PARLIAMENT OF THE REPUBLIC OF UGANDA

BRIEF STATEMENT ON THE MISMANAGEMENT OF UGANDA

TELECOM CO. LTD MADE IN ACCORDANCE TO RULE 25(4) OF THE
RULES OF PROCEDURE OF PARLIAMENT.

NATHAN NANDALA MAFABI (MP)

BUDADIRI WEST

November 17, 2016

THE PREDICAMENTS AT THE SINKING UGANDA TELECOM LIMITED

0.0

Introduction

In 1998 the Government of Uganda (GoU) used the 1997 Communications Act in 1997 to split Uganda Posts and
Telecommunications Corporation (UPTC) intoUganda Telecom Limited (UTL), Pasta Uganda, Post Bank and
Uganda Communications Commission (UCC). UTL was privatized in 1998: UCOM/Telecel (51%) and the
Government of Uganda (49%) shares. In 2005/2006, Telecel sold its shares to Libya African Portfolio Green
Networks (LAP Green N)of Libya; and shares later rearranged into 69% for LAP Green N and GoU 31%.
At takeover by LAP GreenN, UTL was a leading company with a very strong and widespread fixed, mobile and data
infrastructure and servicescovering most parts of the country. Government ministries and Departments,
organizations and individuals chose it to be their preferred service provider.

No Audit done for the last 4 years.

Over the past few years, this company has continuously been on a freefall that has now reached alarming levels. If
nothing is done to save it, itcould soon cease to exist. The freefall is mainly due to:-

1.

Frequent Changes of Top Managementand Poor Management

After the Libyan crisis (2011) UTL has had frequent changes in Top Management: Six {6) Managing Directors (MDs)
to date (an MD per year); eight {8) Chief Technical Officers (CTOs) or one CTO in nine {9) months. For instance
current MD, Mark Jude Shoebridge resignedin July 2015 as Chief Fixed Services Officer,only to return in February

2016 (six months later) as MD. The current Chief Finance Officer, James Wilde took over in August 2016, after
Nigel Williams left unannounced in May 2016 after working for two weeks pocketing full salary for the month and
allowances totaling Shs 130 million. This scenario is reminiscent of poor and unstable management.

High Levels of Indebtedness

UTL is bleeding with overwhelmingLocal and foreign debts that it has now failed to service.

2.1

Uganda Communications Commission (UCC)

Debt demand letter of 1st September 2016 from the Executive Director of UCC shows a debt of U. Shs 22.244
billion with UCC, the Regulator arising from unpaid spectrum fees. The regulator is threatening to withdraw the
frequencies which would in effect shut out all the services of the company.

2.2

Overdue Interconnection Fees owed to MTN

A debt of U. Shs 8 bn in interconnection fees (see letter of 8th April 2016 from MD MTN to CEO of UTL). Even with
agreed instalment payment, UTL has failed to service this debt.

2.3

Uganda Revenue Authority (URA) Accumulated Tax Debt

U. Shs 58.424 billion in Pay as You Earn (PAYE), Withholding Tax (WHT}, Value Added Tax (VAT) and Excise Duty
taxes owed to URA for the period May 2015- Dec 2015. This debt is increasing.

2.4

Huawei Technologies limited

Supplied equipment, spares and services to UTL under LAP Group totaling US $ 7.06 million (U. Shs. 24.244
billion). The Commercial Court in a specially endorsed plaint drawn by M/S ENSafrica Advocates on 8th May 2015
under Civil suit 311 of 2015 (Huawei Technologies Co. Ltd Vs Uganda Telecom Limited) ruled that UTL settles this
case with interest from the date of judgement. UTL has failed to pay.
Unremitted NSSF and UCECPS Payments

2.5

Since July 2013 to date, UTL has not remitted on behalf of its employees the 5% by employees and 10% by
employer to both NSSF and UCECPS provident fund schemes to which some of its staff belongdespite these
monies being deducted from the workers' salaries. This has now accumulated to Ug. Shs 16 billion.
Sale of Properties/Asset Stripping

3.0

On privatization, UTL inherited a lot of assets (buildings, land and equipment). About two years ago,most of these
assets are being identified, prepared for sale and sold off at supersonic speeds. This exercise is going on unabated.

3.1

Assets Sold

3.1.1

Plot 41-47 5th Street Industrial Area

In an agreement of 1st February 2016, Plot 41-47 5th Street Industrial Area under Lease Hold Register 718, Folio 16
measuring 5.537 acres was sold to Magnet Construction Company Limited at US $ 4.9 (U. Shs 17.15 billion). A
deposit of US $ 3.94 million was paid; the balance is to be paid over four 3-monthly equal instalments from May
2016 to Feb. 2017. This agreement was signed by Stephen Kaboyo and David Nambale on behalf of UTL and
Shimon Halfon and Sa m Ahamya on behalf of Magnet.

3.1.2

Plot 1-7 Nsambya Yard

In an agreement of 8th July 2015 signed by David Nambale and Mark Shoebridge for UTL, and Bob Kabonero and
Margaret Mirembe Gureme for lntercar (U) Ltd, this land which is under FRV 309, Folio 3 was sold to lntercar (U)
Ltd at US$ 1.567 million (Ug, Shs 5.484 billion).
Assets Evaluated and lined up for Sale

3.2

With Associated Consulting Surveyors valuation reports of Aug. 29th, 2016 assets fast tracked for sale are:

3.2.1

Plots 125, 128, 130, 131, 132, 133, 142, 143 and 273 Kibuga Block 38 Makerere, Wandegeya
(With Building and Working Communication Equipment/Infrastructure)

Current Open Market Value (OMV) - Ug Shs. 5.0 billion

Forced Sale Mortgage Value- Ug. Shs 3.0 billion

Insurance Value- Ug. Shs 1.5 billion

3.2.2

Plot 41-43 Kyambogo (With Buildings and working Communication Equipment/Infrastructure)

Current Open Market Value (OMV) - Ug Shs. 900 million

Forced Sale Mortgage Value (FSMV)- Ug. Shs 540 million

Insurance Value( IV)- Ug. Shs 300 million

3.2.3

4.0

Plot 2 Siad Barre Avenue Nakasero opposite Rwenzori Courts and currently used for Parking)

);;;>

Current Open Market Value (OMV) - Ug Shs. 10.5 billion

);;;>

Forced Sale Mortgage Value (FSMV)- Ug. Shs 6.3 billion

Fleecing the Company using Bad Agreements, Collusion and Fraud

While the above has continued, the Top Managers of UTL do not have any shame, but have also continued fast
tracking the journey of UTL to its death bed through bad agreements and fraud.
4.1

BCS Group (UTL's Band Width Partner)

With an unsigned agreement of 2012 with UTL to share infrastructure from Kampala-Masaka-Mbarara-Gatuna,
there is afraudulent claimdemanding that UTL pays BCS US $ 471,682 after offset of eo-location charges, yetit's
BCS that owes UTL. MD is personally pursuing this despite some of the Managers within UTL refusing to sign or
querying some documents on this deai(Attachments: does of 16/07/2015, Vouchers Serial; Nos. 703336 (US $
19,714), 716980 (US$ 199, 360}, 720039 (US$ 21, 436), 720041 (US$ 59, 136).These payments are being done
without any contract or purchase order for a period of more than one year. Even then, the amounts keep on
varying each month.
Payments of US $ 25, 760 and US $b21, 850 have just been made in November 2016 to BCS through Stanbic Bank
(Payment Batch id 27097857 and 27064570 and Voucher Ser. No 722256).
4.2

Procuring a Lease Certificate of Title

In 2014 UTL applied to Uganda Land Commission for transfer of lease hold interest for Plot 41-47 sthstreet
Industrial Area from ULC to itself. This was done internally by UTL's Legal Department and Ug. Shs 1,500,000 was
paid (vide Voucher Serial No 708023) in the names of Mr. Latif Wamusango. lt is surprisingthat an agreement
dated 19th November 2014 was later drawn by M/s Kyazze, Kanka and Company Advocates purporting that it was
them that processed this lease hold transfer. Shs 160 million was fleeced from UTL (Ug Shs 110 million on 1ihNov
2014 and Ug. Shs 50 million on lih March 2015). MD and DavidNambale approved this deal of outright robbery of
the company that is already in a crisis.
4.3

Payment to DISC Africa Ltd

For no services rendered a fraudulent payment ofUg. Shs 34 million was made in cash to DISC Africa in two
instalments. The first (Shs 25.944 m) was paid to Ayub Mulumba (UTL's Chief Internal Auditor) on Voucher serial
No. 724655 on 22ndAugust.The last payment is being followed. This is even against the company policy that
requires that such amounts owed to Suppliers must be paid by cheque not cash.
5.0

Conflict of Interest

5.3

Sub-Sahara Group (Owned 99.9% by UTls current CFO- James Wilde)

Has been awarded contracts to audit 472 sites atShs 100 m (Voucher 020089)and to tow UTL vehicles to/from
Garages (voucher 724690 and Stanbic payment batch ID 26986746).This is a very clear case of conflict of interest.

6.0

Grossly un equitable Remuneration

Despite the UTLfinancially bleeding, Top Managers arepaying themselves huge salaries and allowances on top of
other benefits. In Standard Chartered Bank Payment instructions, the Chairman Board of Directors allowance was
increased from a net of US$ 1,500 (Shs 5,175, 000) to a net of US$ 5,000 (Shs 17,250,000)/month wef Sept. 2016.
A fellow Board member (Mwase Moses) remained at US $ 1000 (Shs 3,450,000)/month. This is on top of other
allowances. The Top Four; MD, CFO, Chief Legal Officer and Chief Human Resource Officer earn a total salary of
Shs 420 m/month. The lowest gets Shs 60 m/month and the highest Shs 150 m/month. This is 1/3 of the salary bill
for the about 500 UTL workers. These salaries are indeed the highest for such staff in any company in Uganda.
Field mileage allowance for operational staff was recently removed purporting cost cutting, yet Management is
adding on their payments. Staffshave low morale; no longer go an extra mile to achievedue to lack of facilitation
(transport, etc). There are very few vehicles, mostlyshared and DMCsthat are often impounded by Police. This has
affected network maintenance, yet top Managers driveposhcars giving a wrong picture that UTL is doing very well.
Cost cutting strategies are only at lower levels. There is a threat to retrench some staff all in the name of cost
cutting. While low cadre staffs are being squeezed, Top Management is busy looting from the ailing UTL.
lt is shocking Shs SOm was paid to Stan Chart Bank through Stanbic (batch Id 26658328) to offset a loan for Chief
HR before he came to work in UTL (Voucher Ser. No. 724631)! Also US$ 6,000 (Voucher 722203) has been paid.
7.0

Dubai/Malta Board Meetings

Despite talk that LAP Green HQ closed in Dubai, UTL Management has continued flying out purportedly for
meetings in Dubai and Malta. No capital is being injected into the company. One such trip is when money was
requisitioned in May 2016, signed for and received by Ms Stephen Kaboyo, Moses Mwase, Hon. Aston Kajara then
Minister of Privatization, and David Nambale on the 6th of May 2016 for travel, per diem, and other allowances for
meetings in Malta and Dubai (8th - 10th May 2016). The current ownership of UTL is not clear as the biggest
shareholders (LAP Green) does not seem to have any representative on the Board of Directors.
The press reported the former ambassador to Libya saying /(people coming here to Uganda as Ministers are just
masqueraders posing for photos in Uganda yet they cannot do the same in Libya to confirm their genuineness".
Available information confirms the closure of LAP Green Offices in Dubai in 2014. lt seems there is a Cartel that is
masquerading as LAP Green and busy siphoning money from UTL.
8.0

Multiple Court Cases/Connivance to Steal Workers NSSF Savings

Of the many Court cases against UTL, one of the prominent ones is of UTL former and current Workers and the
Uganda Communications Employees Union (UCEU) against UTL and NSSF. In 2014 championed by David Nambale
UTL initiated a scheme with the Deputy MD/NSSF (Geraldine Ssali) to stealtheworkers NSSF Savings. The claiming
was that; the workers cannot have two provident schemes (NSSF and UCECPS) running at the same time. lt
convinced NSSF to refund all the monies UTLhad paid to NSSF from 1992 during the UPTC when the workers
started saving with NSSF to date. Before, this case was at Industrial Court; before UTL sued NSSF and Attorney
General before High Court to have NSSF refund this money to UTL. One against NSSF was ruled by Justice Lydia
Mugambe in UTL's favor in Sept. 2015. Had it not been for the vigilance of the Workers Lawyerthat immediately
put a notice to appeal this erroneous ruling, the workers would have lost all their savings (over Shs 30 billion).
Moreover, most of this money has already been claimed from NSSF by the qualifying beneficiaries, some of whom
have long died. This would mean NSSF entering into other workers savings to pay UTL.This case is still waiting for
typed court proceedings for it to be filed for hearing at Court of Appeal.

9.0

Stealing, Vandalism and the Shrinking Network and Poor Services

At takeover there were about six hundred sites providing mobile, fixed line and data services. The network is now
vandalized, poorly maintained and has shrunk.Sites are being closed and or cannibalized for spares, fuel and
equipment is being stolen/vandalised; the company cannot afford any spares and hasfailed to provide fuel
regularly. Closing sites is going on even in areas ofhigh demand where other providers (MTN, Airtel, etc.) are
expanding and improving their services/networks. Another 46 sites (attached) are lined up for shut down or norefueling w.e.f Oct. 2016. This will further reduce the already diminished network coverage.
10.0

Lack of Investment

Despite the network now being very old requiring and overhaul/replacement; the investors have not put in any
money to the company. The last investment was done in the network around 2008. For the old network and lack
of proper maintenance that has resulted intopoor services, many customers have abandoned using the company's
services. The customer base has diminished to appalling levels.
11.0

Non-Auditing of Company Accounts

For many years, no auditing has been done on the company accounts/assets and more or so cash. This is why it
took long to detect a fraud that went on for years where petty cash was siphoned to the tune of more than Ug.
Shs 1.5 billion. This case was widely reported in the news print media in May this year.
12.0

Threats of Sacking and Unfair Termination of Employment Contracts

Coming about a month ago, the new Chief HR Officer is going round threatening to sack staff. Some staffs have
been suspended and others their contracts terminated under unclear circumstances.
MD recently requested for passwords for all the lnfo systems and has blocked some staff from accessing some
systems. Normally, these passwords are only accessed by Heads of Department and IT Office.
13.0

Conclusion

Government owns 31% shares in UTL that was once a giant and that still provides services to, government
institutions institutions, other organizations and the public. lt still has a major role to play in the in the Economy. lt
should not therefore be allowed to be killed. lt is therefore, my recommendation that:(i)

The acts going on in UTL are stopped with immediate effect.

(ii)
(iii)

Carry out both Financial Audit and Forensic Audit for the 4 years.

(iv)

(iv) The culprits that are responsible for the state of affairs in UTL should be prosecuted once found to

(iii) Parliament urgently sets up a select Committee to fully investigate activities going on in UTL.
have abated or aided acts of defrauding the company.

For God and My Country

Nathan Nandala-Mafabi