MTN to Launch 4G Network in Uganda

Posted on February 20, 2013 12:05 am

MTN which is the market leader by subscriber and revenue, through its subsidiary MTN Uganda will launch the country’s first fourth-generation commercial mobile service on the international standard 2100-megahertz frequency in March in a bid to beat its smaller rivals like Warid Telecom, Data market leader Orange and AirTel Uganda. The country’s largest mobile operator initially plans to roll out 4G base stations in Kampala and surrounding areas and later in major cities later this year. MTN team announced late last years that they are gearing up to launch their 4G services on the 2.1 Gigahertz spectrum under the new licensing regime. MTN has said the move reflected the company’s long-term spectrum management strategy to better serve real consumer demand in Uganda although I expect MTN to focus on expanding its 3G Network coverage on the existing 850-MHz frequency. The company will also spend heavily on increasing network capacity on the 2100-MHz spectrum. For Ugandan Telecom companies, the 4G investments means deciding whether or not the potentially promising but risky 4G network markets provides are worth the time and huge financial investments, particularly when the 3G market battles are still on in the country. The Ugandan Telecom Market is growing fast because of demographic changes and economic growth being experienced in the country. Demographically, Uganda Telecom business will continue to see growth well into the next few years, and if GDP growth continues at its current rate, more and more people will be in the position to increase their spending power and that’s what will make or break the 4G investments like the one MTN is investing heavily. These fundamental changes amount to more Ugandans being able to purchase more products and services, and many of the country’s consumers will spend their newfound money on technology services that will be powered by 4G networks.

East Africa’s third largest economy has seen dramatic rises in mobile and Internet usage and according to Uganda Communication Commission, the mobile penetration rates has exceeded 20% in almost all Uganda urban areas. Broadband subscriptions, while still low, have been growing close to 56% per year on average over the last three years and show no signs of slowing down. However, even with many positive undercurrents in the country as a whole, investors like MTN Uganda should take note of certain business aspects of the Uganda telecom market, especially in mobile services, where almost all of the markets feature heavy competition as players struggle for market share. This competition, coupled with the fact that the majority of customers prefer less profitable prepaid services, has been driving down revenue per user for the last three years almost bring some network operators to their knees. The crowded marketplace throughout Uganda, along with the downward pressure on revenues resulting from fierce competition, I expect mergers and acquisitions to take place in the short and medium term. There are few opportunities in the broadband sector although broadband penetration rates are relatively low throughout Uganda due to the lack of infrastructure. Therefore, developing broadband infrastructure, specifically the fibre-optic cables and core network equipment, looks to be one of the most promising areas for investment. The large urban areas of Uganda like Kampala and Jinja generally have sufficient infrastructure, but the smaller cities like Entebbe, Mbarara and Gulu are more sparsely covered. While urbanisation is the trend in the East African region, the upcountry areas are experiencing growth as well. The smaller urban cities is where revenue growth could come from spreading coverage to still densely populated and reasonably developed areas that are currently lacking the infrastructure needed in most parts of Uganda and that is why I think MTN Uganda could reap huge profits in the mid term.

Contador Harrison