HOW MTN CRIPPLED M7 RIVAL MP ALEX RUHUNDA’S DAJ BIZ

For more than 18 years, Fort Portal MP ALex Ruhunda has operated very profitable MTN telecom services provision business mostly in his native Toro and surrounding areas. As a franchise holder, his business territory has always covered the whole of Toro, Kasese, Mityana and Mubende in Buganda region. This over the years made him enjoy the status of MTN Master Agent and in the process created jobs and other indirect opportunities for hundreds of would-be unemployed young people in the franchise territory. But lately things haven’t been going very well for him and his sympathizers say that his financial and business woes only escalated late 2017 when he led the masses’ active resistance to efforts by MP Racheal Magyezi to scrap term limits in the Constitution. Ruhunda inspired and worked with others like Kabarole woman MP Sylvia Rwabwogo and Councilor Joram Nitubimanya among others. They caused lots of political upheaval to the NRM mainstream and their mobilization activities inspired the top clerics to also begin denouncing the NRM government like never before. This is the sole reason why peasants in Toro have been reluctant to accept that his woes resulted from genuine business mistakes and anomalies as the MTN CEO Wim Vanhelleputte (fearful to face market hostilities) maintains. His supporters mantain that MTN is merely being used to fix Ruhunda because of the political views he exhibited and the leadership he offered Toro throughout that Togikwatako period.

But the MTN CEO and lawyers mantain that Ruhunda’s Daj Communications business (which he owns with GM Ronald Kyomuhendo, Dennis Mugara and Joseph Rwabuhinga) crumbled because of imprudent business practices. The MTN lawyers of Shonubi Musoke & Co Advocates along with managers like Andrew Tusubira and Philip Odoi are saying the same thing as the CEO. The matter has actually since been filed in Court where Ruhunda is protesting Wim’s decision to terminate part of his dealership by taking away from his franchise territory Mubende and Mityana districts which formed a larger component of his market. Wim mantains that Ruhunda’s company is broke, has no sufficient capital and this is making impossible the realization of MTN’s business objectives. He says Daj, which MTN accuses of becoming so broke to the extent of failing to recruit enough representatives in the field and defaulting on it’s financial obligations to the franchisor, will only be readmitted into Mubende and Mityana after demonstrating significant recapitalization and economic recovery.

The investigations conducted by Mulengera news website have showed how MTN, already accused by ordinary Batoro of political bias against Ruhunda, let down the political enterprenuer. Firstly they set for him very high inflexible sales targets which he failed to hit justifying their decision to categorize him “poor performer.” In December 2017 the very month the age limit debate peaked, he was required to sell airtime cards worth more than Shs4.3bn and he only managed Shs3.3bn which is 77 percent but still MTN bosses branded him poor performer. In the same month he was required to sell electronic airtime worth Shs1.9bn and he managed only Shs651m. This angered MTN whose bosses claimed this was due to Ruhunda’s failure to have sales reps and agents in all the towns in his franchise territory. That was 37 percent which in his subsequent letters Ruhunda admitted wasn’t satisfactory but gave reasons which Wim rejected. In January 2018, he was tasked to sell airtime cards worth over Shs46bn.241bn and only managed Shs3.5bn (83 percent). In February the target was Shs3.8bn; March Shs3.7bn; April Shs3.976bn and May Shs4.162bn. Ruhunda respectively managed Shs4.442bn (116.6 percent); Shs3.590bn (101 percent); Shs2.926bn and Shs2.731bn. Win, whose company stands accused of squeezing Ruhunda for an opening to be created a franchisee belonging to a certified NRM supporter, still considered this “poor business performance.” In the period January-May 2018, Ruhunda performed as follows on the electronic artime sales against stated targets. January the target was Shs1.478bn of which he achieved Shs821m; February target was Shs1.507bn and he delivered Shs777m; March Shs1.055bn and he delivered Shs678m; April target was Shs1.318bn and he delivered Shs687m. May target was Shs1.531bn and he delivered Shs1.023bn (67 percent). In his subsequent letters, Wim informed Ruhunda they had given him enough chance to improve and because he has failed, MTN was taking over Mityana and Mubende markets. He promised within 6 months the decision would be reviewed depending on how fast Daj Communications would improve in the remaining territory. Ironically even when MTN would take over the two districts, Daj Communications was required to continue paying salaries of sales teams and rent for the offices in Mubende and Mityana. Ruhunda protested all this as being ultra-vires the contract terms and referred the matter to court for adjudication. Gratefully, he recently secured an interim order from the Commercial Court restraining the arbitrary take over by MTN. The Telecom remained unmoved and instructed Shonubi to file a defense accusing Ruhunda of mistakes that cost MTN a fortune in his franchise territory. Besides mismanagement and failure to adequately serve the market in his territory, Ruhunda was also resented for failing to pay MTN debts in franchise fees amounting to Shs700m. According to Andrew Tusubira, the MTN Sr Regional Operations Manager in charge of Greater Central, Ruhunda also reneged on his obligations to mantain functional bank guarantees worth billions in banks like Stanbic and KCB. This guarantee is important because its the value against which MTN delivers supplies with the assurance there will be payment by the franchisee. Before finally cracking the whip and kicking out Ruhunda, Wim ensured several meetings were organized to enable MTN teams to understand what was causing persistent financial distress to the once high performing agent. One such meeting occurred on 2nd July 2018 and this was three months before termination. It was held in Kololo Nyonyi Gardens MTN board room. In attendance were Ruhunda, his GM Ronald Kyomuhendo, MTN managers Annie Tabura Bilenge, Juliet Nsubuga, Andrew Tusubira and Philip Odoi. The MTN team sternly warned Ruhunda on the areas he must urgently address to redeem the image of his company. These included paying up MTN debt which in 5 years had accumulated to Shs3.3bn. He was also allowed time to engage his bankers KCB & Stanbic to raise at least Shs1bn for a bank guarantee. He was also asked to bring in invoices regarding all his pending agent commissions. Adjustments to earlier claims were made and the parties agreed that the franchisor had been too patient yet some of these Daj pending obligations risked exposing MTN to severe financial loss of Shs3.334bn and another Shs1.534bn that was moreover unsecured. Ruhunda was also focussed in the inconvenience and reputation loss the franchisor was facing because of his ineptness as MD Daj Communications. He agreed to come up a recovery plan which MTN CEO Wim subsequently rejected as not good enough.

Our investigations led us to areas where Ruhunda failed largely because of clear betrayal by MTN. For instance, MTN refusal to pay upfront commissions and bonuses messed him up a lot. Sometimes this took 4 months yet he must pay monthly salaries, rent and URA taxes. As of June 2018, commission worth Shs471m had remained unpaid by MTN for 4 months. In February 2018, MTN paid Daj Shs827.9m as commission Daj had earned as early as October 2017. This meant that if he is to keep purchasing stuff from MTN, the company to go on it’s core capital and that’s how the capitalization problems Win talks about in his letters came about. To support the migration from scratch cards to electronic airtime, MTN in January 2018 promised an offer of 2 percent increment in commission for all the DSDs to motivate them to sell more but the promise remained unfufilled up to May 2018. This demotivated the DSDs and without them working hard, there was no way Ruhunda would turn water into wine. Those in Busunju and Mityana remain unpaid to this day because a member of MTN field teams misplaced their documentation. In November 2017, URA effected a 1 percent tax increment on airtime cards to discourage their use and in the same month, MTN announced a reduction of 1 percent on the commission agents got for selling scratch cards. The idea was to discourage their use but it affected Daj’s performance overall. In fact as MTN suffered public outrage for such a move, Airtel pulled back, avoided such moves and immediately stabilized it’s prices. This greatly hurt performance of MTN super agents like Daj.

As this instability raged in the market, UCC came up with new restrictions on sim card registration and replacements as well. In fact there was a ban on these two that lasted months. Yet MTN never accordingly adjusted on the targets Daj was expected to deliver upon. Before the UCC ban, Daj was monthly registering more than 27,000 new subscribers for MTN besides more than 3,000 SIM cards that would either be replaced or swapped. The UCC ban affected all these aspects because selling 27,000 new connections per month would automatically result into additional airtime sales as per the MTN set targets. The ban cost MTN and it’s agents lots of sales and resultant revenue. Ruhunda communicated to Wim apologizing for the poor performance while promising to improve. All he wanted was being understood and being allowed time (just months) that he required to address the concerns MTN managers kept raising. As early as June 2018, he listed things he intended to do to better the situation. These included mobilizing Shs2.8bn from UBA and KCB to restore his bank guarantee figure to adequate levels as required by MTN. He asked the MTN (his business partner) for just institutional support which never materialized. To actualize the digital distribution and master agent model, Ruhunda embarked on recruitment and training of the required numbers of DSD agents (more than 2,000) but the MTN bosses were very lukewarm in their approach to him. To increase data consumption and sales in his franchise territory, Ruhunda heavily invested  in stocking Fero phones in all his outlets but the MTN bosses in Kampala didn’t want to know of such efforts. Apparently they were determined to get rid of him regardless of which steps he took. The MTN top management for instance frustrated his efforts by refusing to support his market promotion initiatives and as well as refusing to (in a timely way) pay his well earned commissions and bonuses which he badly needed to meet daily operational expenses. For comments, call, text or whatsapp us on 0703164755.