Smile Communications Uganda Limited, the pioneering provider of 4G LTE services in Uganda and East Africa, as well as the first to introduce VoLTE services in Africa, deeply regrets its prolonged service outage experienced since January 31, 2022.
In acknowledging the inconvenience caused, Smile believes it is important to inform the public about the circumstances that led to this unprecedented downtime. It acknowledges that this update should have been provided earlier, however, it was imperative for Smile to first establish a solid legal footing before sharing these details with our esteemed customers and the wider public.
Smile wholeheartedly appreciates the patience and understanding demonstrated by its valued customers and the general public. It genuinely apologises for a situation that was beyond its control and reiterates its sincere regrets.
To Smile, the extended service disruption experienced can be unequivocally attributed to the actions of American Towers Corporation, the dominant provider of telecommunications passive infrastructure services in Uganda. Smile holds them solely accountable for this regrettable situation.
Smile strongly believes that American Towers operates in a coercive manner, displaying a blatant disregard for the law, its license obligations, industry best practices and most importantly, the well-being of the Ugandan people, since we live in an age where communication services are of paramount importance. It is indeed perplexing that American Towers, a subsidiary of one of the largest communications towers companies in the world which is listed on the New York Stock Exchange, would engage in such practices, especially when the regulations of the NYSE explicitly discourage such behaviour, even from subsidiaries of listed entities. The contradiction between their actions and the standards set by the NYSE raises significant concerns about their disregard for ethical conduct and adherence to industry norms.
As it is not uncommon for entities in a business relationship to face conflicts, Smile found itself embroiled in commercial disputes with American Towers as early as 2018. These disputes were duly referred to arbitration in accordance with the underlying contracts.
The disagreements included discriminatory pricing practices by American Towers, which became more pronounced following its acquisition of Eaton Towers. This acquisition resulted in the emergence of a de facto monopoly in Uganda’s telecommunications tower leasing market. Additionally, Smile contested American Towers’ unfair and monopolistic pricing, especially towards non-anchor tenants (second/third tenants). Smile also raised objections to the illegal power billing practices employed by American Towers, whereby they collected nearly one hundred percent more than the tariffs set by the Electricity Regulatory Authority of Uganda. It is important to note that American Towers, being unlicensed by the ERA, should be charging for power on a pass-through cost basis.
It is worth noting that during the acquisition process of Eaton Towers by American Towers, regulatory approvals were necessary, including from the COMESA Competition Commission. Conditional approval was granted by the Commission, which mandated American Towers to provide, among other things, objective leasing criteria for tower space. However, American Towers conveniently omitted the category of second/third tenants from the leasing criteria it submitted, despite the fact that they contribute significantly to American Towers’ profitability as pure EBITDA. Moreover, the submission of the leasing criteria to the Commission was delayed, raising concerns. As a result, American Towers faced a fine, but this penalty was viewed as insufficient by Smile and other operators who have borne the brunt of American Towers’ excesses.
Notably, the Commission is currently engaged in an ongoing investigation into American Towers for potential additional violations of the conditions imposed for the approval of the Eaton Towers acquisition. Industry experts closely following the matter anticipate that American Towers will likely face further fines and penalties as a result of the investigation.
Also worth noting is that one would have thought that the approval by the regulators of a de facto monopoly would come with strict conditions to ensure fair treatment of tenants and the elimination of arbitrary pricing. However, to Smile’s surprise and contrary to established norms, in Smile’s case, American Towers, even after acquiring Eaton Towers, continued to manage the contracts for Eaton Towers and its own site separately. This meant that pricing and other terms were not standardised. Smile raised this issue with the relevant regulators, but unfortunately, no action has been taken to address the situation so far.
Back to the disputes which Smile had with American Towers. Despite its good faith efforts to have them resolved through negotiations and discussions, it became clear that an amicable resolution was not attainable. Recognising the impasse, Smile made the determined choice to pursue arbitration proceedings against American Towers in early 2021.
The arbitration process was originally scheduled by both parties and the arbitrator to conclude in June 2021 but unfortunately extended into 2022. To Smile’s disappointment, the resulting award favoured American Towers and, in Smile’s view, displayed an unprecedented level of bias.
On the evening of January 31, 2022, immediately after receiving the arbitral award from the arbitrator, American Towers proceeded to disconnect Smile’s sites and, without any colour of right, caused a total shutdown of Smile’s 4G LTE services by February 01, 2022.
In clear violation of industry best practices and without even issuing invoices to Smile for the awarded arbitral sums or exercising due care, American Towers, leveraging their de facto monopoly status, took unlawful actions by abruptly disconnecting ALL of Smile’s sites. Under the provisions of the Arbitration and Conciliation Act, a dissatisfied party has a thirty-day window to challenge an arbitral award by applying to the High Court for its setting aside. In Smile’s view, the arbitral award does not hold binding authority until the expiration of the aforementioned period for challenging the award without a formal application being filed in the High Court, alongside other requisite legal formalities such as the proper registration with the High Court of the arbitral award.
In addition to flouting the provisions of the Arbitration and Conciliation Act, American Towers failed to fulfil its license obligation of providing a fourteen-day notice to the regulator, Uganda Communications Commission, before terminating Smile’s services. Furthermore, in the manner in which American Towers abruptly shut down Smile’s sites, they also violated the contractual agreements that they fiercely defended during the arbitration process. These agreements explicitly mandated American Towers to provide a minimum of five working days’ notice to Smile prior to any site disconnections, which, unfortunately, was not honoured by American Towers.
American Towers, in its actions, seemingly believed that it could leverage its monopoly position to coerce and intimidate Smile. However, Smile, driven by its principles, steadfastly refused to yield to such tactics.
Smile remained committed to upholding the law and acted accordingly. Despite unsuccessful attempts to persuade American Towers regarding their unlawful actions and excessive behaviour, and in light of their dissatisfaction with the arbitral award, Smile promptly pursued legal action by applying to the High Court to have the award set aside.
During this process, Smile duly notified the regulator. Regrettably, the regulator deemed the matter to be a commercial dispute and, as a result, displayed considerable reluctance to intervene.
Placing full trust in the Ugandan judicial system, Smile achieved a significant victory when its application to the High Court was successful, resulting in the complete setting aside of the arbitral award and the granting of costs in favour of Smile. The ruling of the High Court, delivered on April 11, 2023, highlighted that the arbitral award had been issued beyond the agreed-upon timeframe and raised concerns about a reasonable apprehension of partiality on the part of the arbitrator.
In contrast to American Towers’ hasty and unlawful actions following their success in arbitration, Smile opted to uphold the law and refrained from taking immediate action until the expiration of the period in which American Towers could challenge the High Court’s ruling. As of now, American Towers has not appealed the ruling, and the appropriate procedures are being diligently followed to lawfully enforce the decisions of the High Court.
While Smile was engaged in the legal process of challenging the arbitral award in the High Court, it encountered unyielding inflexibility from American Towers during settlement negotiations that had been initiated shortly after American Towers disconnected Smile’s sites. Consequently, Smile was compelled to terminate all contracts with American Towers and request the return of its equipment in order to seek an alternative passive infrastructure partner to resume its 4G LTE services. To Smile’s astonishment, American Towers refused to relinquish Smile’s equipment despite clear demonstration that American Towers had no rightful claim to it. As a result, to this day, American Towers continues to unlawfully withhold Smile’s equipment, effectively holding it hostage.
In Smile’s view, American Towers bears the responsibility for inflicting significant damage on Smile’s investment in Uganda, which amounts to approximately USD 120,000,000 (United States Dollars One Hundred Twenty Million) thus far. The actions of American Towers have not only affected Smile’s operations but have also had a detrimental impact on jobs and livelihoods that rely on Smile’s presence in the market. Moreover, Smile believes that the actions of American Towers have undermined healthy and fair competition within the telecommunications sub-sector. Respected industry experts have consistently expressed their concerns regarding the role played by American Towers and its acquired Eaton Towers in the departure of numerous challenger operators from the Ugandan market. As a consequence, the market has degenerated into a two-horse race between the operators American Towers likes and bought the bulk of its current portfolio of passive infrastructure from. This has created an imbalance and hindered a competitive landscape in the industry.
Smile emphatically reiterates that the actions taken by American Towers are truly unprecedented. Such behaviour is unheard of in both the African and international telecommunications industry: IN A DISTRESSING TURN OF EVENTS, AMERICAN TOWERS MADE THE ILLEGAL, UNJUST AND IRRATIONAL DECISION TO SHUT DOWN SMILE AND TAKE HOSTAGE ITS EQUIPMENT, CAUSING A SUBSTANTIAL LOSS OF A USD 120,000,000 (UNITED STATES DOLLARS ONE HUNDRED TWENTY MILLION) INVESTMENT AND RESULTING IN THE UNFORTUNATE LOSS OF FIVE HUNDRED JOBS FOR ASPIRING YOUNG UGANDAN TALENTS.
Presently, Smile has taken American Towers back to Court, challenging their unlawful actions in taking down Smile’s services and their subsequent refusal to return Smile’s equipment despite the termination of all contracts in accordance with the law. This ongoing legal battle aims to rectify the injustices perpetrated by American Towers and restore justice for Smile.
Smile strongly denounces the detrimental actions of American Towers which have led to significant losses and legal disputes. In the face of this adversity, Smile remains resolute in its pursuit of justice and restitution, holding American Towers accountable for their unlawful conduct.
Smile is committed to keeping its valued customers and the general public informed throughout this process. It recognises the importance of transparency and accountability in addressing the challenges it faces. With unwavering determination, Smile seeks justice and deeply appreciates the support and solidarity of all and sundry. Together, as a united force, we remain steadfast in our pursuit of a fair and just outcome, standing strong in the face of adversity.