LAP Green Com Acquires 51% Stake in UTL

LAP Green Com has concluded a deal to acquire UCOM, the consortium which owns a 51% stake in UTL, according to New Vision. No financial details are currently available, but are expected once the transaction has been closed. LAP already has a number of investments in Uganda, and reportedly holds shares in the National Housing and Construction Company, TAMOIL—the company which won the project to construct the Uganda-Kenya oil pipeline—and recently acquired a controlling stake in Tri Star garments company.

A number of undisclosed bidders had expressed an interest in acquiring a majority stake in UTL, including Telkom South Africa which was widely tipped to be the favourite (see Uganda: 18 January 2007: Telkom SA Could Take Controlling Stake in Uganda Telecom Ltd). However, Telkom apparently pulled out of the process, and in February announced that it had acquired the pan-African ISP Africa Online from the African Lakes Corporation. In April 2005, the government announced plans to sell its remaining 49% stake in the operator through an initial public offering (IPO) on the Uganda Securities Exchange (see Uganda: 22 April 2005: Ugandan Government to Sell Remaining UTL Shares Through IPO).  

UTL was privatised in February 2000 when a 51% stake was sold to a consortium led by Detecon International with a bid of US$33.52 million (see Uganda: 10 February 2000: DeTeCon Win UTL Stake). The consortium consisted of Detecon International, which held 40%, Telecel International (40%), and South African firm Ikwezi (20%). Ikwezi later withdrew from the consortium and was replaced by Orascom Telecom, which had also acquired a stake in Telecel earlier in 2000. OT subsequently announced in late 2002 that it intended to sell the 20% UTL stake it had originally acquired from Ikwezi to Telecel. In May 2003, OT announced that the stake in UCOM had been sold to Gloria Trust, a previous minority shareholder in Telecel, as part of a complex deal along with GSM operators Telecel Burundi, Telecel Central African Republic, and Telecel Zambia, as well as Telecel Pty (a management company based in South Africa). As Gloria Trust had transferred its holdings in Telecel to OT in partial consideration of these assets, UTL was jointly owned by Detecon, Gloria Trust, and the Ugandan government.

Outlook and Implications

In July 2006, MTN International increased its stake in MTN Uganda from 52.01% to 97.34% through the acquisition of the 12.89% stake held in the operator by Tri-Star Investments SARL and the 32.44% stake held by Overseas Telecom AB. MTN paid US$55 million, according to an announcement made to the Johannesburg Stock Exchange, to acquire the stake held by the Rwandan company Tri-Star Investments. That came only weeks after MTN bought the stake in MTN Uganda held by Overseas Telecom AB for 130 million euro (US$166.6 million) (see Uganda: 10 July 2006: MTN Buys Out TeliaSonera's Stake in MTN Uganda). Following these acquisitions, MTN then converted the joint-venture operation into a fully consolidated subsidiary of the MTN Group.

The sale of UTL, which also owns second-placed mobile operator Mango, comes as the market enters a new phase of liberalisation. In June 2006, the regulator issued new unified licensing guidelines under which UTL and the second national carrier, MTN Uganda, hold the first two of these “unified” licences. In December 2006, a third national unified licence was awarded to Warid Telecom, which allows it to deploy fixed and mobile services (see Uganda: 11 December 2006: UCC Awards Mobile Licence to Warid Telecom). The three licence-holders will be permitted to establish and operate national infrastructure until 2010, at which point the market is to be fully liberalised. An interesting prospect is that as LAP Green Com also holds shares in TAMOIL, it might consider deploying fibre-optic cables along the pipeline in order to connect with Kenya.