The High Court in Kampala has given green light for the auditing of struggling Uganda Telecom Ltd.
The case was filed by Uganda Broadcasting Corporation against the official Receiver/Administration, UTL.
Giving his ruling in the presence of Christine Mpumwire, Counsel for the Applicant and Nuhu Wadembere, Counsel for the respondent, Justice Musa Sekaana ordered that “an audit be carried out on Uganda Telecom Ltd-in Administration by the Auditor General (John Muwanga) within a period of Thirty (30) days from the date of this order.”
Justice Sekaana also ordered that the audit report should be presented to all creditors of the company.
He added that the Court shall give further guidance when called upon.
It is worth noting that the auditing of UTL has faced resistance since on Anite Evelyn, the State Minister of Finance for Investment and Privatization asked for it over a month ago.
The Secretary to Treasury Keith Muhakanizi recently directed that the audit on activities of the Uganda Telecom Limited (UTL) be halted.
Muhakanizi, who doubles as Permanent Secretary Ministry of Finance wrote to the UTL Administrator Bemanya Twebaze on August 2nd d asking him to halt the audit process as was directed by Anite because there is an ongoing Court process.
“Reference is made to a letter from the Internal Auditor General dated 31st July 2019. Further reference is made to letters dated 31st July 2019 and 1st August 2019 from Uganda Broadcasting Corporation (UBC) a creditor of UTL, indicating inter alia, that they have filed Miscellaneous Cause No. 226 of 2019 in the High Court for an order that the Auditor General be appointed to audit your activities in the Administration of UTL,” reads part of Muhakanizi’s letter to Bemanya dated 2nd August 2019.
Earlier in a letter dated 16th July 2019, President Yoweri Museveni directed Anite to carry out an audit in the activities of UTL, citing some allegations made against the managers of the Telecom.
“Arising from H.E the President’s letter ref: PO/10 dated 16th July, 2019 addressed to me, to institute an audit of UTL activities, I’m accordingly directing you to conduct an internal audit of UTL activities and evaluate the state of affairs within a period of one month,” read Anite’s letter dated 24th July 2019.
She further cautioned that the internal audit on UTL must be comprehensive to confirm or clear the allegations before President Yoweri Kaguta Museveni.
UTL is indebted to the tune of over Shs500bn.
Anite Reacts To The Ruling
Taking to her twitter handle, Anite (in featured photo) said: “I thank Justice Musa Sekaana for a ruling affirming my demand for Auditing UTL and Presidential directive on the same.
There is authority in this Country and no amount of maneuvers can defeat the right and cause for people of Uganda.”
She added: “I am optimistic the Auditor General will undertake this assignment with immediacy as directed by the court and also thank all Ugandans who have been in the fight with me.”
More Details About UTL
UTL is an insolvent company whose shareholders are Ucom, a Libyan Government entity and Government of Uganda (GoU) through the Ministry of Finance, Planning and Economic Development holding 69% and 31% respectively.
In March 2017, Ucom wrote to GoU withdrawing any future funding from UTL with all its Directors resigning from the Board. Following the due process of the law, UTL was put under Administration with a view of making it healthier, attract investment and settle creditors.
The Official Receiver who is the Registrar General of URSB (Twebaze) was appointed as the Administrator.
Twebaze issued a statement showing how indebted the telecom company is.
“…it’s true the company (UTL) is heavily indebted. On commencement of Administration we asked all creditors to indicate amounts UTL owed them and the claims were up to a tune of Shs940bn. After a rigorous exercise the verified figure stands at Shs530bn. Some of the creditors shied away from verifying their claims and others were found to be fictitious,” Twebaze said in a statement.
The statement added that the Administrator found UTL in a sorry state. “The company was heavily indebted with liabilities estimated at over Shs900 billion owed to various creditors including statutory bodies (URA, NSSF and UCC), shareholders and suppliers against an estimated asset value of Shs148 billion. Interconnect partners like MTN and Airtel, utility companies and key suppliers were interrupting services due to nonpayment of their services.”
Twebaze revealed that UTL’s monthly revenue has stagnated at an average of Shs4.2bn since commencement of Administration.
“Efforts to increase it have been hampered by lack of funds to upgrade the network that does not meet customer’s expectations. With all these limitations the ISP revenue has grown by 16% from Shs2.2bn in April 2017 to Shs2.6bn. However, the GSM revenue has reduced by 61% from Shs793m in April 2017 to Shs308m in May 2019 because we running a 2G network compared to competition at 4G,” he said.
He also spoke about UTL’s Monthly Operational Expenditure.
“.. with even more sites switched, the cost of fuel and power going up and the rate of failure of equipment increasing due to old age, we have still been able to reduce the monthly operational expenditure (OPEX) by 16% from Shs5.7bn in April 2017 to Shs4.7bn in May 2019. The wage bill has been reduced by 40% from Shs1.6bn in April 2017 to Shs1bn in May 2019,” he says.
He added: “Site security cost have reduced by 12% from Shs235m in April 2017 to Shs207m in May 2019. The fuel and electricity costs have increased by 20% and 8% respectively mainly due to increase in unit rates from suppliers. Site maintenance costs have increased by 127% from Shs230m in April 2017 to Shs523m in May 2019 mainly due to daily breakdown of very old equipment. Over one hundred generators have been overhauled, battery banks overhauled, grid extended to sites and several sites that were switched off by our predecessors switched on.”
He explained that the process is on to get an investor.
“..as part of my mandate am required to source an investor and use the proceeds of the sale of assets to settle creditors. The process commenced in January 2018 and we have since then received over 20 expressions of interest and held discussions with those potential investors. We are yet to be successful with any of them. Specifically, Teleology Holdings Limited reached the stage of being given an offer that lapsed because they failed to meet the conditions of the offer. The company is still available for a strategic investor and we continue with engagements,” he explains.
He notes that UTL’s entering into administration did not stop it from being insolvent.
“It is still unable to meet all its costs and the Administrator has to prioritize and optimize resources on a day to day basis. UTL still carries the burden of debt accrued before administration that is expected to be cleared by the consideration from the sale of assets to the potential investor. The monthly revenue has stagnated at circa Shs4.2bn and growth is curtailed by lack of CAPEX and outdated technology compared to competition,” Twebaze concluded.