Row as Uganda Moves to Cancel Internet Highway Contract with Kenyan Company, Soliton
February 29th 2024
The Auditor General’s office is assessing the financial implications of transferring the management of the National Backbone Infrastructure (NBI) from National Information Technology Authority of Uganda (NITA-U) to Uganda Telecommunications Ltd (UTCL).
This was after Soliton Telme, a Kenyan company contracted by the government to manage the National Backbone Infrastructure and e-government infrastructure, protested the move.
The 4,300 km optical fibre infrastructure is a gateway for critical government communications and transactional services and payments, security surveillance through Police CCTV cameras, Integrated Financial Management System by Ministry of Finance, National Identification Database by NIRA, and e-tax services by Uganda Revenue Authority among others.
President Museveni on December 22, 2023 ordered ICT Minister Chris Baryomunsi to expedite the process of granting majority shareholding of UTCL and transfer of the management of NBI to UAE firm, ROWAD Commercial Broker LL.C.
Museveni said the UAE investor “should also be given the management of the ICT backbone which, I hear, had been given to another private operator without my knowledge.”
The President wondered: “Who made that decision? What advantage did Uganda get in that?”
In December 2023, Ministry of ICT, Ministry of Finance, Uganda Telecommunication Corporation Ltd (UTCL), and ROWAD Commercial Broker LL.C signed a share subscription and allotment Agreement which requires the current shareholders (MoICT&NG and MOFPED) of UTCL to expeditiously ensure that the Management and Commercialization of the National Backbone Infrastructure is transferred to the Company (UTCL).
However, ChimpReports understands Soliton, which was contracted at a cost of about $8.2m per year in respect of transport charges and revenue sharing arrangement embedded in the contract, has warned that termination of its contract will attract heavy financial costs on the part of the government.
The contract provides that Soliton is responsible for the delivery of internet bandwidth to ministries, departments and agencies (MDAs).
Soliton was contracted on July 11, 2012 to undertake the Commercialization of the NBI.
The contract commenced in June 2013 and continued for 5 years until 2019 when an extension was granted, stretching the timeline for an additional 10 years until 31st May 2028.
Currently, the Contract with Soliton is in its 11th Year with four more years to elapse.
Officials said if the commercialization and management of the NBI is to be transferred to UTCL the Soliton contract has to be terminated prematurely which will attract compensations and damages resulting from the termination process.
“This could cost the government of Uganda and the taxpayer over USD 36m (approx Shs 138 billion),” said an official who preferred anonymity to speak freely.
Highly placed sources said upon receiving Soliton’s protest letter, the Ministry of ICT wrote to the Auditor General seeking an assessment of the cost implications of terminating of the company’s contract.
Interestingly, the deadline for concluding the deal with Rowad is March 20, 2024.
Contract battle
In 2018, President Museveni wondered how the contract was renewed yet he had expressed reservations about it.
The decision to transfer NBI to Uganda Telecom was passed by cabinet in 2018 by Cabinet .
The then ICT Minister Frank Tumwebaze argued that the whole spirit was to support and revamp UTL to be attractive to potential investors.
The UAE firm, Rowad, will have 60% shareholding of UTCL while the Uganda government will settle for 40% since the investor is expected to inject $250m in the business.
UTL will sell data and other communication services to both government and private sector to compete with the fully established telecoms – MTN and Airtel.
In his December 22, 2024 letter to Baryomunsi, Museveni said he was tired of seeing foreign telecoms repatriating large sums of money to their home countries.
“… Quite a bit of this money is externalised by the foreign companies operating here,” said Museveni.
“Therefore, re-activating a company where the Government owns 40%, that is well run on account of the private sector partners, is a correct decision,” he added.
“The joint venture company of UTL will create jobs, pay workers, pay for utilities and pay taxes like the private telephone companies are doing; but, in addition, it will also generate dividends for the Country.”
Source: Chimp Reports
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