By CHIMPREPORTS
The Auditor General’s office is currently evaluating the financial implications of transferring the management of Uganda’s National Backbone Infrastructure (NBI) from the National Information Technology Authority of Uganda (NITA-U) to Uganda Telecommunications Ltd (UTCL). This assessment comes in response to protests from Soliton Telme, a Kenyan company contracted by the government to manage the NBI and e-government infrastructure.
The NBI, a 4,300 km optical fiber infrastructure, plays a critical role in government communications, transactional services, and various essential functions such as security surveillance, financial systems, national identification, and tax services.
President Museveni, on December 22, 2023, directed the ICT Minister, Chris Baryomunsi, to expedite the process of granting majority shareholding of UTCL and transferring the management of NBI to the UAE firm ROWAD Commercial Broker LL.C. The President expressed dissatisfaction that the management of the ICT backbone had been given to another private operator without his knowledge and questioned the decision-making process.
In December 2023, a share subscription and allotment agreement were signed by the Ministry of ICT, Ministry of Finance, UTCL, and ROWAD Commercial Broker LL.C. This agreement required the current shareholders (MoICT&NG and MOFPED) of UTCL to swiftly facilitate the transfer of the management and commercialization of the NBI to UTCL.
However, Soliton, under its contract with the government, has warned that terminating its contract could result in significant financial costs. The contract, valued at about $8.2 million per year, includes transport charges and revenue-sharing arrangements. Soliton is responsible for delivering internet bandwidth to various government ministries, departments, and agencies (MDAs). The potential termination of this contract has raised concerns about the financial implications on the government.
Soliton was initially contracted on July 11, 2012, to undertake the commercialization of the National Backbone Infrastructure (NBI). The contract began in June 2013 and was originally intended to last for 5 years until 2018. However, an extension was granted, prolonging the timeline for an additional 10 years until May 31, 2028.
As of now, the contract with Soliton is in its 11th year, with four more years remaining. If the decision is made to transfer the commercialization and management of the NBI to Uganda Telecommunications Ltd (UTCL), it would require the premature termination of Soliton’s contract. This termination would likely result in compensations and damages, estimated to cost the government of Uganda and taxpayers over USD 36 million (approximately Shs 138 billion), according to an anonymous official.
In response to Soliton’s protest letter, the Ministry of ICT has reportedly written to the Auditor General, seeking an assessment of the cost implications of terminating the company’s contract. Notably, the deadline for concluding the deal with Rowad, the UAE firm, is set for March 20, 2024. The situation presents a complex challenge for the government, balancing the need for the NBI transfer against the financial ramifications of terminating the existing contract with Soliton.
Contract battle
In 2018, President Museveni expressed reservations about the renewal of the contract related to the National Backbone Infrastructure (NBI). However, despite these reservations, the decision to transfer the NBI to Uganda Telecom was passed by the Cabinet in the same year.
The then ICT Minister, Frank Tumwebaze, justified the decision by emphasizing the aim of supporting and revamping Uganda Telecom (UTL) to make it attractive to potential investors. The Cabinet’s decision included transferring the NBI to UTL to enhance its competitiveness in the telecommunications sector.
As part of the new arrangement, the UAE firm, Rowad, is set to acquire a 60% shareholding in UTL, while the Ugandan government will retain a 40% stake. Rowad is expected to inject $250 million into the business. The restructured UTL will then offer data and other communication services to both the government and the private sector, positioning itself as a competitor to established telecom companies such as MTN and Airtel.
In President Museveni’s letter to Baryomunsi on December 22, 2024, he expressed his frustration with foreign telecom companies repatriating large sums of money to their home countries. Museveni endorsed the reactivation of UTL as a joint venture with private sector partners, emphasizing that the government’s 40% ownership would contribute to job creation, worker compensation, utility payments, taxes, and dividends for the country. The President saw this move as a correct decision in the broader interest of Uganda.
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