Uganda telco market ripe for consolidation

Airtel Uganda’s managing director, Tom Gutjahr, does not think that the country can sustain all of its seven operators, which fight over a market with a population of 35 million.

“It’s an absolute illusion to believe that four, five, six mobile operators can ever be profitable in one country,” Gutjahr told Reuters, adding that, “it’s unlikely that the smaller companies will get profitable any time soon.”

Although the sector expanded by 11 per cent in the 2012/13 fiscal year, officials believe intense competition has forced operators to lower prices to attract customers, causing margins to become thin – thereby seeding the ground for more mergers.

Gutjahr has said that Airtel, which has experienced “some growth” this year and has spent around US$100 million to expand its infrastructure, will consider any other interesting offers that come its way.

According to GSMA Intelligence, there are 21.86 million mobile connections in the country, where MTN dominates the market with 10.8 million, nearly half of the total, while Airtel is in second place with 8.47 million. It achieved this position after buying Warid Uganda last year.

Uganda Telecom comes in at number three with 2.7 million connections.

Another company to be sold off was Orange Uganda, which was bought by Africell earlier this year, although compared to giants like MTN; Africell is a small-scale player, with around 800,000 connections.

However, Gutjahr does believe that there is potential for growth opportunities because almost half of Uganda’s population is under 15.