Uganda's highly competitive telecommunications market is made up of five GSM (Global System for Mobile Communications) operators who have been engaged in a tough price war dating back to 2009, when Warid Telecom introduced near-free calls for users after they paid for a low-denomination recharge voucher.
In a public notice that was issued on June 10 the UCC said, "following a consultation process involving relevant stakeholders from the communications industry, the Uganda Communications Commission hereby announces the issuance of new tariff guidelines for Retail Voice Telephone Services in Uganda."
The notice went on to say , a draft of which are publicly available, are based on recent trends in the voice market and are aimed at promoting fair, efficient and competitive market conduct in the telecommunications sector.
But on Tuesday, David Ogong, the UCC director of competition and corporate affairs, said the regulator was continuing with a consultation process that started in January this year, even though the Friday public notice seemed to suggest the process had been complete.
"The Uganda Communications Commission wishes to clarify that it has not issued a directive to telecommunication operators in form of retail tariff guidelines as reported in the press," Ogong said.
"However, the Commission is concluding the process of consultation with industry players and other stakeholders which started in January 2011," Ogong said.
The guidelines are aimed at curbing anticompetitive pricing practices that may be to the detriment of new market entrants. Ogong said that a series of below-cost tariff offerings have undermined long-term competition, sustainability and quality of service. He said some of the offerings border on predatory pricing or price cannibalism, which jeopardizes long-term consumer choice, affordability and overall economic growth.
In addition, according to the UCC, if the situation is left as is, it will lead to consumer confusion due to the frequency of change in the rates.
The guidelines, which the UCC said are still a draft, stipulate that there will be a distinction between promotional and standard tariffs. Standard tariffs in this case shall be cost-based, transparent and non-discriminatory. Off-net calls should not be priced below the UCC reference interconnection rate. On-net calls on the other hand will not be charged a rate below 70 percent of the interconnection charge. This is also below the current average on-net charge.
Further, promotional tariffs shall not be in the market for more than 90 consecutive calendar days.
Failure to comply could lead to, among other measures, a penalty of up to 10 percent of annual turnover.
The biggest player in the market, MTN Uganda, with 7 million subscribers, welcomed the move, saying the effect of the directive is to introduce a price floor.
"This would appear to be consistent with similar Government action taken in the region (specifically Kenya), to control the price wars in the telecoms sector," Anthony Katamba, MTN Uganda's general manager, legal and corporate services, said in an e-mail response.
Katamba said the government is reacting to the raging price wars that are not based on any significant changes in market dynamics such as supply exceeding demand.
"In fact, a number of networks are strained because of increased traffic carried for which no revenue is earned," he said. Katamba said the price wars not only threatened the viability of most of the operators but have also negatively impacted government revenue and the long-term sustainability of the sector.