MTN loses sh52bn case against UCC

KAMPALA – The High Court in Kampala has dismissed a case in which MTN Uganda had sued the Uganda Communications Commission (UCC), challenging their decision requiring them to pay $14m (sh52b) during negotiations for license renewal.

The transitional period covered October 21, 2018, to June 30, 2020. MTN wanted the court to quash the decision of UCC requiring them to pay (sh52b) as license fees for the transition period, noting that there was no legal justification.

They also wanted the court to issue an injunction restraining UCC from implementing its queried decision and, in any way, interfering with or interrupting their operations because of its disputed decision.

Justice Musa Ssekaana, while dismissing the case on Friday, noted that UCC’s decision cannot be irrational or unreasonable simply because MTN believes it does not favour them.

The judge noted that it is disingenuous for MTN to now turn around and argue that the fee is illegal because it is retrospectively being applied.

MTN, through their chief executive officer, Wim Vanhelleputte, had, among others, noted that on July 22, last year, UCC wrote to them requiring payment of a license for the transitional period of October 21, 2018, to June 30, 2020, of sh52b.

He argued that this decision was tainted with illegality, irrationality, procedural impropriety, and was unreasonable. MTN said they provided telecommunications services under a Second National Operator Licence for the operation of a telecommunications system, issued and dated April 15, 1998, for a period of 20 years from October 21, 1998.

MTN argued that the Second National Operator Licence provided for the extension of the license under Article 3.2 and 3.3, respectively, whereby the licensee might apply to UCC for renewal of its license not later than 12 calendar months prior to the expiry of the license.

On October 2, 2017, MTN  applied to UCC for the renewal of its license and UCC determined that the renewal fees for the applicant license would be $58,000,000 (sh200b) and authorised them to continue operating under the license terms and conditions.

UCC later on November 21, 2018, deferred the issuance of the renewed license to allow for the alignment with internal government processes and extended the operations of MTN license for a period of 60 days from November  21, 2018.

The period was further extended on March 21 2019 to ensure continuity, while negotiations over the new license progressed and extensions were made until June 30, last year.

On March 18, 2020, UCC communicated its decision to renew the license for a term of 12 years from July 1, 2020.

In the same letter, UCC indicated for the first time that the MTN  would be required to pay license fees for the transition period between 2018 and June 30, 2020, separate from the sh370b new license.

On July 22, last year, UCC issued a demand requiring MTN to pay a license fee of sh52b for the transition period for operating its telecommunications business during the period between the expiry of their license and renewal of the new one.

On August 10, last year, MTN responded to UCC’s demand and highlighted that although the company recognises its obligation to pay fees in connection with its operations during the transition period, it did not agree with the premise on which UCC had assessed the fees payable.

UCC, through Susan Wegoye, the commission director legal, argued that they presented MTN with a clear methodology for the sh370b fee that had been assessed based on, among other things, on the economic opportunity availed by a 10-year license term.

It said the letter, dated November 16, 2018, which communicated a revised renewal fee of sh200b, did not represent a final position on this matter.

It only communicated a revised amount, which UCC had considered as an option at the time, subject to further consultations and discussions.

UCC noted that they were cognisant of the lengthy discussions and arrangements that were required to conclude the renewal/extension process and on October 20, 2018, communicated that it had extended the operation of the license for a period of 30 days from October 21.

One of the terms for the extension was that upon renewal, the period for which the operation license was extended would form part of the extension period under the new license.

UCC argued that from the onset, there was never a position that the fee payable following expiry would be on the basis of the expired license.

The said license did not have a provision stating the amount of fees payable for the period after expiry.

The expired license provided for fees for the 20-year term, not beyond. UCC said following various consultations within the Government, it was determined that the fee of sh370b was payable for a 12-year period and that an equivalent of the prorated value of sh370b would be payable for the transition period.

This formula had been arrived at after consideration of the most relevant methodology and a directive was issued to that end by the President in a letter dated March 11, 2020.

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