What Ezee Money Vs. MTN Uganda court case teaches us about competition in Uganda

Image: viewafrica.com

You probably don’t know that MTN Uganda was sued by Ezee Money, an independent mobile money service provider operating in Uganda.

Ezee Money has won the case taking home Ugx 2.3 billion. However, MTN has appealed to the supreme court.

To make things interesting and objective, I’ve juxtaposed this post with conversations I had with friends on Facebook, the Ezee Money and MTN Uganda press releases.

How does Ezee Money work?

Ezee Money is a mobile finance service provider that started operations in 2013. They enable transfer of money from one mobile user to another getting a commission from each transaction. Now because they are mobile, they need the service of mobile telecom operators to facilitate the transfer via messages (SMS) between agents and end users.

Now Ezee Money is not a mobile communication network but rather a mobile financial service provider. This is where the battle is; “Mobile Communication services provider” and “Mobile Financial services provider”. For simplicity, lets loosely use “Telecom” and “Bank” which are very familiar concepts to most people. So Ezee Money is loosely a mobile “Bank” regulated by Bank Of Uganda(BOU).

Why Ezee Money sued MTN

Fortunately or Unfortunately there’s now a blurry line between being a “Telecom” and being a “Bank” in the mobile space. For instance, is MTN a telecom or bank? The answer is, it’s both.

David Okwii: Daniel Ligya how does Ezee Money really work? And where does its reliance to MTN come in? Do you mind to explain.
Daniel Ligya: Ezee Money uses a terminal that takes in SIM cards which are used to communicate with their platform and the agents. So ideally, their rely on the telephony network as a medium to relay message instructions and as you might know, the best positioned people to do that are the licensed telecoms

Now Ezee Money approached MTN to lease some of it’s telecom infrastructure so as to facilitate it’s mobile banking platform. What Ezee Money didn’t consider was that MTN although initially started as a telecom is now a bank too. So, this is like Pride Micro-finance, a bank approaching Centenary bank and saying “hey can we use your ATMs for our customers to withdraw cash?”. Maybe not the best analogy, but the point is MTN is actually Ezee Money’s competitor. Ezee Money is saying, “hey MTN, you’re supposed to be a mobile telecom, can we use your network to run our banking services?”. That’s partly the problem.

David Okwii: I see. Ezee Money no doubt has a case against anti-trust. Except they attempted something illogical while expecting miracles. There’s a fault in their business execution strategy which unfortunately again the courts of law can’t solve. You can’t expect your competition to willingly allow you to utilize their resources while competing in the same business for the same customers. It’s lame, period.
Daniel Ligya: I guess MTN’s primary role is to provide telecom services and they have an obligation to provide the service to anyone in need of it as long as they can afford it. The fact that they are into financial services doesn’t mean they should deny competitors the services. For anyone to engage in money transfers, you have to work with a licensed financial institution ( forget the technical word)for a service.

Ezee Money’s case against MTN Uganda

*Denied the use of Ezee Money short-code on it’s network.
*Threatened Ezee Money’s aggregator with a complete denial to access to the dominant network.
*Cut off all Ezee Money’s call center lines.
*Cut off all 300 data SIM cards that were being used on Ezee Money GSM enabled POS machines.
*Intimidated all agents who were also providing MTN Mobile money into signing exclusivity agreements and especially warned them against any dealings with Ezee Money.

To this, MTN Uganda responds;

Sometime in 2012, M/s Ezee Money sought MTN’s services, namely an E1 Modem line and 30 fixed telephone lines, to be used for it’s money transfer services. MTN granted the services. However because Ezeemoney was a new Company with no prior business with MTN, and hence it did not meet the post-paid service conditions (trade vetting requirements), MTN advised Ezee Money that it could not provide these services which were post paid. MTN instead migrated Ezee Money to the prepaid service. Ezee Money also wanted MTN to provide SMS aggregation services, but they went through a third party, Yo Uganda Ltd. However, MTN advised Yo Uganda Ltd to ask Ezee Money, to engage MTN directly, which Ezee Money never did.

Wire James kicks off with a good analysis of the MTN Vs. Ezee Money ruling here http://wirejames.com/…/when-money-muzzles-the-media-ezee-m…/ However, James majorly concentrates on media absence from the story — which is another point in itself and subject to discussion for another day.

“During the reading of the Judge’s ruling, many media houses were present and their reporters were seen keenly taking notes as expected. However, it surprised me when I learnt that none of the media houses went ahead to report to the public what had transpired. They all kept silent and internet searches that I have done on this case show the absence of any information on this ruling until the 16th of November when Ezee Money paid for advertising space in the New Vision newspaper to make public this information.”

__________________________________________________

You’re not a Telecom: MTN to Ezeemoney

MTN responds with a press release with a defense and a basis for its court appeal here.
http://www.mtn.co.ug/…/EEZE%20MONEY%20PRESS%20RELEASE%20AGA…

MTN doesn’t seem to object to some form of anti-competition stunts on its part, but rather to the claim that Ezee Money isn’t telecommunication provider. MTN says Ezee Money isn’t a Telecom but a mobile finance provider. Therefore Ezee Money is not a licensed communications services provider which should be protected by the Uganda Communications Act.

“MTN will maintain on appeal, that it can not be liable for
breaching a law that prohibits anti-competitive behavior against
license communications services provider when, as it is clearly says in Ezee Money’s Press Release, Ezee Money provides mobile financial services, and is not a licensed communications service provider, or at all”.

MTN has other defenses you can read up yourself that might not be so pertinent to this discussion.

______________________________________________

But what’s interesting to this case is the brief history between MTN and Ezee Money. It turns out some of the staff members of Ezee Money were former employees of MTN who were implicated in some fraud scandals. It’s said the employees stole money from MTN to fund their new found venture.

“MTN Uganda was aware that some of Ezee Money’s employees, in particular Irene Kawuma was charged and convicted by the High Court to imprisonment for 15 years for committing fraud against MTN for causing it loss of over Shs 450 Million”
________________________________________________

Those are facts. Now lets talk. Do I think MTN pulled off some anti-trust stunt against Ezee Money? Of course. Even MTN seems to agree, but is rather concentrating on exploiting a loophole in the Anti-competition Law that protects only “Telecoms”. MTN is urging that Ezee Money isn’t a Telecom and is therefore not covered under that specific law which is their basis for an appeal. But MTN is also capitalizing on crimes committed by Ezee Money’s employees — albeit unrelated to the case itself — hopefully to win the pubic good will.

Joseph Kaizzi: But this is no win for Ezee Money David. Given the trail of events and the purported fraud by Ezee Money proprietors, I concur with MTN for taking the stand against them. Look at this way, I steal from you, then I use your money to come pay for your services, who does that? If this is the legacy Ezee money wants to leave behind then I want nothing to do with it. The press release is probably going to work against them as now the fraud by their managers will be in the public eye and we shall all start questioning their true motives. Then again, who will trust a mobile money service whose managers have been implicated in fraud?

It seems MTN didn’t forgive it’s former employees for defrauding it’s mobile money network. Ezee Money wasn’t in good graces with the giant mobile telecom when they started out their own venture. That’s because MTN is playing well with other financial institutions such as Micropay, Mcash, traditional banks like Stanbic bank, Centenary bank and several others (http://www.dignited.com/…/10-banking-apps-will-save-long-q…/) to use MTN’s mobile money network without any court cases. Therefore, it’s less likely an issue of Anti-competition, but rather a sour business relationship that exists between the two. Of course no side will admit this fact as it has no legal ground in the courts of law.
______________________________________________

Joseph Kaizzi: According to the communications act of 2005 (http://www.opm.go.ug/assets/media/resources/394/UGANDA%20COMMUNICATIONS%20ACT.pdf), the fair competition regulations only apply to UCC licensed operators. “These Regulations apply to an operator issued with a licence under the Act and to any other person required to comply with Part X of the Act.”
Peter Otandeka: Joseph Kaizzi You are referring to Clause 1 that states “An operator shall not engage in any activities, whether by act or omission, which have, or are intended to or likely to have, the effect of unfairly preventing, restricting or distorting competition in relation to any business activity relating to communications services.” The onus is on MTN to prove that Ezee Money was the “bad guy”. But all evidence currently available proves that MTN did all it could to unfairly take them out of business..

Legalities aside, I think Ezee Money can’t win simply through courts of law. Even though Ezee Money won again after MTN appealing, they just don’t stand a chance of emerging as a strong mobile money service provider. Mobile money runs on a Mobile network that Ezee Money doesn’t own or control. That means they still have to operate as a parasite inside a host. We know from history that Mobile Telecoms tightly control their infrastructure and often play it hard with 3rd party providers to use their platform. I extensively wrote about that here http://techmoran.com/ceo-weekends-why-african-developers-…/… . It’s terribly hard to succeed on mobile anyway in Africa preciously because there’s absence of strong anti-trust laws among other things.

______________________________________________
So what’s my conclusion?

laws or no laws, it won’t change anything. We need radical disruptive thinkers and innovators. People who can win not in the courts of law but purely on the innovation and market battlefield.

Wire James: David Okwii, can you please throw more light on the Anti Competition Law you refer to in your post? Perhaps quoting it here will help us be on the same page. Secondly, you seem to believe that technology disruption on its own is the silver bullet towards taming anti-competitiveness among giants however, that is wrong. Despite the rapid innovations and disruptions going on in the USA, law suits galore exist with small players suing big ones and vice versa. The one thing that MTN cant deny is that by virtue of the license they hold, they are mandated to offer services to any one or entity that approaches them as long as they are operating leglly. The Communications Act 2013 Section 53 will give you more guidance on this. I am currently penning down a deeper analysis of this court ruling as I flip through the 45 page judgement and I’ll cover indepth some of the issues that are being misunderstood here. My first article was purely aimed at bashing the media for pussy footing on a matter of national importance. Now over to the analytical article.