Uganda too small for seven mobile phone firms - Airtel

By Elias Biryabarema

KAMPALA (Reuters) - Uganda's mobile phone market has room to grow but is still too small to support all of the country's seven telecommunications companies, the managing director of Airtel Uganda, a local unit of India's Bharti Airtel , said.

"It's an absolute illusion to believe that four, five, six mobile operators can ever be profitable in one country," Tom Gutjahr told Reuters. "It's unlikely that the smaller companies will get profitable any time soon."

Seven major telecom firms serve Uganda's population of 35 million, and mobile penetration is about 44 percent, according to Uganda Communications Commission. The sector expanded by 11 percent in the 2012/13 fiscal year, from 19.2 percent in the previous period, according to the government statistics office.

Nevertheless industry officials have noted that cut-throat competition that forced players to lower tariffs to woo subscribers was wearing margins so thin there was a need for mergers for some companies to remain viable.

Last year, Airtel bought Warid Uganda to become Uganda's second-biggest telecom operator after MTN Uganda, owned by South Africa's MTN Group . Airtel now has some seven million subscribers.

Orange Uganda, owned by French company Orange , was sold to Africell early this year. It was the second small operator in Uganda to be sold in about a year, and there could be more acquisitions as stiff competition erodes profit margins.

Gutjahr said Airtel would look at any "interesting offers".

He declined to offer revenue projections for 2014 but said the company had "seen some growth" during the year. He added that Airtel had spent about $100 million in infrastructure expansion this year.

He added that Uganda's young population - roughly half is younger than 15 - could feed growth opportunities for telecom companies in the east African nation.

"All these people who are still young today, they're going to be the telecommunications users of the future," Gutjahr said. "This growth is absolutely unique in the world."

(Reporting by Elias Biryabarema; editing by Edith Honan and Susan Thomas)