ANALYSIS OF GROWTH AND CONTRIBUTION OF TELECOMMUNICATIONS
COMPANIES TO THE ECONOMY
BY
KYAZZE BRIAN
14/U/8481/PS
A DISSERTATION SUBMITTED TO THE COLLEGE OF BUSINESS AND MANAGEMENT SCIENCES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF BACHELORS OF SCIENCE IN BUSINESS STATISTICS OF MAKERERE UNIVERSITY
JULY, 2017
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DEDICATION I dedicate this report to Mr. Ndugwa Ben and my sister Christine.
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ACKNOWLEDGEMENTS
I convey my sincere gratitude to Mzee Ndugwa Ben for the utmost opportunity of education he has granted to me. Special thanks go to my dear supervisor Mr. Serunjogi Ambrose, UCC officer
Mr. Yahaya and Mr.Tenywa Eridad. May God bless you all.
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LIST OF ABBREVIATIONS
BMI: Business Monitor international
EAC: East African Community
FY: Financial Year
GDP: Gross Domestic Product
GPRS: General Packet Radio Services
GSM: Global System for Mobile Communications
ICT: Information Communication Technology
IT: Information Technology
ITU: International Telecommunications Union
MNO: Mobile Network Operator
MTI: Mobile Telecommunications Industry
MTN- Mobile Telecommunication Network
PIP: Public Infrastructure provider
PSP: Public Service Provider
SIM: Subscriber Identity Module
SMS: Short Message System
UCC: Uganda Communications Commission
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List of Figures
Figure 4.1 A Column Graph Showing Tele-density Growth ...... 26
Figure 4.2 A Bar graph showing the revenue collections from the telephone companies ...... 27
Figure 4.3 A column Graph showing phone subscribers from a period of (2006/07 – 2015/16) . 28
Figure 4.4 An area Graph showing the relationship between revenues collected and the number of subscribers ...... 29
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List of Tables
Table 4.1Uganda’s Tele-density ...... 25
Table 4.2 Revenue statistics of the telecommunication companies ...... 26
Table 4.3 Computation of Revenue Trend ...... 27
Table 4.4A Table showing the phone subscribers (2006/07 – 2015/16) ...... 28
Table 4.5 Computation of the phone subscribers’ trend ...... 30
Table 4.6 Excel computation of α and β for revenues collected ...... 32
Table 4.7 Excel computation of α and β for subscription ...... 33
Table 4.8 Forecasted revenue figures up to 2025/26 ...... 34
Table 4.9: Forecasted phone subscribers up to 2025/26 ...... 34
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Table of Contents DECLARATION: ...... Error! Bookmark not defined.
APPROVAL ...... i
DEDICATION ...... iii
ACKNOWLEDGEMENTS ...... iv
LIST OF ABBREVIATIONS ...... v
List of Figures ...... vi
List of Tables ...... vii
Table of Contents ...... viii
ABSTRACT ...... xi
CHAPTER 1 ...... 1
BACKGROUND TO THE STUDY ...... 1
1.1 INTRODUCTION ...... 1
1.1 PROBLEM STATEMENT ...... 4
1.2 JUSTIFICATION ...... 5
1.3 OBJECTIVES OF THE STUDY ...... 5
1.3.1 Main objective:- ...... 5
1.3.2 Specific objectives ...... 5
1.4 HYPOTHESES ...... 6
1.5 SCOPE OF THE STUDY ...... 6
CHAPTER 2 ...... 7
LITERATURE REVIEW ...... 7
2.1 Introduction ...... 7
2.2 Liberalization reforms and growth in the sector ...... 7
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2.3 Regulation ...... 9
2.4 Other factors...... 12
2.5 Penetration of mobile telecommunications ...... 12
2.7 The Role of Telecommunication in Economic Development...... 16
2.8 Society and Telecommunication ...... 18
Economic Impact ...... 18
Social impact ...... 19
CHAPTER THREE ...... 20
METHODOLOGY ...... 20
3.1 SOURCES OF DATA ...... 20
3.2 CONTENT ANALYSIS ...... 20
3.3 DATA ENTRY AND ANALYSIS ...... 21
The trend movement ...... 21
Testing for a trend ...... 22
Testing for seasonality ...... 23
Study limitations ...... 24
CHAPTER FOUR ...... 25
ASSESSMENT OF THE ECONOMIC PERFORMANCE AND GROWTH OF THE
TELECOMMUNICATIONS INDUSTRY ...... 25
4.1 Introduction ...... 25
4.2 Descriptive statistics ...... 25
4.3 Testing the hypothesis...... 30
4.4 Trend for revenue Collections ...... 31
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4.5 Testing the hypothesis for phone users increase ...... 32
4.6 Forecasts for the levels of revenue and phone users ...... 34
CHAPTER FIVE ...... 35
SUMMARY OF FINDINGS AND RECOMMENDATIONS ...... 35
5.1 Introduction ...... 35
5.2 Summary of Findings ...... 35
5.3 Recommendations ...... 35
5.4 Conclusion ...... 36
Bibliography ...... 37
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ABSTRACT
The research project is about analyzing the growth and contribution of telecommunication sector to the economy
This report comprises of 5 chapters;
The 1 st chapter is composed of the following, the background of the study, objectives, problem statement, justification and scope of the study.
The 2 nd chapter comprises of the literature review that discloses the findings of other researchers
about similar researchers, adherence issues and barriers among others.
The 3 rd chapter discusses the major steps and how the study was done, investing the growth of
the telecommunications industry, its contribution to the economy and forecasting the future
The 4 th chapter presents the analysis industry contribution in terms of revenues and its growth in terms of number phone subscribers and tele-density
The 5th chapter presents the summary of the findings, recommendations and the conclusion of the study.
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CHAPTER 1
BACKGROUND TO THE STUDY
1.1 INTRODUCTION
Once referred to as the pearl of Africa, then devastated by civil war, peace and radical economic reforms have transformed Uganda into one of the fastest-growing economies on the continent.
With a 34.9 million people according to the 2014 national population and Housing census, having 236,040sq km of land making a population density of 148 persons per sq km and with about 7.3 million internet users(as of june,2015); 20.9% of the population, according to ITU
Uganda is strategically established current and co-concurrent opportunities.
The Government of Uganda through its policy of liberalization of the economy and privatization of commercial enterprises under its control resolved to restructure and eventually privatize telecommunication companies in the sector. In August 1997, the Uganda government passed the
Uganda communication Act, which provided the legal frame work for the introduction of competition in the telecommunication. After the passing of the act, Uganda posts and
Telecommunications Corporation (UPTC) was split into three business units; Uganda Posts
Limited (UPL), Uganda Telecom Limited (UTL) and a regulatory body called the Uganda
Communications Commission (UCC). Consequently, in the telephone sector, UTL provides a government cooperation telecommunication services in Uganda. Mobile Telephone Network
(MTN) a private Company came in and a host of others have made it to the market. The introduction of private companies in the telecommunications sector was to encourage competition, which leads to provision of better services at reduced rates. The general functions of
UCC are to regulate and promote the development of the communications sector in Uganda.
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In the last two decades, there has been phenomenal growth in the telecommunications sector
worldwide. The telecommunications industry has made its mark in history by revolutionizing
lifestyles of individuals, systems, government and entities in Uganda. There are a number of
factors that have in different ways contributed to the growth of the sector. Uganda has equally
had its share of this progress and in some instances pioneering the use of mobile phones
attributes to change lives. With the advent of deregulation and liberalization in Uganda in the
past two decades, an occurrence that was embraced in much of the world economies, the
telecommunications industry has been characterized by a dynamic environment, rapidly growing
and manifested by unprecedented innovations. This has happened at a time the sector is
experiencing new technological developments. The telecom companies have embraced these
developments to create new opportunities. This is because in the rapidly changing industry, the
availability of state of the art technological advancements shapes the competitiveness in the
sector.
Uganda’s Information and Communications Technology (ICT) sector is dynamic and vibrant.
The sector has registered double digit growth since 2000 and grew by 33% in 2006/2007.
According to http://www.ugandainvest.com website, the ICT sector has an average growth 58% over the last decade. The website also reveals that, over 3.5 million users connected to mobile phone networks in 2006. The website further reveals that the investment inflows have been very strong in 2006, the sector attracted in excess of US $73 million consequently leading to direct employment standing at 6000 while over 350000 people are indirectly employed. In 2008 investment increased to USD 326 million and employment in the sector both direct and indirect increased to over 400,000 persons and over 1.5 million employment in the sector in 2016
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Sector dynamism is a result of Uganda’s good ICT legal and regulatory framework, a stable micro economic environment and economic reforms pursued since the early 1990s. The telecommunications subsector, formerly dominated by a single national operator, has been progressively liberalized over the last 20years. Infrastructure capacity is rapidly improving. Most national and regional transmission links are digital. Optical fiber links connect major economic centers, with expansion in progress. There is extensive use of microwave in the backbone infrastructure and VSAT Services. International gateways are satellite based but connection to the world optic fiber network is eminent.
This dynamism is a result of a good legal and regulatory framework, a stable micro economic environment and economic reforms pursued since the early 1990s. Although still small, export of
ICT services has generated foreign exchange inflows. With virtually no earnings in 2001, the sector earned over US $10 million per annum. A consultancy review report by Uganda
Communications Commission (2015/2016), tele density, given by percentage of population owning a fixed and or a mobile phone increased from 31.6% in 2008/09 to 61.2% in 2015/16, over the last ten years (2006/07 t0n2015/16), Uganda’s subscriber base grew from about 3.8 million to over 22 million subscribers
According to Wafula (2009), the number of Uganda’s telecommunication subscribers went up by almost four times in the last three years and according www.ucc.co.ug (viewed june 2017), subscribers went up by more than two times in the last six years indicating a high growth rate induced by the liberalization of the telecommunication sector according to experts. Uganda combines a competitive and vibrant mobile market with a fixed-line incumbent that is fairly proactive and innovative, consequently obtaining a significant and fast growing telecoms market.
With a population of around 34.9M, and above 22.3M subscribers at the end of FY 2015/16, it is
3 not only a large mobile market but also one with considerable room for further growth. As we increase our focus on exciting Africa markets, these factors made Uganda a clear choice for a new single country report.
According to Uganda’s Minister of Information and Communication Technology (ICT) Mr.
Frank Tumwebazze, the number of telephone subscribers has increased from 9.4M in 2009 to
22.3M by June 2016. Mr. Tumwebazze attributed the surge in telephone users to the heavy investment made by the nine telecommunication companies that operate in Uganda, following a change in ICT regulations and by government, a youthful population to give room to more players
The research presents highlights of the Mobile Telecommunications Industry (MTI) in Uganda.
It examines the growth and contribution of the MTI to the Uganda economy. It underpins the drivers of this growth, which include deregulation, liberalization, and technological advancement in mobile phones, the growing population and strategic hinterland location. There are nine telecommunication companies according to the ministry of ICT and they include MTN, UTL,
Airtel, Africell, Vodaphone, SMART, SMILE,K2 AND SURE telecom as per 2015/16
1.1 PROBLEM STATEMENT Telecommunication sector in Uganda is still under developed and lacks circulation all over the country despite having a number of telephone companies present. There is inadequate support towards the telecommunications sector which has taken up just a handful of other interested parties in the business. Also there is need to identify why despite all the contribution and performance of privately owned networks, the services remain expensive and hence inaccessible to some people.
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There is also need to establish the level of economic performance and social development and
understanding the benefits accruing from its development, future plans and prospects. There is
need to understand the fluctuations in the revenues collected from the telecommunications sector
despite a great increase in the revenues over the decade.
1.2 JUSTIFICATION The justification for this study include: —
• Telecommunications is the center of all businesses, sectors and community life and
therefore it worth to show its contribution to the economic and social development;
• The study may be of use to future researchers in the field of telecommunications and may
also provide literature to other students of School of statistics and applied economics;
• The findings of the study may be of importance to telecommunication companies to
strategize in Uganda in order to improve their production levels and also contribute to
national development;
• The study may help government to come up with a policy to assist telecommunication
companies in Uganda through tax incentives and other incentives.
1.3 OBJECTIVES OF THE STUDY
1.3.1 Main objective:- To assess the growth and contribution of the telecommunications industry to the economy of
Uganda for the period 2006/07 to 2015/16
1.3.2 Specific objectives a) To assess the distribution of telecommunication services throughout the country;
b) To forecast the trend of the growth of the telephone sector in Uganda ;
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c) To determine the role of the telephone companies in the economic and social
development of Uganda.
1.4 HYPOTHESES a) To test for the trend of the number of phone users across the country;
b) Research is done to test for the trend of the amount of revenue collected from the
telephone companies in Uganda;
c) The research is done to forecast the revenue collections from the telecom sector for
the next five years.
1.5 SCOPE OF THE STUDY The researcher covered the period from 2006 to 2016. The main focus was on the telecommunications sector in relation to the social-economic development of Uganda, highlighting the contribution of the telecommunication sector, tele-density and number of subscribers. The researcher opted to focus on telecommunication companies.
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CHAPTER 2
LITERATURE REVIEW
2.1 Introduction When the NRM government was evolving a policy on liberalization of the telecommunications sector, many skeptics scoffed at the vision as unworkable. It was as if sacrilege was about to be committed, but looking at the huge companies like British Telecom and others, they have only managed to stay in business by either merging or privatizing. In order to capture all productivity gains in the telecommunications sector, a necessary condition is a telecommunication s system designed to meet the needs of the industry and service sector. Uganda’s telecommunications infrastructure is increasing at a 10% annual growth rate. The following mobile companies operate in Uganda: MTN; Airtel; Uganda Telecom; Africell; Vodafone; Smile Telecom; Smart
Telecom; Sure Telecom; and K2 Telecom. Mobile phone companies now provide coverage for urban and most rural areas, though reception quality can be erratic. SIM cards for U.S. visitors coming to Uganda with compatible triband phones cost less than USD2 and widely available.
Customers are required to register with a passport photo and copy of their passport bio data page.
2.2 Liberalization reforms and growth in the sector The mobile sector as a whole, including mobile telecommunications, has undergone an unprecedented and dramatic transformation over the last two decades. This started with a liberalization and privatization era following the economic recovery program in the late 1980s.
Historically, the telecommunications sector was run by the then East African Posts and
Telecommunications Corporation (EAP & TC) under the East African Community (EAC) with the international services provided by East African External Telecommunication Company. With collapse of EAC in 1977, Uganda established the Uganda Posts and Telecommunications
Company (UPTC), which was operated by decree from 1977, until the UPTC Act of 1983. Since 7 it was the only company, UPTC operated as a de facto monopoly provider of both telecommunications and postal services in Uganda until 1993. Furthermore, it was the sole regulator acting under the direction of government. Such arrangements bred inefficiencies in the provision of poor services since the company could not regulate itself effectively. The government kept funding a “bottom less pit” and therefore some radical steps had to be taken to overcome the inadequacies, gross inefficiencies and poor services.
In 1996 the government of Uganda outlined the telecommunications goals and numerical targets of quality and growth. The Uganda communications Act of 1997 was formulated specifically to: enhance the national coverage of communications services and products; expand the existing variety of communications services available in Uganda to include modern and innovative postal and telecommunications services; reduce government direct role as an operator in the sector; encourage the participation of private investors in the development of the sector; encourage and enable competition in the sector through regulation and licensing competitive operators to achieve rapid network expansion; reduce and if possible eliminate direct and indirect subsidies paid by government to the communications sector; and establish and administer a fund for rural communications development UCC, 2004)
IAs part of the reform, the government of Uganda adopted a four-part strategy to facilitate the rapid expansion of the telecommunications sector: UPTC was split into 3 entities, namely
Uganda Post Ltd (UPL), Uganda Telecom Ltd (UTL), and Post Bank. An independent regulatory agency, the UCC was established in August 1998. Competition was introduced in the industry by licensing the first mobile operator, Celtel, and the second national telecom operator MTN
Uganda limited in April 1998. The incumbent telecommunications company, UTL was privatized, where 51% shares were sold to a consortium of Telecel, Orascom and Detecon in
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June 2000, thereby reducing government control and direct role in the sector. This ushered in
Uganda an era of stiff competition in the telecommunications sector which partly explains the
unprecedented growth characterized by innovations that account for the economic and social
upgrading in the sector.
The UCC was established by the Uganda Communications Act 1997 (Cap 106 Laws of Uganda),
with the mandate to license, monitor, inspect, regulate and ensure general improvement and
equitable distribution of communications services. This development has witnessed great
positive changes in the sector, leading to attraction of foreign direct investments (MTTI, 2010).
A number of mobile telephone service operators joined the market to provide mobile
communications services (Uganda Telecommunications sector Report, 2005). By December
2008, four providers namely, MTN, UTL, ZAIN (now AIRTEL) and WARID provided
communication technologies in Uganda. By 2009, seven mobile telephone service operators
existed, namely, UTL, MTN, ZAIN, WARID, ORANGE limited, SMILE and I-Telecom (UCC,
2009), BY June 15 th 2016 there were new entries, exits and mergers of telecommunications companies making Nine service providers, namely; MTN; Airtel (merged with WARID),
Uganda Telecom; Africel (took over ORANGE); Vodafone; SMILE Telecom; SMART
Telecom; Sure Telecom; and K2 according to the UCC annual market and performance report
(2015/2015) Telecom The consequence of these developments is competition and innovation to capture and maintain markets, culminating into efficiency, reduction in rates and expansion of services.
2.3 Regulation The reform regime stemming from the policy of 1996 resulted in the enactment of the Uganda
Communications Act (Laws of Uganda, cap 106) in August 1997 to put the requisite legislative
9 framework in place. According to the Act, services were classified under major and minor license services. The major license services include local, long distance or international telephone services, trunk capacity resale, rural telecommunications, store and forwarding messaging, cellular or mobile services. These provisions have significantly shaped the resultant structure of telecommunications market in Uganda.
Initially MTN Uganda Ltd and UTL were granted a five year duopoly (exclusivity) policy.
During this time there was limited competition. The duopoly policy framework focused on the provision of infrastructure under minimum competition. During the period of limited competition in the national telecommunications operators’ licenses, the provision of certain services were restricted to major license and holders of licenses granted prior to the exclusivity for the respective services (UTL and MTN). Limited competition was thus a key strategy pillar in attracting private sector investment at a time when the market size was assumed to be small. The duopoly policy ended in July 2005, having registered significant milestones. These included investments worth more than US$460 million attracted since 2001; a tele-density of 6.5 percent; and more than 80% of geographical area covered by fixed and or mobile telephone. Furthermore,
85% of the sub- counties in the country had a point of presence of telecommunications services;
8.7 percent of the population owned a fixed or mobile phone; and more than 290,000 people were employed in the sector (UCC, 2010)
However, when the policy expired in 2006, Uganda opened the sector up to full competition.
Since then, Uganda has adopted a new licensing regime, which is technology neutral. This has witnessed competitive behavior in the sector, resulting in phenomenal growth, especially with regard to operators, subscription and related services. This period also saw the creation of the ministry of information and communications technology (ICT) in June 2006. The ministry of
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ICT formulates guidelines that give service providers the freedom to decide which technology to
use in providing services. This technology-neutral licensing regime is characterized by two main
categories of licenses: Public Service Provider (PSP) and Public Infrastructure provider (PIP).
The PIP is the license required to establish and operate infrastructure facilities in Uganda, used to
provide services to the public or for resale to a third party. The PSP is issued to persons that offer voice telephony services (operate like public switched telephony services, whether fixed or mobile) and data services. This includes internet access services or internet service providers.
The range of choice and freedom for investors has furthered the development in the sector. The regulatory regime led to the enactment of the necessary laws that would govern the sector with the main aim of increasing efficiency, increasing outreach and guiding the liberalized sector. The institutional build up to regulate the sector ensured that all aspects of the sector had responsible institutions to address the growth of the sector in a healthy way. The initial duopoly created actually challenged the beneficiaries to cover the entire country which the UPTC monopoly had failed to do in decades. It is therefore imperative to acknowledge the role the regulatory regime played in nurturing the nascent sector to what it is now.
During the early days of liberalization, it was realized that there was a tendency for MNOs to concentrate services in towns and major trading centers neglecting the rural areas. Although government had divested its interests in the telecommunications sector, due to uneven distribution of services, it still continued involving itself strategically. In response to the initial uneven distribution of services the government put together the Uganda rural communications fund that was raised by charging 1% on calls made in order to extend services to remote rural areas. To achieve this goal, the government contracted and tasked MTN Uganda Limited, a national operator to install fixed pay phones in places, largely rural and underprivileged where
11 calls could be made. This effort yielded very positive results as other operators realized that the rural community was viable for business. There was rapid uptake of telephone services in rural areas dispelling the initial thinking that rural areas are not viable. This created a pull of rural areas as operators installed masts to ensure they had network to tap into this virgin market. This led to the extension of services to cover rural areas to the extent that by 2016 almost all Uganda was networked.
2.4 Other factors A part from the reforms in the sector, there are other factors that in various ways contributed to the growth in the telecommunications sector: although Uganda is landlocked, it is a strategic hinterland extending to Democratic Republic of Congo, South Sudan, Rwanda and Burundi. This attracts investments that target these countries. Uganda’s population is growing at over three per cent per annum, resulting in about 34.9 million people as per the 2014 national population and
Housing census. Investors view this as a potential market for high subscription. Currently, subscription stands at more than one-third of the population. Uganda is a member of the EAC that consist of: Kenya, Rwanda, Burundi, Tanzania, and Uganda. This process started in 2000 and plans are in advanced stages to establish political and economic integration. This brings together over 120 million people with a large market, further increasing opportunities for doing business in the region.
2.5 Penetration of mobile telecommunications Uganda’s telecommunications infrastructure before 1996 was among the least developed, not only in Africa, but also in global terms (Byarugaba, 2010). It had a teledensity of only 0.21 per hundred citizens, compared to the African teledensity average of 25 per hundred citizens
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(Shirley, et.al 2002:8,11). However, the sector experienced a dramatic and unprecedented transformation following liberalization, to the extent that by 2004 Uganda’s teledensity had risen to 4.8 per hundred, and 30 per hundred citizens by the beginning of 2010 (UCC, 2010). This figure has now risen to over 58.7 per hundred citizens in 2016. The BMI (2012) report forecasts and projects the teledensity to increase to over 82 in 2016. It is observed that the rapid growth in teledensity started in 1998 the time when mobile phones had come on the and there was competition following liberalization. According to the Uganda economic outlook 2016 the mobile market grew to approximately 23 million people in 2015 representing a penetration rate of 54.9%. According to BMI mobile internet users represented 95% of all internet subscribers in
2015. The sector is expected to improve access to high speed broadband services from 512 kilobytes per second to 4Mbps and 30Mbps for rural and urban households respectively. This will support business productivity and facilitate communication. The national Backbone
Infrastructure (NBI) will also be extended to cover more areas in the country. Although this trend is quiet impressive, the MNOs are still working hard to expand further in order to dominate the market and as such further increasing the tele-density. This process has been followed by economic upgrading where new technologies are acquired and new systems are put in place to attract and retain customers.
At present, Uganda has approximately 23 million mobile phone subscribers, spread across nine telecommunications companies although it is likely, as Aker and Mbiti (2010) report, that individuals hold more than one phone from the different operators. It is plausible to argue that with an estimated population of 34.6million people; close to half the population have a phone.
The percentage covered by telephone networks has increased to over 95 percent national wide.
When compared with the fixed lines, the performance of the latter is rather weak, with fixed line
13 subscribers standing at merely 342,624 in 2011 having increased from less than 40,000 in 1995.
The rather lower growth in fixed lines subscription is explained by the exploits that mobile phones have made as a result of technological advancements. The growth in the overall tele- density is therefore primarily a result of the expansion in use of mobile phones and not fixed phones. Note that the rapid growth in telephony is closely related to the time when the sector was liberalized and competition was encouraged just before and immediately
2.6 Productivity of the telecommunication industry
Many people including economists, policy makers, and corporate managers have long believed that the operational performance of private enterprises is much more efficient than that of public utilities. Consequently, many government policy makers gradually deregulated their public transportation utilities like bus, rail, and aviation transport services, etc., and especially the telecommunication service for partial or full privatization. After British Telecom (BT) first released its shares in 1984, governments of over 80 countries have fully or partially divested their holdings in the national telecommunication service (Megginson, 2005). Some marked cases are the following: Bell in Canada, American Telephone & Telegraph (AT&T) in America, and
Nippon Telegraph and Telephone (NTT) in japan.
The direct contribution of the investment in telecom sector to the aggregate economy emerges from superior productivity growth in the telecommunications industry whereas the indirect effect results from the use of telecommunication services in other sectors in the economy. For example, due to rapid technological change and productivity growth, the prices of telecommunication services have declined significantly together with significant improvement in quality
(Kao,Hwang, & Sueyoshi 2008). This phenomenon has encouraged all other industries to substitute telecommunication services inputs for relatively high priced traditional inputs, such as
14 labor and capital and increased the cost efficiency. These effects along with the network externality effects of telecommunications infrastructure are difficult to identify and measure.
These effects could be best analyzed in a more disaggregated framework (Mbarika, 2006).
Based on the existing research in this area, two measurement methodologies are highlighted in this paper. One approach is to use the Input-Output (I-O) framework (Cronin at el, 2004;
Saunders et al, 2004) and another approach is to capture the contribution of telecommunication infrastructure by estimating econometric cost model (Nadiri & Nandi, 2004). Therefore the benefits derived from the telecommunications infrastructure capital is positive and varies considerably across industries
Uri (2001b) explored productivity changes of incentive regulations in the form of price caps in the USA telecommunications industry using BCC-DEA and the Malmquist productivity index.
Moreover, Bernardo et al., 2002 measured the operating performance of 31 national telecommunication companies in 25 countries using a multiple regression model, and got the same type of results. One of the reasons for the persistent gap between rural and urban areas in any country is the telecommunications infrastructure gap, which results in the information gap between rural and urban areas. Rural areas have little or no telecommunications infrastructure
(e.g. in terms of telephones, facsimile, computers, printers and internet, except in tele centers or community phone shops where available), when compared with the urban areas. This difference in telecommunications infrastructure is called the digital divide. Telecommunications infrastructure should then be developed in rural areas in order to reduce this digital divide, as
Mbarika(2006) stated earlier in this study unit.
According to Wagner, et al (2008), if rural people obtain more information about agriculture prices, markets and economic opportunities beyond their geographical horizon they will be able
15 to increase their productivity. Availability of telecommunication services can help to improve information flow between rural and urban regions and help reduce gap of economic development between developed and developing countries but here other factors such as cultural, social and institutional factors can play important roles. Information between rural and urban areas can only be transmitted if there are communication technology links between these areas.
Government and other financially able parties, such as in the private sector, should establish communication technology links to facilitate information transmission.
The analysis in technical efficiency changes for telecommunication industry, examined empirically by Lin, et al. (2002) , cannot really demonstrate the efficiency because they ignored that local phone or mobile phone services are only one part of the fixed and non fixed communication network services and also ignored the issue of efficiency changes between pre and post privatization. In addition, the issue of cost management of CHT has been overlooked by many studies. Telecommunications modern telecommunications provide a cost effective and time efficient medium for accessing rapid development of knowledge and new ideas across the word(Savage, et al, 2005)
2.7 The Role of Telecommunication in Economic Development Most studies find a positive correlation between telecommunications and economic development. Most of them were based on cross country data or regional data of development countries. Savage et al, (2003) argues that telecom benefits depend on the stage of development
There is increasing agreement in scholarly circles that the information technology (IT) revolution has lead to a dramatic increase in U.S. productivity growth. For example, according to Jorgenson
(2004), information technology added 1.18 percentage points to GDP growth and accounted for
2/3rds of the growth in total factor productivity during the second half of the 1990’s (Jorgenson,
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2004). This is doubly impressive when one recognizes that IT assets account for less than 5% of total capital stocks.
Telecommunications is developing an important role in social welfare, particularly for health care and education. ICT are expanding concepts of information access and literacy. Development models are now including health, education and quality of life indicators with the traditionaleconomic growth indicators of GNP and GDP. The Human development Index (HDI) and Physical Quality of life Index (PDQI) are two composite development indicators. HDI is composed of GDP, life expectancy and adult literacy (Bebee & Gilling, 2003). PDQI is composed of life expectancy, infant mortality and literacy. The improvement in infant and maternal mortality figures strongly indicates that human health development is occurring UNDP
(2001.) Acess to modern telecommunications in developing countries can contribute to these improvements through providing information fast and efficiently during medical emergencies.
Telecommunications technology can bring necessary medical expertise from distant locations for emergency care of complicated cases. It can educate the local community about family health matters or any other subject (Koski&Majumdar,2008).
Telecommunication investments affect economic development in the same general way as other infrastructure investment. It can reduce the cost of production. It can increase revenues. Finally, it can increase employment through both direct and indirect effects. Telecommunicatons, however, will affect revenues and costs in more indirect ways than many other types of infrastructure investment. The reason is that much of the benefits of increased telephone services are derived from increases in information and knowledge (Pentzaropoulos & Giokas, 2009)
Telecommunications can also reduce transactions costs, widening the scope of markets and thereby increasing competition and efficiency. Another possible interpretation is that the growth
17 in telecommunications is simply a passive consequence of development. The advanced nations have more telephones because they are able to afford them. In this view, telephones are a consumption item like televisions and radios; growth in penetration will only follow, and cannot precede, the attainment of higher levels of wealth. Recent research addresses this relationship and has come up with some fairly conclusive findings (Colpitts, 2004).
2.8 Society and Telecommunication Telecommunication has a significant social, cultural and economic impact on modern society. In
2006, estimates placed the telecommunication industry’s revenue at $1.2 trillion (USD) or just under 3% of the gross world product (VoIP Magazine, 2005).
Economic Impact On the microeconomic scale, companies have used telecommunication to help build global empires. This is self-evident in the case of online retailer Amazon.com but, according to academic Edward Lenert, even the conventional retailer Wal-Mart has benefited from better telecommunication infrastructure compared to its competitors. (Edward, 2008)
In cities throughout the world, home owners use their telephones to organize many home services ranging from pizza deliveries to electricians. Even relatively poor communities have been noted to use telecommunication to their advantage. In Banglafeshs Narshingdi district, isolated villagers use cell phones to speak directly to wholesalers and arrange a better price for their goods. In Cote d’Ivoire, coffe growers share mobile phones to follow hourly variations in coffee prices and sell at the best Price (Samaan, 2006)
On the macroeconomic scale, Lars-Hendrik Roller and Leonard Waverman suggested a causal link between good telecommunication infrastructure and economic gwoth (Lars-Hendrink and
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Waverman, 2001). Few dispute the existence of a correlation although some argue it is wrong to view the relationship as causal (Ali, 2009)
Social impact Telecommunication is playing an increasingly important role in social relationships. In recent years, the popularity of social networking sites has increased dramatically. These sites such as
Facebook, Twitter, Snapchat, Instagram, Imo, etc allow users to communicate with each other as well as post photographs, videos, events and profiles for others to see. The profiles can list a person’s age, interests, sexuality and relationship status. In this way, these sites can play important role in everything from organizing social engagements to courtship. (CNN, 2015)
Prior to social networking sites, technologies like SMS and the telephone also had a significant impact on social interactions. In 200, market research group Ipsos MORI (Ipsos MORI,
September 2012) reported that about 91% of 15 to 24 year-old SMS users in the United Kingdom had used the service to coordinate social arrangements.
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CHAPTER THREE METHODOLOGY
3.1 SOURCES OF DATA The research aims at analyzing the performance of the performance of MTN Uganda, its contribution and social development of Uganda and growth of Telecommunication companies.
To achieve this, the researcher collected secondary data from UCC offices in
Kampala(Bugolobi) and their website. The kind of data was revenue generated from telecommunication sector over a period of 10 financial years.
The number of phone subscribers was also got from UCC for the past ten years and the tele- density over the decade
Variables considered therefore include;
• Time
• Revenue
• Phone subscribers
• Tele-density
3.2 CONTENT ANALYSIS Though there are numerous data analytical techniques, this report makes use of part of time series analysis as a tool for data analysis.
A time series is a collection of observations made sequentially in time. Time series analysis begins at looking at the historical series which are too persistent to be neglected.
Forecasts based on such regulatory and patterns portray the fact that the future allows the past with some degree of consistency that what happens in the past predicts the future. This section tempts to apply a decomposition technique on the economic development factors in order to
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isolate the two major movements of the time series. Decomposition is then followed by statistical
tests in order to check for the existence or nature in the series of the trend and seasonal
components.
3.3 DATA ENTRY AND ANALYSIS Data were entered using Microsoft excel. Following the data entry, descriptive tables and graphs
and pie charts were drawn using excel. Analysis of data was done according to the stated
objectives and hypothesis of the study, using excel. Techniques used include time series analysis
and hypothesis tests were done using Pearson’s test.
The trend movement The circular trend is a long time tendency of the time series to either rise or fall. The trend was
used as an analytical tool in order to attempt to forecast the future behavior of the trend
Least square fit of the trend
The linear regression model was used to estimate the linear trend.
Yt = α + βt + Ɛt
Where;
Yt- is the phone subscription
α – is the intercept on the Y t- axis
β – is the rate of change in Y t and
Ɛt –Is the error term
2 2 2 2 Assumptions; E ( Ɛt) =0, E( Ɛt ) = σ , Ɛt~ N(0, σ ) and E(t, Ɛ ) =0
The BLUE of α and β are computed using the statistics below;
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