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Airtel acquisition of rival Warid Telecom reshapes competitive ladnscape

Edris Kisambira | April 25, 2013
In acquiring Warid Telecom Uganda, Bharti Airtel beat off competition from South Africa's Vodacom and set the stage to reshape competition in the region

Warid Telecom will be remembered for igniting a price war in the Uganda telecom industry in the last quarter of 2010 that run through 2011 to 2012 as competition for subscribers and market share heated up.

This resulted in a huge drop in call rates for both within and off-network calls for all five major network service providers, a development that was welcomed by mobile phone subscribers who are now not happy with Warid's decision to sell.

Warid Telecom slashed voice tariffs, in some cases offering almost free calls.

Some players criticized the price wars, saying they were distorting the market, were unsustainable and unhealthy to the industry and the economy as they resulted in low tax revenues.

The Uganda Revenue Authority reported a US$33.6 million shortfall in its domestic revenue collections target in the 2010/11 financial year, partly due to price wars in the telecommunications sector, which dented revenue collections.

According to the revenue collecting body, price wars in the telecommunication sector led to a shortfall of $9.2 million due to the decline in average call rates.

The telecom market in Uganda will re-aligned now that Airtel has a subscriber base as big as MTN's. According to Makau, from a user perspective, with one less option to choose from, a monopolistic or duopolistic market could develop. This he said can easily lead to poor service levels and stagnation for the rollout of innovative products onto the market.

"If the regulatory authority in Uganda is not careful, this might negatively impact the telecom sector," Makau said.

No information has been provided on the amount of money involved but the deal is pending regulatory approvals.

Today, there are seven players in Uganda's telecommunication market including MTN, Airtel, Warid, Uganda Telecom, Orange, Smile and K2 -- the latest entrant.

Airtel entered the Ugandan market in 2009 after buying Zain Africa's operations, resulting in a rebrand in 2010.

Airtel has a presence across 17 African countries with over 62 million customers at the end of quarter ended Dec. 31. Globally, Airtel is ranked the fourth largest mobile services provider in terms of customer base.

 

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