Orange out, Africell in. How will they survive Uganda’s challenging telecom industry?

Orange Uganda CEO Phillip

As they say, nothing lasts forever; France’s Orange has after six years thrown in the towel and has signed a initial agreement with Lebanese company, Africell Holdings to sell its entire 95 per cent stake in its subsidiary in Uganda at an disclosed fee. According to previous reports, most of the English speaking countries of the Orange Operations in Africa are all up for sale. Even if analysts say that the Kenya Operation is worse off compared to Uganda, what has kept Orange in Kenya are the strong terms of exit the Kenyan government imposed on the French based firm.  As the deal waits for  approvals from relevant authorities, the company has assured our sources that transition will take 3 to 5 months. The deal is currently still at shareholder level and will trickle down to company level in due course time.

Where there is smoke, there is fire — and the Orange Uganda sale has been in the rumour land for a while as they struggled to compete with MTN and Airtel in subscriber numbers since their launch six years ago. According to a press statement released on Monday,

“Orange has agreed to sell its 95% stake in Orange Uganda to Africell. A review was recently carried out that led the Group to conclude that after 6 years of operations, the subsidiary in Uganda had not met the Group’s criteria in terms of operational performance and value creation,”

What miracles will Africell perform that the French telecom giant failed?

Africell Holdings is a Beirut-based company that operates in three countries and Africell Sierra Leone is the biggest operator in that country. Uganda will be the most technologically advanced buy-out for Africell unlike Gambia, Sierra Leone and DRC, Uganda brings on table 2G, 3G and 4G networks all in one package that Africell doesn’t have in countries where it currently operating. With a challenging telecom industry in Uganda mainly dominated by MTN and Airtel, Africell has a high mountain to climb if they are to keep on top of the game and also resume with Orange’s legacy especially in the data market,.

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With the likes of Smile Telecom having at least 9,000 registered subscribers on their LTE network and most of which are orange modemformer Orange clients, how will Africell manage to retain clients and avoid churn? Even after the industry regulator, UCC has declared Orange the best in quality of service year after year, this has not increased Orange’s subscriber base. This is a clear indication that Ugandans are not interested in good quality, its all about a combination low prices and brand loyalty. Orange has managed to lower its data tariffs in a recent promotion –1GB of data for only (about $1) UGX 2500 for an hour, its a clear indication that the company has woken up after Smile Telecom’s aggressive marketing campaign.

Basically Africell is inheriting a good quality network with 2.8 million subscribers for both voice and data and great data network. How they will capitalize on the strengths and reputation Orange has managed to build in data market in Uganda is yet to be seen. Even if Orange Uganda’s 620,000 voice clients, will be Africell’s smallest subscriber base. Africell might have to come up with a better strategy especially for the voice market than Orange Uganda’s if it is to “crank up” those numbers. New players like Smart telecom already have a UGX 74 per call strategy, something we explained in detail earlier and Africell has to come up with better and more aggressive strategies if they are to start competing in the voice market.

Yes, Africell has a chance to compete in the market, despite the high taxes imposed on the telecom companies, 40% to be exact, meaning for every UGX 1000 of Airtime you buy UGX 400 goes to taxes. And just like other players in Uganda, Africell would face it tough especially with the high costs of operations. According to UCC reports only 98,334 are registered for fixed internet and 2.7 million people have subscribed for mobile internet (accessed through mobile phones). Compared to the tens of millions of voice users its clear there is still potential in Uganda’s data market.

We need more data penetration in rural areas, With the several capacity limitations in wireless technologies, what we need in Uganda is fiber to home and office. Can some one give us just that?