February 27, 2018 / 8:18 AM / 6 months ago

Ugandan affiliate of Vodafone gets creditor protection

KAMPALA, Feb 27 (Reuters) - A Ugandan Internet service provider that uses Vodafone’s brand under license has obtained court protection against creditors after high operational costs pushed it into financial difficulties, an official said.

Afrimax Uganda Ltd, owned by sub-Saharan Africa telecoms investor Afrimax Group, launched its 4G broadband internet service in the East African country in 2014.

It has a small slice of a market dominated by units of South Africa’s MTN Group and India’s Bharti Airtel.

Donald Nyakairu, the firm’s court-appointed provisional administrator, told Reuters on Tuesday it had obtained a three-month “interim protective order.”

The order would bar a run on its assets by creditors while allowing him and the shareholders to explore viable options to salvage the business.

Trading as Vodafone Uganda, the firm’s 40,000 fixed and mobile users gave it a tiny share of Uganda’s estimated 16 million internet users.

The financial problems begun around mid last year, triggered by the high cost of rental payments for transmission infrastructure from bigger market players, Nyakairu said.

Most of the transmission infrastructure in Uganda is owned by MTN and Bharti Airtel and smaller players typically rent to use it.

According to the industry regulator internet penetration in Uganda stands at about 45 percent, signalling potential room for growth.

But over the last five years, at least two smaller players have sold out after margins were squeezed by competition.

Some investors had expressed interest in buying the distressed firm, Nyakairu said, adding that negotiations were in advanced stages. (Reporting by Elias Biryabarema; editing by Duncan Miriri and John Stonestreet)

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