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MTN, EzeeMoney court battle tells us why we need fair competition

Mathew was one of those young entrepreneurs who had it going on for him. At one of the floors on Maria’s Galleria in downtown Kampala, he had set up a small phone company called Ulaya. This was around 2006.

At Ulaya, Mathew had put up about six to eight booths. In there, he had mastered the art of bringing down the charges of making international calls. For a phone-call to countries such as India, you were charged Shs 500 per minute. What Mathew was doing, to some, resembled something out of a magic box considering international calls went for more than Shs 1,000 a minute at the time. Ulaya attracted a number of customers.

What Mathew was doing was not that complicated really. He was simply doing Voice Over the Internet calls. He would buy airtime from one of the three telecom companies and use some of their codes to offer his services.

When I visited his shop a few weeks after its launch, Mathew was upbeat. He spoke of plans of expanding his business to other areas. Things were looking up. About four to five months later, I checked up on Mathew to see how he was doing. Things were different; they had turned for the worst. He was in complete distress.

He showed me letters from the three major telecom companies at the time – MTN, Celtel, and utl – complaining about his business. The three companies had written letters to the regulator to rein in Ulaya. Their fears were that Mathew’s small shop offered him unfair advantage, and that it was also illegal since there was a moratorium on new players entering the telecom industry. Ulaya died a slow, agonizing death.

When Warid telecom entered Uganda in early 2008, it excited customers with its Bang KB for free product, where you paid for the first two minutes of the call while the rest were free of charge. Warid was the first company that whetted the public’s appetite for cheaper calls.

But Warid had one major challenge; its ambition to spread throughout the country depended on whether the other telecom companies accepted to share the masts.

The Uganda Communications Commission had encouraged telecom companies to share masts in order to limit the amount of hardware infrastructure in the country. However, Warid telecom complained that some companies were reluctant to share their masts because that would offer it unfair advantage.

K2, a telecom operator under the wings of Buganda kingdom, struggled in its early days to sign up subscribers when it started business in late 2012 as company officials complained about the expensive inter-connection fees they had to pay to some of its competitors. Like many, K2 faced a baptism of fire.

In early 2013, EzeeMoney Uganda Limited launched services in Uganda. The idea was to allow payments over the phones, more like mobile money. One of the major clients they signed up was Yo! Uganda Limited.

However, for EzeeMoney to succeed, it needed to tap into MTN Uganda’s market, such as its agents. So, when Yo! Uganda Limited approached MTN to use its platform, they were told to take a hike. MTN argued that they could not accept Yo!’s request because EzeeMoney was a direct competitor.

Yo! severed ties with Ezeemoney. EzeeMoney’s market share has since nosedived. Like Ulaya and Warid who operated in a highly-competitive environment, one wonders what the future for EzeeMoney is. EzeeMoney, however, sued MTN for sabotaging its business, and won with the Commercial court rewarding it with Shs 2.3bn in damages.

The EzeeMoney and MTN case is important as it creates yet another opportunity to discuss the issues surrounding Uganda’s failure to put in place a competition law, despite discussions to have one over the last 10 years.

The case offers Uganda a perfect opportunity to discuss the issue of fair competition, especially where large transnationals are involved. Companies that dominate the sectors in which they operate have become so big that new entrants are finding it hard to operate there comfortably.

To be fair, we have to recognise the level of investments that companies such as MTN have made. By my rough estimates, the company should be approaching $1bn in investments in the country since it launched in 1998. New players should not expect a free ride on MTN’s back.

MTN is also one of the biggest taxpayers in the country. Its mobile money platform has changed the way ordinary Ugandans transact business.

While the need for huge companies such as MTN to protect their investment is quite understandable, they have to do that fairly by using other means such as innovation, competitive pricing, attracting talent, just to mention a few.

Denying new entrants a fair playfield to operate is just another form of monopoly, which is totally against the spirit of the freedoms of an open market that Uganda is.

jeff@observer.ug
Twitter: @jeff_mbanga

The writer is the business editor of The Observer.

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