Distributors demand about Shs15 billion in out of court settlement
Uganda Telecom Limited (utl) is fighting a daunting court case that could bring with it unintended consequences and exhausting trips to court.
A group of dealers have sued the telecom company for severing ties with them, with some dealers claiming that in doing so, utl “gravely breached” the distributorship agreements. The case also saw criminal summons issued against Abdulbaset Elazzabi, utl Managing Director, for the same purpose.
Court documents filed by Karuhanga, Tabaro and Associates, the legal firm representing the dealers, are not clear as to why utl ended the dealers’ services. However, an official close to the dispute said that utl chose to end their relationship with the aggrieved group to favour another set of dealers.
Utl counters this argument. The company points out that the dealers’ contracts had ended, and that the company was not under any obligation whatsoever to renew those contracts. Neither officials of Karuhanga, Tabaro and Associates nor those at utl were willing to comment on this story on the record because the case is before court.
What is clear from the court documents, which The Observer has accessed, is that this is a case that is going to be fiercely fought along the lines of utl’s alleged failure to respect an interim order restricting it from hiring new dealers, and not the telecom company’s reasons for ending its relationship with the dealers.
Either way, the court case places utl’s brand and image in the firing squad. Legal disputes of this nature have a disturbingly bad habit of dragging on for too long, in some instances taking more than two years.
And throughout this period, a company’s image – regardless of the court’s final verdict – is normally the first victim. This legal dispute was sparked off on December 3, 2009, the day utl put out a company advert in The New Vision newspaper calling for new dealers.
A week later, a group of nine dealers – X-tel Limited, Country Oils Limited, Derka Telecom Limited, Bamanya Distributors Limited, Winner Classic Shopping Centre Limited, Josu Telecom Ltd, Salcom T/A and Hashim Hassan, Trade Port Ltd, and Investment Masters Ltd, rushed to court, where they managed to get an interim order stopping utl from hiring any dealers.
However, court documents filed by Karuhanga, Tabaro and Associates at the Chief Magistrate’s court of Buganda Road on Monday this week point out that utl has not respected this interim order.
For example, the court documents note that on January 5, 2010, utl, through its servants, requested for a presentation from X-tel for fresh distributorships. X-tel is one of the nine companies that pushed for the interim order obtained in the second week of December 2009.
Then again, the court documents point out that on January 8, 2010, Midcom Limited, a new dealer, made an application to distribute the company’s products, which utl is said to have duly approved.
The documents also take issue with utl allowing Tel-choice, perhaps utl’s largest distributor, to transact business in an area that the dealers say breaches the distributorship agreement. The documents note that on January 25, 2010, Tel-choice distributed airtime in Mbale, claiming that territory falls under one of the aggrieved dealers.
The court documents note that “Uganda Telecom through its servants and agents have wantonly and whimsically with impunity and with humiliating disrespect disregarded court orders.” Both parties were expected in court by press time yesterday.
The dealers are demanding for Shs15 billion for this matter to be settled out of court.
It is not clear how the market will react to this court case. Dealers are at the heart of a telecom company’s business. They act as the link between customers and the telecom company.
It is not certain just how much of a negative impact the interim order will have on utl’s sales in those territories being claimed by the dealers suing the company. Utl has over the years appeared to have had a cordial relationship with its dealers.
The telecom company is one of the few that has been recognizing the best dealers with gifts, among other awards. This case comes at a time when the market is facing intense competition, with distributors under pressure to meet their sales targets.
But also the growth in the number of mobile phone subscribers has also made airtime distributorship a lucrative venture, hence the court case.
Whether this is a case revolving around the pressure to find distributors who can meet utl’s ambitions, or an attempt by the distributors to retain their most treasured client, is hard to tell.