Plan to sell troubled Lycamobile Uganda finalised

Telecom Company Lycamobile was early this week quick to clarify that it wasn’t exiting Ugandan market like it had started being speculated.

They instead said they had experienced a technical fault, leading to glitches on its network, contrary to reports that it was set to exit the Ugandan market.

“We reassure you that Lycamobile is here to stay and grow. We remain committed to providing best value and high-quality services to the people of Uganda,” Lyca Mobile said in a statement issued on Monday, 04 December 2023.

The company explained that the glitches were caused by an ongoing network expansion project to improve its services.

Several users of the network took to social media to report that the telecom company was winding up business in the country. Others followed suit, saying this could be the reason why the company’s network had gone off.

THE TRUTH

According to insiders, there is more than meets the eye.

“It’s [Lycamobile] facing a lot of challenges and soon it will exit the Ugandan market,” said a source.

We are told Lyca is in talks with a new player for a possible buy-off.

We are told UK based Sparknet intends to enter the Ugandan internet provision market and they are looking at acquiring Lyca mobile.

Knowledgeable sources told us that discussions are in advanced stages.

Sparknet is also reportedly in talks with Airtel Uganda and Liquid Telecom to use their internet infrastructure but this is a story for another day.

This would not be the first of any such mergers or buy-offs.

Airtel had previously merged with K2 and Warid, while Africell-way back in 2014 had bought off orange telecom.

WHY IS LYCA QUITTING

Sources add that Lyca, which has been focusing mostly on internet provision, found Uganda a tough market dominated by telecoms like MTN, Airtel and other internet service providers.

However, in a bid to penetrate the market, insiders say they dug their own grave by moving to offer cheaper data.

“It won them customers, but the company ended up in losses,” a source observed. “They have accumulated losses and heavily indebted,” a source adds.

It should be recalled that in October 2021, Africell closed business in Uganda, having entered the competitive telecom sector in 2014 through the acquisition of Orange’s operations in the country.

Then MTN Uganda Chief Executive Officer Wim Vanhelleputte would reveal that cheap data brought Africell problems.

He warned that calls for telecoms to reduce cost of data should be accompanied by policies on cost of doing business, or else suffer a similar fate as Africell.

Vanhelleputte was then appearing before Parliament’s Information, Communication and Technology Committee that was scrutinising a motion on the poor service delivery among telecom operators in Uganda.

While responding to allegations of exorbitant costs of internet data, Vanhelleputte said the internet costs are a reflection of the costs the telecoms incur in providing data, and any telecoms that have attempted to sell data below their costs of operation have ended up closing their businesses.

“We have to be careful not to systematically sell data below cost. The reason why Africell had to close shop is systematically selling data below the cost. I wish I could do that, Examples of the companies that have done that, one that is fresh is Africell. The reason they were selling data below cost. I wish I could sell data at a lower rate. If you sell goods below the cost, you can do it for a short term, but for a long term, you close shop and that is what happened to Africell and all the operators, they were selling data below the cost,” he explained.

Apart from cheap data, customers have also been complaining about Lyca’s internet being slow and unstable.

“Customers need faster and stable connections to see work done easily. A customer would rather pay high for a connection that is fast and stable than Lyca’s cheap one with poor network coverage,” commented one the customers who quit the network.

We are also told that Lyca bosses abandoned customers and are not always available to attend to their concerns.

“Their services can go completely down and Lyca people don’t make any effort to reach out to customers. Customers can have some queries but nowhere to run,” adds another customer.

“With over three million customers, they thought they had done it all. They took a laid back position. They forgot customers and made little or no effort to retain them. They forgot about them. Customers had no where to report their grievances or to seek help in case of glitches. Customers started running one by one. By the time Lyca people woke up from slumber-land it was too late.”

All these have reportedly left Lyca bosses with no option but to quit Ugandan market.

WIDER PICTURE

Lycamobile’s French companies were early this year fined 10million euros by a Paris court for money laundering and value-added tax (VAT) fraud.

The group’s former chief executive officer Christopher Tooley also received a prison sentence and a heavy fine for complicity in the VAT fraud, agency reports said.

We are told these developments have since affected Lyca’s operations worldwide including Uganda.

Lycamobile, owned by Subaskaran Allirajah, has said it disagreed with the decision and had appealed.

Four months after the trial ended, the court ruled that the companies had “knowingly participated in a complex and elaborate system of money laundering” between 2014 and 2016, which involved 17mn euros.

This system involved a series of shell companies, two Lycamobile salespeople and resellers in the Parisian district of La Chapelle, the reports said. It operated for the benefit of construction companies demanding cash to illegally pay employees.

The companies were also found guilty of having “deceived” the tax authorities in a “misguided” legal regime allowing exemption from VAT, within the framework of a “strategy” to be more “competitive”.

“The money laundering accusations concern the activities of two salespeople who were laid off and fired upon discovery of this parallel activity,” Lycamobile said. Lycamobile Services was fined 3mn euros and Lycamobile France 7mn euros.

Mr. Tooley was sentenced to three years’ imprisonment and fined 250,000 euros. He is banned from managing a business for five years. The group’s other British leader, Andrew England, was released.

Lycamobile’s General Manager in France, Alain Jochimek, was sentenced in both parts of the case, to three years in prison, including eighteen months to be served under an electronic bracelet, with a fine of 120,000 euros. He was also prohibited from managing a business for five years.

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