Possible policy reversal as MTN loses $30 million to Kenya, South Sudan telco’s

March 7, 2016 in Business, Companies, Policy, Technology & Telecoms by Editor

KAMPALA, MARCH 07- MTN Uganda lost as much as $30 million to its peers in Kenya and South Sudan as international telecom operators took advantage of concessions on regional calls under the East African One Network Area to  terminate Uganda bound traffic through its neighbours networks.

Commenting on annual results for 2015 last week, MTN Uganda Chief Executive Brian Gouldie reported , inbound minutes declined from 9 million in December 2014, to just 3.3 million to the year ending December 2015. Corresponding revenue losses say inflows fall from an $4million monthly to $1.5 million over the same period.

The development which has occasioned losses to the taxman in foregone customs duty on the calls as well, is likely to trigger compensatory levies that could potentially increase the cost of cross-border calls within the region just as cautious Burundi and Tanzania agree to join the East African One Network Area.

“We are going to engage both the Ministry of Finance and the Uganda Revenue Authority to see what measures could be introduced to minimise the loss,” Gouldie said.

Although he refused to divulge details, Keith Muhakanizi, Uganda’s Secretary to the Treasury, told 256BN that proposals to that effect had already been submitted to the legislature for consideration.

“I cannot discuss the details until the proposal has been considered and endorsed by parliament but yes, we have suggested some remedies,” Mukanizi said.

The initiative that almost halved the cost of cross-border calls and eliminated roaming charges within the region, came just over a year ago after the governments of Kenya, Uganda, Rwanda and South Sudan agreed to drop duty levied on calls from within the region under the East African Community Common Market Protocol.

But this opened a window through which unscrupulous operators could offer attractive discounts on termination charges  to foreign operators. Until new tools are designed, for now, the regional networks are able to identify traffic from each other under the internationally assigned operator codes. The switches can not trace the full path of traffic terminating into a local network from a from a regional peer.

Kenya and  South Sudan were net beneficiaries under this scheme according to Gouldie.

MTN blames a 6.2 percent decline in overall tax contributions during the year to shrinkage in remittances of exercise duty and corporate . The telco says excise duty payments fell 10.1 percent to Ushs 148,158,000 while corporate tax declined 11.7 percent to  Ushs  103,517,000.

Exercise duty was impacted by lost revenue on international inbound traffic that was routed through the One Network Area while currency depreciation and capital allowances also weighed down corporate tax.