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UTL Saga: The Calm before Stormy Cabinet Meeting at State House Entebe

On a hot Monday (June 25) afternoon, President Museveni told his aides in Khartoum, Sudan that he wanted to fly back to State House Entebbe as soon as he could for a Cabinet meeting.

At around 7:15pm, Museveni’s aircraft landed at Entebbe Airbase. He was later chauffeured to State House where he entered the Cabinet meeting room at 7:30pm.

The visibly knackered President had just concluded intense negotiations with warring South Sudan leaders, Salva Kiir and Riek Machar in Khartoum.

“You could easily tell that the President was tired but he expressed determination to deliberate on an important item on the agenda – Uganda Telecom saga.”

All the Ministers who were enjoying a tea break quickly reconvened for a session that would later turn dramatic if not nasty.

At the heart of the deliberations was the ‘Interim Report on the Process of Selection of Potential Partners for Uganda Telecom (UTL)’.

Background

It all started with the western-sponsored war against Libyan leader Muammar Gaddafi in 2011 dismantling the then government in Tripoli. With Gaddafi toppled and slain by rebels, the state’s enterprises/stakes in countries across Africa were affected.

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In Uganda, UTL which was partly owned by the Libyans could not raise the much-needed capital to maintain its operations and upgrade its network.

A Parliamentary investigation showed that UTL was overburdened by debt of about Shs900bn. UTL’s 2G internet services could not compete with rivals in the market such as Airtel and MTN who are providing 4G.

The Libyans had tried to keep the telecom afloat by raising funds for staff salaries but the situation was not sustainable as the partners in the business – government – could not inject in more money or forfeit shares.

The frustrated Libyans eventually wrote to government saying they would not commit any more funds to the sinking ship. They further said they had withdrawn from the company and also directed their directors to resign, plunging UTL into a deeper crisis.

This literally left only one active shareholder – government of Uganda.

Officials told ChimpReports during our investigation that the Minister of Finance Matia Kasaija, as the representative of government’s stake in UTL, quickly rushed to court where he secured a “leave of court” to hold and make decisions of a board meeting.

The decision would be binding on other ‘shareholders’. Kasaija then declared UTL insolvent before putting the company under administration.

He said the company would be sold off to pay creditors.

Bemanya’s reign

Bemanya Twebaze, the Registrar General and Official Receiver, Uganda Registration Services Bureau (URSB), was appointed Administrator with powers to look for an investor/business partner to recapitalise and operate UTL business.

Bemanya was as well tasked with selling and transferring any property of the company in piece-meal or as a whole and use the proceeds to settle creditors’ claims.

The Administrator also had to make UTL “healthier” and “attractive for investment.”

$1

Several officials briefed about the situation at UTL told us that as early as late 2017, the entity was receiving unsolicited expressions of interest from companies across the world.

One of them was Liquid Telecom which is part of Econet Group owned by Strive Masiwa, a London-based Zimbabwean businessman dealing in data, voice and IPs. He was ready to buy UTL at $1.

On January 10, 2018, the Administrator published adverts in the media soliciting companies that would buy and invest in UTL.

But this came against the backdrop of negative publicity about the health of UTL. Bemanya had a tough task convincing the public he would turn around UTL which was literally on its deathbed.

How would the administrator market a company with a debt of Shs 900bn and obsolete infrastructure that needed an overhaul of $200m?

In several meetings with Privatization Minister Evelyne Anite, it was decided that government converts debt owed to Ministries, Departments and Agencies (MDAs) into shares held by Uganda Development Corporation (UDC) on behalf of Government and UTL was required to supply internet and data storage services to MDAs.

This would increase the customer base, improve revenue performance of UTL and also the net value as well as the attractiveness of the company.

This meant that whoever was interested in investing in UTL had to work with government.

Some of the companies which expressed interest, according to records seen by ChimpReports, are Liquid Telecom, Telecel Global (Telecom firm based in Lebanon), Teleology Holdings (company based in Gibraltar UK), Mtech Communications (mobile content provider based in Nigeria), Seacom (internet vending service provider in which Aga Khan has a 30% stake), Xi Digitel (ICT Company with offices in UK, UAE and Switzerland).

Mauritius Telecom was also among the companies interested in UTL. It has 1.3 million customers. It’s owned by government (33.3%), State Bank of Mauritius Investment Manager (19%), National Pension Fund (6.5%), Employees of Mauritius Telecom (1%) and France Telecom (now Orange S.A) (40%).

Others included Munu Technology Associates Limited based in Uganda; China Telecom based in China, Extensia of UK, Baylis Consortium headquartered in New York; EW Tech Company; Neubacher Montage LLP  (UK); Afrinet Communications (Kenya) and Hamilton Telecom owned by a U.S. based Uganda known as John Mukalazi Kamya.

It’s understood that the bids from Afrinet and Hamilton came in late. Bemanya, according to documents, informed the two companies that their proposals would be considered “if the process which was in advanced stages could not yield positive results.”

Upon review of the proposals, most companies were found wanting. Their proposed offers were far below the anticipated $84m which Bemanya hoped to obtain from selling UTL.

A meeting held April 19, 2018 resolved to invite Afrinet and Hamilton to submit their proposals for consideration while other suitors were told to raise their offers.

Cabinet

The suitors openly told the administrator that UTL was hugely indebted and required millions of dollars to revamp its equipment.

Secondly, the UTL license was expiring in 2020. No investor would commit $200m in a company whose license would expire in a period of two years.

Prospective investors also wanted tax waivers, government business, free and unlimited access to the national infrastructure backbone.

Cabinet agreed to have UTL’s license renewed and other conditions required by suitors fully met. For example, Cabinet ordered that all government officials (400,000) must use UTL lines. This meant an already established market for investors in UTL.

UTL owns prime properties in Kampala

With all these concessions, UTL became attractive.

Bemanya had earlier ordered an asset revaluation for land and equipment which showed UTL was worth $84m. UTL owns prime land in Kololo (15 acres), Nakasero (parking lot opposite Sheraton Hotel), Wandegeya, Nsambya and Mengo; Telephone House etc.

Museveni had been informed that government was buying internet at $300 per Mbps from foreign service providers such as Soliton.

“Why are we buying internet expensively from foreigners? Why not use our own infrastructure?” Museveni queried during one of the Cabinet meetings last year.

He ordered that all government institutions buy internet from UTL. Internet provided by NITA had by early this year reduced to $70 per Mbps.

Meanwhile, an assessment of debts discovered ghost invoices worth Shs 398 bn. This reduced UTL’s actual debt to Shs 556 bn from Shs 954 bn. For example some invoices showed supply of fuel for all UTL stations across the country yet less than a half were operational.

The prospects of tax waivers, access to national IT backbone, an established market of government institutions for internet and call services and fresh evaluation of UTL’s prime properties saw the company look much healthier and attractive.

Stormy State House Meeting

When Museveni arrived at the Cabinet meeting at Entebbe, he expected to see unity in seeing UTL rise and shine again. But this was not the case.

Anite told Museveni that Bemanya had asked him to share a bribe from Hamilton, an offer she rejected.

Anite, who wept before Cabinet, further said she had returned from Nairobi where she was receiving treatment for a strange ailment.

“I was feeling a terrible back pain and went to Nairobi for treatment. But because I want UTL up and running, I decided to cut short my medical trip and return to Uganda. I don’t know whether I was poisoned or bewitched,” she lamented as Cabinet looked on in shock.

The overweight Deputy Prime Minister Gen Moses Ali was shifting uneasily in his chair.

Attorney General Byaruhanga

Attorney General William Byaruhanga crossed his hands over his chest. Museveni leaned forward to listen attentively to Anite’s submissions.

“Your Excellency, Bemanya wants Hamilton but the owner doesn’t have money. This Bemanya got Kitu Kidogo (bribe) from Hamilton. I said no, I will not take it.’ I want to deliver on my mandate, Your Excellency.’”

An official told ChimpReports that Anite did not provide evidence to back up his claims against Bemanya. We also could not independently authenticate these claims. Contacted, Bemanya said he could not discuss Cabinet briefings.

“We can’t discuss what transpired in Cabinet. It’s confidential,” he insisted.

This website understands that Anite is a subject of a State House investigation for reportedly soliciting an $8m (Shs 28bn) bribe from an investor.

Anite has since denied the charge, saying, “You know, my job is an envious job, there are many people who want to have it. So, you would expect them to say anything.”

But officials familiar with the investigation say President Museveni was handed a recording pinning Anite in the bribe scandal.

Ministers react

Nevertheless, Anite’s accusations against Bemanya attracted different reactions from Justice and Constitutional Affairs Minister Kahinda Otafiire.

“Hon Anite, you are saying Bemanya is favouring Hamilton. But this company is giving a consideration of $70m and plans to invest $285m. Why do you want Cabinet to consider Mauritius Telecom which is offering a consideration of $45m and is looking at a capital investment of only $100m?” asked Otafiire.

Officials said Anite had no answer for Otafiire’s question. “She was crying before the President,” recalled an official who attended the heated session.

But Otafiire was not done. “Hon Anite, you know I supervise the Administrator. Why didn’t you talk to me about this?”

Anite insisted on addressing Museveni, saying Bemanya was insubordinate. “There is insubordination. I asked him to recommend Mauritius Telecom but he refused. He can’t listen to me.”

Justice Minister, Kahinda Otafiire rejected Anite’s view on potential investors in UTL

Our investigations show Anite had worked well with Bemanya until early this year when two collided on who should buy UTL.

While Anite favoured Mauritius Telecom, Bemanya was quoted as telling Anite in one of their meetings that “your position is indefensible. We have to go by what these companies are willing to offer and their planned investment.”

At one of the meetings at Anite’s office, an official said, Anite warned Bemanya of being “thrown under the bus.” Anite also described herself as the “queen of intrigue” and that Bemanya had to stop playing games with her.

It was a matter of time for the relations to deteriorate.

The bureaucrat’s refusal to abide by the politician’s choice saw the once close allies turn into enemies, a situation that could derail plans to secure an investor for UTL.

During the Cabinet meeting, a member asked Bemanya to defend himself.

But Gen Ali refused, saying Bemanya should address his concerns somewhere else not Cabinet.

Museveni asked Attorney General Byaruhanga: “What is the way forward?”

Urban Development Minister Isaac Musumba interjected, saying “people are confusing privatization with insolvency. With insolvency, you are looking for a buyer to pay off creditors. While government can give parastatals to any investor, with insolvency you need to have the highest bidder.”

Time check was 10:00pm. Museveni jokingly told off Musumba that “we are not here for laws.”

It was agreed that a Committee be formed chaired by Byaruhanga to read the report on selecting investors for UTL and report back by next week.

It will be composed of Ministers of Finance and ICT. Before a decision was reached, Anite interjected: “Even DG ISO should be part of this committee. Security, security…”

Museveni did not object to the request, saying, “Okay, DG ISO, okay…”

Officials told us Museveni wants to see UTL being revamped as soon as possible hence the need to act on who will take majority stake in the company.

“No one is being investigated as reported by the media. The Cabinet sub-committee is looking at the Administrator’s report after which a decision will be taken,” said a senior government official who spoke on condition of anonymity as Cabinet deliberations as confidential.

ChimpReports will keep you posted on this unfolding development.

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