MTN AND THE CASE FOR ECONOMIC LIBERALISATION

Last week telecom company MTN released their 2024 financialresults.

They reported that revenues grew 18.9 percent, crossing the three trillion shilling mark – the first company in Uganda to do so, laying the ground for a 30 percent jump in after tax profit of sh641b.

Last year revenues came in at sh3.17trilion. In 2023 revenues and after tax profit came in at sh2.67trillion and sh493b respectively.

While voice calls – sh1.26trillion, continue to be the single largest contributor to the company’s revenues, data and fintech sales registered higher growth --  30.5 percent and 22.8 percent, cementing a trend that saw  voice revenues fall below 50 percent for the first time three years ago.

Data and fintech revenue streams are set to cross the trillion shilling mark this year, assuming continuation of current growth trends.

An interesting detail from the results is that MTN subscribers last year grew to 22m from under 20m in 2023. This is interesting because the population of Uganda in 1998 the year MTN entered this market, was reported at 20.6m.

In 1998 all told there were about 50,000 telephone lines in Uganda.

A condition of their second network operator license, was that they were supposed to grow the network to 89,000 lines in five years, a figure that was surpassed in their first year of operation.

The telecom sector in Uganda serves as the posterboy of the possibilities that come with the liberalization of the economy.

While one can argue that the South African based company has rode on a superior technology and therefore the old Uganda Posts & Telecommunications Corporation (UPTC) maybe excused, that argument flies out the window when you consider how the state operator continues to flounder to the point of insignificance.

"The liberalization of the economy, allowing private players to participate, has been the key driver of the economy over the last 40 years. With a single stroke it attracted billions of dollars into the economy and increased production of goods and services...

Liberalizing the economy unlocked individual initiative, which has paid off handsomely for those who have gone out to take advantage.

Liberalisation’s detractors, less vocal now than in 1998, argued that the government was selling out to foreign capital and this would be detrimental to the economy. While they gave little in the way of alternatives, by logical extension they were suggesting government should recapitalize the old state enterprises, with which money is anyone’s guess and lock out foreign capital. Thank God they were not listened to at the time.

But that is not true. They actually had the ear of the  new government after 1986, which government tried to go along with their prescription, fired up the money printing presses to capitalize the state owned enterprises and quickly sent inflation soaring to as high as 240 percent at its peak.

Most Ugandans have no concept of what 240 percent inflation looks like. What this means is that prices were doubling every three months. So if you paid a million shillings in school fees in first term by the time third term came around you would be paying sh8m.

"The worst inflation most Ugandans have seen – more than 80 percent were born after 1990, was the 30 percent inflation we saw in 2011, this again was driven by an explosion in government expenditure during that election year...

But generally with such high inflation investment is near impossible and the only sensible economic activity is speculation.

By government swallowing its pride in time, stabilizing the economy, thanks in no small part to divesting itself of the black economic holes that were the state enterprises, passing the responsibility of stimulating production to the private sector, is why companies like MTN can now be serving more customers than there were Ugandans in 1998.

Without a doubt MTN has been good for its owners.

They will pay out a final dividend of sh190b for a total of sh506b to its shareholders, but MTN and the liberalized telecom sector has done brilliantly for the general economy. In taxes alone, the company has paid about sh10tr since 1998...

I am sure the figure of the economic impact of the sector is somewhere, but going by anecdotal evidence alone it is not a difficult argument to make for the economic impact on the economy in general and on our individual lives.

One other detail to come from MTN’s results was that the total value of transactions carried out on their mobile money platforms was about the size of the country’s GDP at sh158.6 trillion. While some people discount the importance of that number, a large part of it is money that was under our mattresses, in our socks and bras, but now in the formal economy.

When the money is in your pockets it helps no one, except maybe to massage your ego, if it’s in your back pocket. But once it is in the formal sector it can be lent out – MTN lent out sh1.4trillion last year or can earn its owner money – they paid out sh40b in interest on deposits.