A Uganda Telecom official said the company will file the appeal sometime next week to contest the judgment, which the company said is unfair considering the interconnection fees in question relate to Gemtel, a Sudanese telecom company, whose traffic they carried via MTN's networks.
"The judgment is unfair and that is the reason it will be appealed. The interconnection fees in question relate to call traffic to Gemtel, which is a foreign operator and as such these calls we think are international," said Emmy Olaki, the deputy spokesperson of Uganda Telecom.
A week ago, Uganda Telecom was issued a court order to pay MTN 3.5 billion shillings ($1.5 million) for interconnect fees for the period between 2008 and 2009 when MTN carried traffic terminating to Gemtel. Together with the costs of the suit, damages and interest, the amount comes to $2.17 million.
Uganda Telecom disputes liability for the $1.5 million and contends that the amount was arrived at by MTN wrongly applying domestic/local rates to traffic originating from MTN's network transiting through Uganda Telecom's network and terminating onto the network to Gemtel.
According to Uganda Telecom, if international transit traffic rates were applied instead of domestic rates, it would not have to pay anything to MTN.
The interconnect payment agreement between Uganda Telecom and MTN is limited to local traffic. But Justice Geoffrey Kiryabwire of the Uganda High Court ruled that communication traffic carried by Uganda Telecom on MTN's behalf to Southern Sudan was local traffic.
This is because Gemtel uses the calling code +256 477, which the court recognized as a local call. Uganda Telecom argued in the original suit, and are expected to push the same argument in the appeal that their network and Gemtel's are two distinct networks located in two different countries and locations.
Gemtel started using the Uganda code in 2006, after the government granted Uganda Telecom permission to further authorize Gemtel to use Uganda's international code. Upon this arrangement, Uganda Telecom requested MTN to treat traffic on the Sudan network as international not local. MTN rejected the appeal although it continued sending traffic to Sudan.
In February, MTN threatened to stop carrying calls from Uganda Telecom, the third largest operator in Uganda in terms of subscriber numbers, over unpaid local and Gemtel interconnect charges. The Uganda Communications Commission (UCC), however, intervened and MTN relented.
At the time, MTN said continuing its agreement with Uganda Telecom was a business risk as debt continued to grow unabated.
In July last year, UCC fixed interconnection rates in a landmark move that leveled the playing field, but this court case is a legacy of the period before the charges were fixed.
A fixed interconnection rate is international practice, but until July last year, the Ugandan market was yet to adopt it. Every one of the five players in the Uganda market charged the other a high interconnection rate to maximize profit.
In the region, interconnection is a thorny issue. In Kenya, Safaricom and Orange Kenya have recently failed in a bid to overturn an order to reduce mobile interconnection charges.
The Kenyan regulator has been studying an appeal from the two companies since February, asking for a rethink on a reduction from 2.21 shillings (a little less than $0.03) per minute to 1.44 shillings by July, further declining to 1.25 shillings by July 2012.
Both companies argued that any reduction would endanger jobs and harm their ability to invest in new cellular infrastructure.