Boston, MA -- (SBWIRE) -- 08/27/2012 -- While the Ugandan market enjoyed growth in Q411, this was at a lower level than previous quarters. The price wars between operators that hit the market through 2011 are beginning to subside, although we do not have regulatory figures more recent than H111. MTN, the country's largest operator, was the only operator to release Q112 figures, which indicated that net additions are declining. Q411 figures were less than 50% of Q311 net adds, while Q112 additions fell below 100,000.

As a result, our forecasts for mobile growth in the Ugandan market have been revised down. The market also implemented SIM registration on March 1 2012, and we believe this will serve to limit the number of new additions in the market. Further, when the registration period ends in March 2013, we are likely to see a sudden drop in subscribers, as unregistered SIMs will be discounted.

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In March 2012 MTN Uganda refused to pay UGX136bn (US$55mn) in tax liability as directed by Uganda's Revenue Authority (URA). The liability is inclusive of a UGX91bn (US$37mn) penalty imposed on the firm after it refused to pay tax debts pertaining to the period between 2003 and 2007. However, MTN claims that it owes the URA only around UGX19mn (US$) in back taxes. MTN further adds that this amount was cleared after the tax authorities provided it with a grace period in 2007.

As opertors' revenues have been severely hit during the price wars, companies are increasingly looking towards tower sharing as a source of income. Eaton Towers has benefited from this, having purchased 400 towers from Warid Telecom in the same month. The deal will see Eaton own and maintain the sites, while Warid continuis to rent the towers. The move took Eaton's total number of towers in Uganda to 700. In March 2012 Orange also announced it is to sell its telecoms towers to Eaton Towers as part of a 15-year partnership agreement. Orange is seeking the sale in an effort to lower its operational infrastructure while preventing the unnecessary and unsightly proliferation of telecoms masts.

One of the triggering factors for the end of the price wars in September 2011 was the rampant inflation that the Ugandan economy is suffering from. However, this is beginning to fall thanks to interest rate hikes, with our Country Risk team estimating it will be at around 14% by the end of 2012 - down from 20.3% in April 2012. The economy continues to grow strongly, although worries over public spending are intensifying. The government is likely to cut back on expenditure given the recent interest rate hikes that may impact on the Ugandan consumer.

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