Orange set to enter Uganda mobile market

New competition is coming to Uganda's mobile telephony market in the form of France Telecom and its Orange mobile brand.

This development follows the signing of a partnership agreement last Friday between France Telecom and Hits Telecom Uganda, a new mobile operator owned by a group of Middle East investors.

Hits secured a public service and infrastructure provider license last year. The license, along with Hits' existing GSM  network, will be transferred into a joint venture called Orange Uganda, according to Jimmy Kiberu, Hits Uganda's chief corporate affairs officer.

France Telecom will own 53 percent of the venture and provide roughly half the $200 million investment planned over the next three years to roll out Hits' existing network across the country.

The Orange brand will be marketed to customers beginning early next year, Kiberu said in a phone interview.

The France Telecom investment into Hits, whose operations users have been eagerly awaiting, will take investment into Uganda's telecom sector to $1 billion.

The Uganda Communications Commission  reported last month that some $850 million has so far been invested in the sector. The biggest chunk of investment in the industry has gone into GSM network building, which accounts for over 75% of the outlay.

The French group, which just launched operations across the border in Kenya, will face strong competition in a mobile market that consists of African giants MTN and Zain. Other competitors are Uganda Telecom, which is majority-owned by Libya's Lap Green Networks, and Warid Telecom, an Abu Dhabi-based company that launched in Uganda in February.

According to a France Telecom news statement, the Uganda investment is the first concrete evidence of its revived African ambitions after the group's abortive $41 billion bid for TeliaSonera, the Nordic operator.

France Telecom has operations in 16 African countries, predominantly in French-speaking West Africa. It made its first major foray into English-speaking Africa last year when it successfully negotiated a $536.7 million purchase of a 51% stake in Telkom Kenya.

Since then, however, the company has struggled to secure sizable acquisitions and is facing increasingly fierce competition from other foreign telecom groups, including Vodacom of South Africa and Vodafone of the U.K. France Telecom recently lost out to Vodafone in the privatization of Ghana's incumbent operator.

The Uganda deal suggests that the French group is having to settle for smaller operations, often starting from scratch. Although Hits has a fledgling network, largely based in Kampala, it has not yet marketed services to customers.

Hits was established in 2007 with equity financing of $200 million from investors led by International Investment House, an Abu Dhabi-based private equity firm targeting infrastructure projects.

With a rapidly growing population of around 30 million people and a mobile penetration rate of less than 17% as of March 2008, Uganda offers major prospects for growth, according to France Telecom. The existing players have a combined subscriber base of 6.8 million users according to the latest figures.

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