Africell’s Ugandan Withdrawal Is A Telco Exit Long In The Making

In Africa, telecom operators are the ones often at the gate-keeping quarters of innovation, with customer reaches unarguably wider than that of any other business, even banks. 

In one tech-told story or the other, tech startups (especially fintechs) are trying to build to pick up where telecoms left off. And in most of those often-told accounts, the early-stage ventures ought to be careful not to thread into territories where everything could be at risk of irrevocably crashing down. 

As it appears, telcos can also stand in the way of telcos. In Uganda, a mobile operator that was founded in the year 2000—albeit kicking off operations in The Gambia in 2001—has decided it’s finally time to throw in the towel. 

Africell’s ambition to excel where a bigwig couldn’t 

Africell, which is a subsidiary of Lebanese but London-based Lintel Holdings, will be calling it quits in the East African market. According to the telco, the Ugandan exit is due October 7th, 2021 as it looks to focus on the markets where its business is profitable. 

Africell entered the Ugandan market in 2014 by taking over the reins of Orange Uganda, which is a subsidiary of one of France’s biggest telcos (Orange). Evidently, after more than a decade of operations, profitably operating in the country’s telecom market is no longer foreseeable. But, it seems, Africell’s Ugandan misadventure is an event with a seemingly long-forgotten premonition. 

It was early November 2014 when word got out that Africell had finally closed the curtain on its acquisition of the entire 65.93 percent stake Orange owns in its Ugandan unit. By selling Orange Uganda to Africell Holdings, the French telco exited the market and focused on its other markets (including some in Africa).

Roughly a year before the deal happened, Orange Uganda was the third-largest telecom operator in the country, with around 625,000 subscribers as of December 2013. 

Even though the subsidiary had one of the largest subscriber bases in the mobile market, the firepower of its strongest competitors MTN, Airtel, and Uganda Telecom Ltd (UTL) did not allow Orange Uganda much opportunity to grow. 

As of June 2014, the operator was sitting on only 3 percent of Uganda’s overall user total. In fact, when it was first revealed (May 2014) that Orange will be selling to Africell, Orange Uganda had not made a single profit. Between 2008 and 2010, Orange Uganda reportedly hemorrhaged USh 142 Bn (¬USD 40 Bn) in losses.

Why was the telco having a hard time, so much that it had to sell out of the market? Orange Uganda was conscientious about cracking the voice segment of the sector, but the ascendancy of the existing operators—Airtel and MTN—didn’t give it many avenues to succeed. 

As reported, Orange was the one offering up its shareholding, which means something was indeed awry with the business—or the market situation. Orange Uganda was founded in October 2018 through a venture-joining agreement between France Telecom (as Orange was then called) and Hits Telecom Uganda. 

A cellco’s cycle comes to a foretold end

Despite Orange’s tough luck in Uganda and its unapologetic exit, Africell—which at the time was already operational in The Gambia, Sierra Leone, and the Democratic Republic of the Congo (DRC)—saw a case for possible success. The company was not only confident about picking up where Orange left off but was also bullish to succeed where it failed. 

Africell was keen on transplanting its success in other regions to Uganda. That looked likely because, at the time, Africell held a leading dominant market share in Gambia and Sierra Leone and could rack up 20 percent of the mobile sub-market in DR Congo—in just two years after launching there. 

During its early days, Orange Uganda was referred to as a “cellco” (not telco), which is suggestive of the business model’s likeliest limitations.

Despite launching there about 7 years ago, it appears that doing the one thing it was bullish about proved impossible after all. Beating a competition led by two of Africa’s largest telecom companies doesn’t seem to have turned out quite well. Now, Africell re-sets its sights on the African markets from where it expanded.

According to the local press, Africell is known for affordable internet packages, which is obviously a practical means to cracking a Ugandan telecoms market dominated by tech-savvy young (about 77 percent of the East African nation’s population is under 25 years of age). Due to the telco’s unusual yet scintillating drive, last year, it was named the top performer in service delivery by the Uganda Communications Commission (UCC). 

Be that as may, in 2019, Africell was reportedly in debt of about USh 250 Bn (USD 70.7 Mn), which is mostly rumored to be a financial burden it inherited when it was taking over Orange Uganda from its previous owners.

Same 2019, after the telco realized it had lost over USh 1.5 Tn (USD 424 Mn), the company changed leadership hands by bringing in Ziad Daoud (a Dubai-based chief emerging market economist) as CEO. But in March 2021, Ziad handed in his notice and was succeeded by Houssam Jaber as COO. Yet, all roads lead to a Ugandan exit. 

In the African telco ecosystem, telcos hardly abandon markets due to the huge opportunities that abound in a continent with more unconnected people than anywhere else.

Usually, it’s more of expansion than the former; last year, Kenya’s Safaricom—East Africa’s most profitable venture—partnered with MTN Uganda to expand M-PESA, the mobile money service that is now ubiquitously Africa’s most-told fintech success story to the Ugandan market. Mid-2020, MTN said it would abandon its Middle Eastern markets to focus on Africa. Meanwhile, Africell is looking to make the most of Angola’s ongoing telecoms liberalization

Nevertheless, Africell isn’t the first ” company” to exit the Ugandan market this year. In August, Smart Telecom and ShopRite—Africa’s largest supermarket chain—also divulged their intentions to move outwards. 

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