Government in the recently read annual budget promised that they would help sinking Uganda Telecom (UTL) get back on its knees.
Part of this resuscitation included finding a viable investor to pump capital into the ailing telecom.UTL has liabilities of over 900bn.
Six companies have since shown interest in buying out the offered shareholding for UTL and the Financial Intelligence Authority (FIA) went ahead to verify the offers made and pick the best of the lot.
However, in the evaluation process, a contest arose after the UTL administrator recommended that Hamilton Telecom should be awarded after it emerged as the best evaluated bidder.
But the line minster, Hon Evelyn Anite raised queries on the financial stability of Hamilton Telecom before clearing Mauritius Telecom to takeover UTL despite being the lowest bidder.
Whereas says it will invest in $70 million, Mauritius Telecom is offering $45 million.
Cabinet therefore recommended that Asubo should conduct investigations on the financial muscle, authenticity of the said companies.
Asubo’s findings indicate that Mauritius Telecom with its lowest offer is the best contender to takeover and recapitalize UTL.
Asubo’s report has since attracted widespread criticism from across a section of interested parties.
Below is the Asubo’s full report
The Financial Intelligence Authority (FIA) headed by Sydney Asubo conducted a due diligence report on six companies which were vetted as the best to takeover Uganda Telecom Limited.
The companies include Hamilton Telecom Limited, Neubacher Montage, Mauritius Telecom Limited, Baylis Consortium, Telecom Global and Afrinet Kenya Limited.
The Financial Intelligence Authority (FIA) has conducted a financial due diligence on Hamilton Telecom Ltd., Neubacher Montage LLP, Mauritius Telecom, Baylis Consortium ,Telecom Global and Afrinet Kenya Ltd , as requested by the Honorable Minister of state for Finance , planning and Economic Development( Privatization and Investment). This company analysis and financial due diligence report is based on information obtained by the FIA from other financial intelligence units, companies’ financial statements /Banking information ( where they are available ) and information obtained from open sources among others.
We now present our company Analysis and Financial Due Diligence Final Report dated May 25, 2018.
- MAURITIUS TELECOM
1.1 Company Background
Mauritius Telecom was established in 1998 as Mauritius Telecommunication services and in 1992, after merging with overseas Telecommunications services it was renamed Mauritius Telecom. The company provides a wide range of voice and data services using fixed-line, mobile and internet platforms. It also facilitates access to TV services, mobile banking and mobile money services.
1.2 Shareholding Structure
The company’s shareholding structure is highlighted below;
| Share holder | Percentage shareholding |
| RIMCOM (investment vehicle of Orange SA) | 40.005% |
| Government of Mauritius | 33.49% |
| SBM Holdings Ltd.( Subsidiary of the State Bank of Mauritius ) | 19.0% |
| National Pensions Fund | 6.55% |
| Existing and retired employees of Mauritius Telecom Group | 0.96% |
The major shareholders of Mauritius Telecom including RIMCOM (an investment vehicle of Orange SA), Government of Mauritius and SBM Holdings Ltd.( a subsidiary of the state Bank of Mauritius ) are credible entities with well known funding sources.
1.3 Management and Corporate Governance
According to information available to us, Mauritius Telecom’s board of directors consists of individuals with extensive experience in both the public and private sectors , having worked in various areas in the private sector and in government departments and ministries .In addition, the company’s management team has a wealth of international experience in the telecom industry.
1.4 Financial Analysis
Trends in the Balance sheet growth
| 2016
(Rs ‘000) |
2015
(Rs ‘000) |
2014
( Rs ‘000) |
ASSETS
| Non-current Assets | 11,373,859 | 9,306,274 | 8,038,071 |
| Current Assets | 4,278,071 | 4,127,840 | 3,727,317 |
| Total Assets | 15,651,930 | 13,434,114 | 11,765,388 |
EQUITY AND LIABILITIES
| Equity | 4,745,192 | 5,008,987 | 4,894,325 |
| Non-current Liabilities | 4,398,670 | 3,695,019 | 2,936,007 |
| Current Liabilities | 6,508,068 | 4,730,108 | 3,935,056 |
| Total Equity and liabilities | 15,651,930 | 13,434,114 | 11,765,388 |
Trends in the profit and loss growth
| 2016
(Rs ‘000) |
2015
(Rs ‘000) |
2014
(Rs ‘000) |
|
| Revenue | 6,200,455 | 6,075,207 | 5,487,270 |
| Cost of sales | 1,288,795 | 1,168,794 | 1,068,890 |
| Operating expenses | 5,295,935 | 4,989,786 | 4,449,462 |
| Profit before tax | 231,066 | 1,181,581 | 1,145,160 |
| Income tax | 186,695 | 216,139 | 232,217 |
| Profit for the year | 44,371 | 965,442 | 912,943 |
*** Mauritian rupee=109 Uganda Shillings
Source: Mauritius Telecom audited financial statements
From the above statements the key performance indicators of Mauritius Telecom such as total assets, shareholders’ equity, revenues and net profits depict an entity in a sound financial condition.
. The company is adequately capitalized and has a solid asset base’
. The company is highly profitable. However we notice a significant reduction in the company’s profitability in 2016 mainly attributed to a reduction in its investment income and an increase in operating expenses.
1.5 Regulatory Compliance
We have not received any adverse information related to non-compliance with any regulatory requirements. In addition, the Financial Intelligence Authority has not received any reports on this company indicating possible involvement in money laundering or terrorist financing.
1.6 Conclusion
In views of the foregoing, it is our considered opinion that Mauritius Telecom is a financially stable company with credible shareholders whose funding sources are clearly known, and would be a viable investment partner with the Government of Uganda.
- TELEOLOGY HOLDINGS LIMITED
2.1 Company Background
Teleology Holdings Ltd. Is Gibraltar registered private equity with 12 international and 8 Nigerian shareholders .The key promoter of Teleology Holdings Ltd. is Mr. Adrian Wood, a former chief executive of MTN Nigeria. There are media reports indicating that prominent Nigerian politicians and businessmen are behind the company.
It is reported that Teleology Holdings Ltd. is in the process of acquiring 9 mobile, formerly Etisalat Nigeria, one of the major telecommunication companies in Nigeria, which got into financial problems leading to failure to repay a USD 1.2bn syndicated loan obtained from 13 banks. It is further reported that Teleology Holdings Ltd. executed a loan purchase agreement to take over the loans, and that they have so far paid USD 50m of the USD 500m bid.
We have also established that Teleology Holdings Ltd. owns 50% of the shares of Teleology Uganda Ltd. which was incorporated in Uganda on April 17, 2018, as a company limited by shares. The other share holders are DMA Technical services Ltd. (44%) and K-Tech Consult (U) Ltd. (6%).
DMA Technical services were incorporated on September 9, 2016 with Abdul Jingo (20%) and Agele Ismail Aliga (80%) as the shareholders. Their main business is indicated as construction, engineering and general consulting.
K-Tech Consult (U) Ltd. was incorporated on August 14, 2007 with Luwum Adoch and Tayebwa Nicholas each holding 50% of the company’s shares. Its main business is indicated to include provision of public telecommunication services and products including fixed and mobile telephone services, sale and distribution of international telephone calling cards and local international airtime cards.
2.2 Financial Analysis
There are no records of Teleology Holdings Ltd’s previous business operations and financial records. In addition, the company’s funding sources are not clear.
There are reports that Teleology Holdings Ltd. submitted its bid to acquire 9mobile with intentions of using 9mobile’s assets to source for funding from financial institutions. However, this may prove to be difficult given that 9mobile previously defaulted on a USD 1.2bn debt. In addition, this borrowing may be indicative of Teleology Holdings Ltd’s lack of financial strength.
Given the unclear ownership structure , unknown sources of funding and the fact that the company is yet to complete payment of the USD 450m in the proposed acquisition of 9mobile in Nigeria, Teleology Holdings Ltd’s financial standing is uncertain.
In addition, Teleology Uganda Ltd is a newly formed company with no record of financial transactions. A review of the respective bank accounts of DMA Technical Services Ltd. and K-Tech Consult (U) Ltd revealed that both companies have not had any significant transactions.
However, the financial Intelligence Authority has not received any adverse reports on Teleology Holdings Ltd. Teleology Uganda Ltd .,DMA Technical Services Ltd, K-Tech Consult (U) Ltd or Mr. Adrian Wood indicating possible involvement in money laundering or terrorist financing.
2.3 Conclusion
In light of the above, it is clear that Teleology Holdings Ltd is a special purpose vehicle with no known previous operations as a business, unclear shareholding and funding sources. Moreover, the company is in the process of another acquisition. It is therefore our considered view that it would be risky for the Government of Uganda to partner with this company, and thus would not be an ideal partner.
- HAMILTON TELECOM LIMITED
3.1 Company Background
Hamilton Telecom Ltd was incorporated in Uganda on August 23, 2016. As a company limited by shares. The objectives for which the company was registered include provision of communication services, satellite services and cellular internet among others.
3.2 Shareholding Structure
Hamilton Telecom Ltd’s shareholders are John Mukalazi Kamya who owns 75% of the company’s shares, and Hamilton Energy International LLC which owns 25% of the shares.
There is not much information on Hamilton Energy International LLC but according to open source information, the company was registered o August 23,2010 in Maryland, United States of America. The company’s address is indicated as Ste.702 7200 Wisconsin Ave. Bethesda Md 20814, an address it shares with Mr. John Mukalazi Kamya. It is therefore possible that Mr. John Mukalazi Kamya is the single beneficial owner of Hamilton Telecom Ltd.
3.3 Financial Analysis
The FIA has not been able to obtain Hamilton Telecom Ltd’s audited financial statements. However, a review of the company’s operational bank accounts revealed that the business employs 20 people and indicated an expected monthly turnover of UGX 200m.From the time the bank accounts were opened on January 27,2017, the total account turnover is about USD 571,000. The source of the funds credited onto the accounts is indicated as John Mukalazi Kamya. Beyond the transactions in these accounts, there is no further indication of the company’s financial strength.
The Financial Intelligence Authority has not received any adverse reports on Hamilton Energy International LLC or John Mukalazi Kamya indicating possible involvement in money laundering or terrorist financing.
3.4 Conclusion
From the above information, it appears Mr. John Mukalazi Kamya is behind Hamilton Ltd, with all the funds to the company’s bank account coming from him. As an individual, his financial strength is not very clear. However we note that Hamilton Telecom Ltd is a relatively new company with limited known business operations. It is therefore our opinion that it is risky for Government to engage this company as a strategic investor. We strongly advise against engaging this entity as a partner, as the company clearly lacks the financial capacity to be a meaningful strategic partner to Government of Uganda.
- TELECEL GLOBAL
Telecel Global is an international carrier service provider of voice, data, sms and IPTV with the entity’s global headquarters located in Beirut, Lebanon. The company has offices in the Republic of South Africa, United Kingdom and Dominican Republic.
The Financial Intelligence Authority has not been able to obtain the company’s financial records to facilitate assessment of its financial strength. However, we have not received any adverse reports on Telecel Global indicating possible involvement in money laundering or terrorist financing activities.
- AFRINET KENYA LIMITED
The FIA has not been able to obtain information on Afrinet Kenya Ltd’s operations including audited financial statements. We are therefore not in position to give an opinion on the company’s financial strength. However, a review of the Communication’s Authority of Kenya’s annual report for the 2016/17financial year indicated that Afrinet Kenya Limited is not listed among the operators providing mobile telephony, fixed voice or mobile money transfer services in Kenya.
The financial Intelligence Authority has not received any adverse reports on Afrinet Kenya Limited indicating possible involvement in money laundering or terrorist financing activities.
- BAYLIS CONSORTIUM, NEUBACHER MONTAGE LLP
The Financial Intelligence Authority has not yet been able to obtain information on the operations of Baylis Consortium and Neubacher Montage LLP, inquiries from our counterparts in the respective Jurisdictions have not yet yielded any information, although some have indicated that compilation of the required information is underway. We are therefore not in position to give opinion on the suitability of these two companies as investment partners wit the Government of Uganda.
