically. This means that Vodafone will at last have the 2G and 3G spectrum it has always wanted on top of the 4G-LTE license, putting it in a strong position to battle it out with the telecom giants like Airtel and MTN Uganda.
The weak link
So, how bad is it for Smart Telecom? Okay, now imagine this, in fact don’t imagine– Let’s breakdown some facts for you; First, the company has not paid any interconnection fees to all other Mobile Network Operators (MNOs) for over three months, Smart Telecom has also allegedly failed to remit its 200 worker’s NSSF savings for over a year and to top it all off they are heavily burdened with debt and with less than 400,000 subscribers and no hope to break even soon, it will take a miracle for the company to survive in Uganda’s harsh the telecom market.
Two years back, I wrote a post trying to analyze how smart, Smart Telecom’s pricing strategy of 74 shillings per call was — I wondered if it would be able to sustain the company in the future. Not to rub it in, I guess our predictions may finally see the light of day. So, however rich an investor like the Aga Khan (yes, he owns Smart Telecom) is, he cannot sustain a non-profit making business for more than five years. We saw this with Orange in 2014 where the company literally failed to break-even since 2009 till when they finally threw in the towel and sold all 95% of their shares to Africell Holdings.
So, what’s in for Vodafone?
Assuming the rumor-mill turns out to be accurate, Vodafone will be able to take up over 350 base stations (not towers/masts) that Smart Telecom owns. But, lets hold back a second here, Vodafone in Uganda is just used as a brand name for Afrimax Uganda Limited and they pay a fee to Vodafone for this brand. This means the deal could actually be between Afrimax Holdings and Smart Telecom– I know its confusing– but who cares, we all came to know it as Vodafone. If and when the merger or buy out is happens, Vodafone will have to take on all of Smart Telecom’s liabilities. And may be, just may be –this could lure the main Vodafone to actually buy more shares in Afrimax Holdings. Again, who cares? As consumers, all we want is cheap and affordable voice and data services but its seems whenever we make such demands it’s the small telecos that suffer. So what do you think, would a Vodafone Uganda and Smart Telecom merger make sense to you? Vote in our mini poll below.