Vodafone Uganda has long been rumored to exit the country owing to its financial position but has stayed up to this date. However, bad news keep coming its way a few weeks after the telecom operator was put under administration and filed for protect against creditors. This puts it in a sweet spot for an acquisition and as a result, several bidders have lined up to take up what remains of Vodafone since Afrimax (trading as Vodafone Uganda) has now parted ways with Vodafone (The brand owner) but there are still some caveats.
Afrimax acquired the rights to trade as Vodafone in Uganda but the latter has since terminated this arrangement as of 20th January, reports the New Vision. We assume this is as a result of the insolvency facing the former, with a liability of up to UGX 298.9B against an asset base of UGX 55B. Vodafone’s end of the contract with Afrimax comes at a time when the company’s license is still valid (Anyone can still acquire it), given UCC hasn’t raised any flags meaning the telecommunication firm may only go down over if insolvency persists but first it has to trade as a going concern, as in as a profitable entity.
Also, Vodafone only terminated its branding agreement with Afrimax Uganda Limited but is willing to enter a new arrangement with any new shareholders as per the same New Vision Report. This is after an audit established that the continued failure by its shareholders to inject funds into the company and neither were financiers willing to extend credit facilities to it were hurting its financial position.
As of now turning around the company is in jeopardy unless short term financing is met to tide the company through this period. However, the provisional administrator Mr. Nyakairu said he’s informed that the current shareholders are in talks with prospective buyers of their shares. This could be Vodafone’s last breath in case it matures into a new take over or new capital injection.
Vodafone runs on a monthly budget of UGX 2.6 billion
Earlier, Vodafone’s situation was saved by the high court order that placed it under the stewardship of a provisional administrator as creditors were taking break neck speeds towards getting cleared. Secured creditors include Nedbank and government agencies like URA, NSSF among others.
The report goes on to add that Vodafone runs on a monthly budget of 2.6 billion Shillings in form of operational expenses. Implying that unless agreements with the potential investor are expedited. The company may run out of the little revenue it still holds at the moment.
Furthermore, it’s no longer a myth that Vodafone will either be sold, re-branded or exit Uganda alltogether. However, as the company is planning to reduce staffing from 150 to as low as 50. Vodafone may stand to sell it’s assets in order to clear all creditors or develop new mechanisms to achieve the desired targets while cooperating with the creditors, as the current administrator Donald Nyakairu asserted.
If these creditors do not co-operate, then the company’s fate and that of al the other creditors is doomed. We might as well agree that the company be liquidated and pray that the sale of these assets will realize enough funds to be distributed
How did Vodafone get here in the first place?
Cut throat competition in Uganda’s telecommunication space cannot be out-ruled but also the failure by its shareholders to finance its operations, failure by finance institutions to extend credit culminating into switching off 80% of its sites over non-payment of arrears. The sites are the core asset of the telecom and their inactivity means no service is delivered to customers. Whose only option was to migrate to where they could get service.
However what prompted financiers withholding to inject money in to the ailing telco remains untold.
Additional reporting by Remmegious Ssewankambo
