Photo: The Independent Mobile network operators in Uganda.analysis
By Haggai Matsiko
Kampala
— A fight is raging between telecom operators on one side, and the
Uganda Communications Commissions (UCC), the Uganda Police Force, and
State House on the other, over moves to monitor the Shs44 trillion
mobile money business.
At the heart of the
fight is a push by President Yoweri Museveni to get full access of the
telecom data systems through the multi-billion technology called
Intelligence Network Monitoring System (INMS) that government put in
place last year.
While Uganda has
multiple telecom companies, the fight to defend business secrecy appears
to have been left to the two telecom giants -- MTN Uganda, which says
it controls 55% of the telecom market share or about 11.2 million
subscribers, and its main challenger; Airtel Uganda.
Although Museveni
acquired the INMS to monitor mainly the data and voice operations of the
telecoms, the current disagreements appear to stem from the push by
government departments to pry into mobile money, which is the biggest
cash cow of the telecoms. Mobile money, which has been growing very
fast, had a value of Shs44 trillion at the end of 2016. That is what the
Uganda Police, State House, and the Ministry of ICT want to get
involved in.
Since telecoms
started operating, they have been doing what is called self-declaration
to the sector regulator, UCC. But with the entry of mobile money, which
requires financial sector regulation, and the advent of cyber security
and terrorism which implies roles for security agencies, several control
wars have erupted.
At the centre of
the fight are the telecom operators, the Inspector General of Police
Gen. Kale Kayihura, President Museveni's son, Maj. Gen. Muhoozi
Kainerugaba, who also doubles as the Presidential Advisor on Special
Operations, ICT Minister Frank Tumwebaze and sector regulator, UCC boss
Godfrey Mutabazi.
The fight is an
escalation of incidents from as early as November last year when UCC
directed that telecoms grant the Uganda Police access to their Mobile
Money operations data. The telecoms protested.
In a letter dated
November 13, for instance, Airtel Uganda noted that from section 5(1)
(u) of the UCC Act, the obligation and function to establish an INMS
lies exclusively with the UCC and not the Uganda Police or any other
department/agency of the Government of Uganda.
"We are not aware
of any amendment to this provision or any other law or regulation that
provides for INMS for Uganda Police," notes V.G Somasekhar, the Airtel
Executive Director in a letter to UCC.
Apart from this,
Airtel noted, the Mobile Money services is regulated by Bank of Uganda
under a different law and as such does not fall with in the category of
services that should be monitored by UCC through the INMS created
pursuant to section 5(1) (u) of the Uganda Communications Act, 2013.
Airtel had earlier
in an October 23, 2017, letter raised concerns about the legality of
INMS being implemented by Uganda Police contrary to section 5(1) (u) of
the Uganda Communications Act, 2013.
In conclusion,
Airtel said it would await the requisite Memorandum of Understanding
(MoU) among others, which would define among others; the technical
requirements for UCC's INMS; the parameters to be monitored by UCC
through the INMS; the scope of information to be accessed by UCC through
the INMS and the commercial terms in respect of Airtel's resources that
will be used by the UCC for the INMS and other related matters.
Insiders say MTN
also raised some objections but was not as assertive as Airtel Uganda.
Insiders suspect the telecom giant is not keen to stir up a storm with
the government at a time when it is looking to get a renewal of its
concession, which expires this year.
The Independent wrote emails to both MTN Uganda and Airtel Uganda for a comment. The two had not responded by press time.
State House's role
Mutabazi copied his
directive in the letter to ICT Minister, Frank Tumwebaze, IGP Kayihura,
the former Director ICT, Amos Ngabirano and Maj Gen. Muhoozi
Kainerugaba.
Muhoozi's
involvement is a window into the involvement of State House. President
Museveni was directly involved in procuring the technology, which among
others also monitors Mobile Money operations, international calls and
other data operations.
It is not clear how
much was invested in the technology but at the time it was being
procured, estimates put the cost at between $20-30 million (Shs 66
billion--99 billion).
After several
frustrated attempts to procure the technology, President Museveni
finally awarded the deal to a company called Global Voice last year.
Global Voice had
always chased the deal through spy-turned businessman, Abu Mukasa. Abu
Mukasa used to work for the External Security Organisation (ESO) but
with the right god fathers, he became a big time broker.
He was at one point
an aide de camp to Justice Minister Kahinda Otafiire and later switched
camps and got closer to Amama Mbabazi, former Prime Minister. Mukasa,
had co-founded Hits telecom, which was later sold to Orange, making him
Orange's first Ugandan director, and brought a company to procure the
technology. The company known as GlobalVoice, was founded by former
Haiti President- Laurent Lamothe.
Under this company,
Mukasa had pitched to run the technology in the arrangement of Build
Operate and Transfer (BoT) because the government at the time didn't
readily have the money to procure it.
Museveni at some point consulted with Peter Kahiji, the director technical services of IT sector regulator, NITA-U.
President Museveni
also brought on board Josephine Wapakhabulo, the daughter to the late
James Wapakhabulo, who was Uganda's speaker, foreign affairs minister
and Deputy Prime Minister.
Ngabirano, Kayihura
and UCC Executive Director, Godfrey Mutabazi had all worked on the
procurement of the technology before Wapakhabulo came in. It is not
strange; therefore, that Mutabazi is asking that the telecom companies
allow the police to monitor their activities.
Police is also
being asked to manage the technology because initially, insiders say,
for President Museveni, the biggest motivation to procure the technology
was in its security features like enabling eavesdropping. It is not yet
clear how the fall- out between President Museveni and police has
affected this arrangement. Insiders who spoke to The Independent say
State House is now in charge of the technology.
Apart from its
security features, the technology was also expected to put an end to
suspected under-declaration of revenue by the telecoms.
Since telecoms have
been "self-declaring", the UCC has only been levying fees on them
basing on what the telecoms say they earned.
UCC collects an
annual levy on telecoms gross revenue of 2 per cent. The levy is too
critical, it constituted 27% of the Commission's projected revenues in
the financial year 2014/2015. And UCC is required to remit 1% of the
operators' levy to the Consolidated Fund.
However, in his
2015 report published this year, the Auditor General, John Muwanga,
added his voice to those that have raised as a red flag, the fact that
the regulator relies on the operators audited financial statements to
raise invoices of the 2% levy on the revenue.
"A review of the
revenue collection system revealed that the Commission has not yet built
capacity to independently verify the revenue figures reflected in the
operators audited financial statements to counter the likelihood of
audit risk/ or collusion," the report reads, "As such, there is a risk
of under collecting revenue for the Commission in the circumstance."
At the height of
the MTN mobile money scandal, it was alleged that the operator had been
under-declaring the volumes of its Mobile Money platform. Apparently,
MTN was reportedly making Shs14 billion a day but was declaring Shs9
billion.
In his 2016/17
budget speech, President Museveni claimed that the telecom companies
were under declaring and as a result evading an estimated $400 million
per year in taxes.
Big money targets
Apart from the
monitoring aspect, insiders say, the technology might also bring the
country closer to dealing with a telecom fraud known as voice traffic
termination fraud or SIMbox fraud, which costs telecom companies revenue
and the government taxes.
International
studies have indicated that network operators lose about 3% of the
annual revenue due to fraudulent and illegal services. Some researchers
put the total losses from the underground mobile network industry to be
$58 billion in 2011.
Apparently,
fraudulent SIMboxes hijack international voice calls and transfer them
over the Internet to a cellular device, which injects them back into the
cellular network.
As a result, callers from abroad end up appearing as if they are calling with local numbers.
The calls become
local at the destination network like MTN, and the cellular operators of
the intermediate and destination networks do not receive payments for
the call routing and termination.
Besides causing the
financial loss, an international study shows that SIMboxes degrade the
local service where they operate. Often, cells are overloaded, and voice
calls routed over a SIMbox have poor quality, which results in customer
dissatisfaction, the study adds.
In Uganda, some of
the major players in this fraudulent trade also happen to be major
players in the telecom sector, senior officials in cabinet and some
Chinese dealers.
The trade is very
lucrative, insiders claim. While telecom companies are always co-owned,
revenue and losses shared on top of paying taxes; for simboxes, apart
from the initial capital injection, there are literally no expenses, no
taxes at all since it is an underground business.
An owner of a
simbox can earn up to $10,000 dollars a day from just one simbox, those
knowledgeable about the industry claim. That is about $ 350,000 a year.
And with multiple simboxes, the figure goes up to millions of dollars.
But as simbox
operators make these billions, registered operators and government are
the major losers. Simboxing hurts telecoms business of international
call termination, which is big business with agreements between telecom
companies in millions of dollars. For instance, for a person using
Vodafone to call an MTN subscriber in Uganda, Vodafone pays part of what
it charges the caller to MTN.
What simbox
operators do is hijack the call before it lands on the MTN servers,
bypass MTN servers, and the call goes through a local line. Therefore,
MTN charges the owner of the line the local rate but the owner of the
simbox receives a higher rate for helping convert an international call
into a local one. Simbox operators receive their cash outside the
country to avoid being traced.
Uganda's Financial
Intelligence Authority early last year noted it was investigating
revenue diversion and tax evasion in the sector amounting to $140
million (over 470 billion) in lost revenue.
The fraudsters pay only an eighth of the money they should have paid to the main voice operators in termination fees.
In a March 19 2015
letter, the FIA boss, Sydney Asubo, warned Mutabazi that over the past
three years the country had lost up to $144 million accruing from
incoming international telecoms traffic that is disguised as local
traffic by simboxes.
Apart from the
losses to telecom operators and government in tax revenue, fears remain
that the untraced billions made by those who own simboxes can be used to
jeopardise national security.
Estimates indicated that government loses 45 per cent in tax revenue and operators like MTN over $10 million a month.
Mutabazi told The
Independent that government decided to have INMS managed by "the
authorities managing it" - a vague description because of the lack of
clarity, because of the overlaps of its functionalities--it has aspects
of monitoring traffic, data, voice and security, among others.
"We wanted to
prevent wastage and duplication of resources where there are multiple
systems," he told The Independent, "But UCC has visibility of the system
and we use it to also play our part."
Mutabazi said they had explained this to the telecoms in a bid to get them to comply.
"Unless they are
afraid to be monitored," Mutabazi said, "But Mobile Money runs on
telecom infrastructure which is regulated by UCC. The point INMS is
monitoring is on the switch when it is all still data and not money in
the bank."
Mutabazi said that
from his stand point, the players understand this is the same way they
understand that local interception is provided for in the security laws.
"We have explained this," Mutabazi told The Independent in telephone interview.
Mutabazi was
responding to concerns raised by the telecoms over the implementation of
the monitoring technology. These concerns are contained in
correspondences between the sector regulator and telecoms copies of
which The Independent has seen. Mutabazi said that the telecoms had
since pledged to grant the required access. It remains unclear, however,
when the access will be granted and what impact that will have on
especially mobile money.
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