The takeover of one telecom company by another will have many ramifications on the chain of people and institutions that do business with both Warid and Airtel Uganda.
The Government is also expected to smile all the way to the bank with a reasonable pay cheque in taxes. Experts believe this will be strongly based on the precedent set in the oil and gas deal between Tullow and Heritage Oil that attracted a capital gains tax of up to 30%
Sarah Banange, the Uganda Revenue Authority (URA) assistant commissioner for corporate affairs said they had asked Warid to provide the paperwork of the transaction and were waiting for feedback. She said
“We moved to get the paperwork to see whether they qualify for capital gains or not, we have even notified the regulator,”
The acquisition of Warid by Airtel was confirmed early this week. The transaction is expected to take six months, although the regulator Uganda Communications Commission (UCC), this week said the two entities have one and ahalf months to fulfill the requirements of transfer of license.
In an e-mail to employees, Warid chief Sriram Yarlagadda said the company was waiting for the required regulatory and other approvals. He urged employees to continue serving customers with the same zest that we have been demonstrating all these years.
“I am sure you have a lot of questions that need answers and i shall be meeting with you” promised Yarlagadda.
Available information indicated that Warid Telecom and Airtel will set up a committee to oversee the terms, benefits and what departing employees are entitled to.
“The other task will be to look at who is staying and who goes,” said a senior employee.
However, even Airtel employees are reportedly not safe, although the Indian giant is likely to be the main brand because it is the buyer, has more subscribers and a larger international network.Yarlagadda said when all the approvals and regulatory requirements have been met, the two telecoms, with the assistance of project teams from both sides, will embark on the integration in a seamless and smooth manner.
In the interim, all Warid and Airtel customers shall maintain their numbers, according to information from the two firms. Airtel Uganda spokesperson Fiona Wall said all the services, including mobile commerce and the brands shall remain as they are until UCC approvals are over.
“We are trying to grow our customers, that is why we bought Warid,” said Wall.
Some departments that have duplicate roles will suffer, like the human resources departments, according to sources.
This week, the company said suppliers would continue to be part of the massive distribution system. “The merger will result in a combined subscriber base of 7.4 million, with a combined billing of shs 60b. This means that each of you will continue to be part of this massive distribution system and will have enough opportunities to grow,” read a notice.
The Government has also moved in to nip its share from the transaction in revenue for what tax officials expect to be in the
category of Capital gains tax. Wall said many decisions are yet to be made, which involve many people after the regulator’s clearance, including the tax issue.
“we are trying to do everything according to the law,”said Wall.
Capital gains tax is a tax on the profit realized on the sale of an asset that was purchased at a cost amount that was lower than the amount realized on the sale. The regulator is expecting the two firms to provide their business plans before the green light is given, among other requirements.
Airtel or Warid: Which brand will prevail?
Pubic goodwill for Warid has grown over time and Warid has won many hearts. Airtel suffered a brand interruption during the several re-branding processes, as well as the high costs of making phone calls, with the tariff pegged on the dollar in the 1990′s. This took away brand loyalty However, overtime the Asian firm slowly gained back its place moving to number two in the market.
On the other hand, Warid entered the market about five years ago, and its creative marketing approach and wide promotional activities attracted the attention of customers in a market that was already facing stiff competition with seven players. The most popular promotion, Pakalast gave the telecom unprecedented brand mileage.
Uganda’s Telecom Market
The acquisition of Warid by Airtel has emerged as a game changer in one of Africa’s most competitive markets. Because of the cut-throat race to maintain market leadership through promotions, most telecoms have been operating at a loss. In fact almost all of them stopped the public display of giving a cheque worth 1% of their gross income to UCC’s rural communications Development Fund, as earnings plummeted.
It is therefore, expected that more mergers and acquisitions will occur and the market will eventually shrink to just about four