Telkom's Uganda dream shattered

ADSL South Africa (Broadband South Africa), 20 March 2007

Telkom’s dream to enter Uganda seems to be shattered after the telecoms giant failed to win control of Uganda Telecom.

Uganda’s New Vision newspaper has confirmed that Telkom failed to buy out Ucom. Apparently a rival bidder has scooped the grand prize away right before Telkom’s eyes. Telkom has refused to deny or confirm this and made it clear that they would make “no further comment on the matter” (Telkom mum after Uganda setback, Stones, Business Day, 16 March 2007).

Why would Telkom be upset about their failure to buy out Ucom?

The Ucom consortium, SA’s Telecel International (60%) and Germany’s Detecon (40%), held a controlling stake of 51% in Uganda Telecom. Uganda Telecom is the key to any successful entrance in the Ugandan telecoms market.

In other words, Telkom’s failure to buy out Ucom must be a clear setback for them in their bid to enter the Ugandan telecoms market without having to face major obstacles.

Who’s the rival bidder that ‘scooped away the grand prize’?

Libya Africa Portfolios or in short, LAP, ‘scooped away the grand prize.’ LAP is ‘the investment arm of the Libyan government’ (Telkom mum after Uganda setback, Stones, Business Day, 16 March 2007).

What played in LAP’s favour?

The fact that ‘LAP already has several investments in Uganda’s construction and garment industries,’ must have helped to seal the deal for them (Telkom mum after Uganda setback, Stones, Business Day, 16 March 2007).

It seems that the price LAP offered was right as well because Hans Paulsen, Uganda Telecom’s Chief Commercial Officer, made it clear that ‘…there was a sticking point over the price and that Telkom was not the only bidder’ (Telkom mum after Uganda setback, Stones, Business Day, 16 March 2007).

In other words, LAP clearly had an advantage where existing investments in Uganda and the price offered is of a concern.

Is this the only example of Telkom’s failure to expand into new countries?

No, Telkom already failed to obtain a stake in other key players as well, damaging their efforts in seeking new growth opportunities further a field.

Telkom’s list of failures include:

• Portugal Telecom – Telkom’s effort to obtain a stake in Portugal Telecom failed when negotiations collapsed. Why would a stake in Portugal Telecom be important to Telkom? Portugal Telecom ‘…has operations in the Congo, Mozambique, Guinea Bissau, Kenya, Sao Tome, Cape Verde, Angola and Morocco’ (Telkom mum after Uganda setback, Stones, Business Day, 16 March 2007). In other words, it would enable Telkom to enter a lot of new markets.

• Nitel  – ‘A bid to buy 51% of Nigeria’s fixed-line operator Nitel fell through when Telkom became anxious about the quality of that business’(Telkom mum after Uganda setback, Stones, Business Day, 16 March 2007). In other words, Telkom got cold feet and lost out on the opportunity to enter the Nigerian telecoms market.

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