Over the past month, Uganda Communications Commission (UCC) has banned the selling of SIM cards and ordered telecom companies to put in place National ID card readers to electronically verify customer information against the database maintained by the National Identification And Registration Authority (Nira).

According to the UCC directive, one can only obtain a Sim Swap/replacement after producing a valid police report, presenting a letter from Nira verifying and validating that a Sim card holder’s national ID is authentic, being re-registered by the telecommunications operator using biometrics and a photograph.

As a result of the directives, telecom companies and other players say hundreds of billions of shillings have been lost in actual revenue and business. Thousands of phone users have also had to make do without having access to phones due to lack of SIM cards.
UCC officials, however, say once the latest plan is implemented, the registration of subscribers and tracking of people who use their mobile phones to aid crime will be made easy.

However, there is general cynicism about the effectiveness of the latest promise. All the past assurances have fallen flat despite subscribers and other entities paying the price in a string of directives.

Take, for instance, the latest directives banning the selling and swapping of Sim cards. Sources within the telecom industry told Saturday Monitor that UCC and other entities it works with lack clarity on what they want to enforce and in the course of the six years have had to amend or withdraw many of their directives. In the February 23 directive, for example, several amendments, warnings have since been issued leaving the sector in disarray.

Loss of revenue from sale of cards
Retailers of airtime cards earn money in form of discounts given by telecoms on the scratch cards they sell. This ranges from 3 per cent margin off the scratch cards sold to 2.5 per cent. Once the UCC ban on sell of airtime scratch cards fully takes effect by June 30, this revenue stream will be cut off. Already, these retailers had seen their earnings cut after their commission was reduced by 1 per cent from 4 per cent. The retailers, however, are at the bottom end of a long chain.

“It is an eco-system that is being destroyed and we don’t know to whose benefit,” an official at a telecom told Saturday Monitor.
More than 55 per cent of the revenue generated by leading telecoms is from the sale of airtime scratch cards and they already anticipate losses as people transition. In the end, however, the same telecoms will be the major beneficiaries as many groups and individuals will be kicked out of the chain.

At the pinnacle, are the companies that manufacture the scratch cards on behalf of the telecoms but most, if not all, the telecoms contract this service to firms outside Uganda. The chain of individuals and companies that move, store, process and secure the cards from when they leave the supplier to the final user are some of the people that will be kicked out of the system.

These include shipping companies, clearing agents, regional warehouse owners, security companies, transporters, major dealers and many others plus their respective employees.

URA loses
Reports suggest that Uganda Revenue Authority(URA) is already losing revenue and is likely to lose more, especially taxes accruing to the tax body from the importation and sell of Sim cards.

Telecoms currently pay 25 per cent full duty on their airtime scratch cards imports. URA also collects revenue from the other businesses and personnel who man the chain, from the manufacture to the final user.

In December last year, Ms Doris Akol, the URA Commissioner General complained that the tax body’s revenues were shrinking due to cheaper voice and data bundles which many subscribers were opting for. Ms Akol revealed that the tax body’s fortunes from airtime were already dwindling.

“As URA, when that mode of taxation changes we will have to review the policy and agree on how we will be able to monitor the transactions of airtime transfer either from mobile money and all that and agree on another medium of taxation.

There cannot be that kind of blanket loss of revenue like that. It cannot happen. What I know is that there are some tax policies that are in the offing which should be able to allow those changes,” URA Corporate Affairs manager Vincent Seruma said in an interview.

Collectively, telecoms are among the leading taxpayers in the country. MTN Uganda has for many years topped the list of taxpayers in the country. Mr Seruma says discussions are already ongoing to manage the problems that will be created with the current changes.

“That may be a temporary measure, they cannot stop subscribers. I don’t think URA is that stupid to let the thing pass and we lose revenue just like that. The question is how the communication service is provided by a telecommunications company be tracked by URA for purposes of taxation and the discussions are going on now but the details are not yet out,” he said.

Telecoms bleed
On average, telecoms across the country handle 40,000 to 50,000 customers a day. These are either acquiring new Sim cards, replacing lost ones, and other such services.

A technical staff at one of the major telecoms in the country told Saturday Monitor that that telecoms, and subsequently government, may not feel the impact now. The official explained that telecoms and consequently government will lose billions in anticipated revenue which is likely not to be realised as a result of the impasse.

As a result of last year’s exercise, the number of mobile phone subscribers in the country dropped by 56,946 according to the Post, Broadcasting and Telecommunications Market and Industry report UCC. UCC attributed this to the abandonment of Sim cards by users as a result of the registration, verification and validation exercise where every subscriber was required to use their national identity card details for the exercise.
Customers trapped
In the period of more than 20 days since the ban was effected, subscribers who have lost their lines for various reasons have been unable to replace them. Telecom officials told Saturday Monitor that hundreds of millions of shillings are lost every day by this category of people, with some having to put their businesses on hold because their cash is held up.

The telecoms are also losing money that would have accrued as a result of the same people either buying airtime or doing other transactions on their phone. “I have had that number since 2001 and those [expletive] have switched me off. My money is on that line and it is what my contacts know,” one affected subscriber told Saturday Monitor.

Whose mess?
Nira insists its mandate is to register people and that its timelines are not driven by the UCC deadlines. On the other hand, UCC has since pegged much of its directives on the work of Nira. With both government entities unwilling to take responsibility, the culmination has been an impasse resulting into numerous directives from the communications regulator and without anybody taking responsibility.

An IT expert working with one of the telecoms told Saturday Monitor, on condition of anonymity because they are not authorised to speak on behalf of the telecom that, at worst, it would not take more than seven days to set up the API and that this was what was envisaged when the March 8 directives by UCC were issued. More than 20 days later, the same API is yet to be established.

The talk about the establishment of the API, which would have saved subscribers from the current impasse started more than two years ago. Sources within telecoms indicate that demands for the establishment of the same from UCC have all been in vain.

With mounting pressure from, among others, President Museveni who listed a number of things that should happen in the wake of Ms Magara’s murder, including the need for electronic identity card readers, UCC moved to implement what had been agreed on.

Multiple sources have told Saturday Monitor that the latest delay has been occasioned by a fight for who controls the money and subsequent procurement between top officials at Nira and UCC.

Considerations to use local experts or to source others from the telecoms were reportedly rejected in favour of a foreign company.
“There was a bit of misunderstanding about the compatibility of the equipment in NIRA and the other which may be procured.
“It turns out that the fear was unfounded and any other supplier can provide the equipment. It should be running by tomorrow [last Saturday],” Mr Fred Otunnu, the UCC corporate affairs director, said.

Mr Otunnu explained that that the regulator has been working with the telecoms and has been engaging the same in daily meetings as a permanent solution is being found.

“I can’t tell you that is going to end. What we are going through is to address the interface part. Hopefully, this should be it. If they are going to be any changes in the future, they should be on the back end,” he said.

Counting the cost of the Sim card mess

Dealers
- Loss of business
- Unable to meet obligations
- Loss of money

Customer
- Loss of money and time
- Unable to communicate
- Inconvenienced

Leaders
- Failed to explain justification
- Failed to provide direction
- Corruption allegations

UCC
- GSM regulator
- Failed to establish API for
two years
- Controversial directives
- Unclear guidelines
- Clash on role with NIRA

Telecoms
- Disorganised as a result
- Immediate financial loss
- Loss of revenue

Bank of Uganda
- Mobile Money Financial services
- Know your customer
- Allows banks to use other identities

NIRA
- Slow/ inefficient registration
- Unclear about role in Sim
registration

UCC
- GSM regulator
- Failed to establish API for
two years
- Controversial directives
- Unclear guidelines
- Clash on role with NIRA

URA
- Loss of direct
and indirect
taxes
- Future taxes
threatened