Dictator Museveni's staffers at State House are in the final stages of procuring technology that could enable the government to break a billion-dollar mushrooming telecom fraud and also eavesdrop on international calls, Radio Katwe reports exclusively. The technology, called an Intelligent Network Monitoring/verification System (INMS), will cost the Ugandan taxpayer between $20-30 million (Shs. 66 billion--99 billion) and is expected to, for the first time, enable the country monitor the volume and billing of voice and data traffic of telecoms.
While Uganda has technology capabilities to eavesdrop on local calls, international calls and international communications by-pass fraud have been off its radar. Aware of this, some dubious individuals have skimmed billions of shillings off illegal re-routing on international calls. Individuals seeking to transmit sensitive information have also been using international lines, thereby, minimising risks of local eavesdropping.
Insiders say that, for Dictator Museveni, the biggest motivation to procure the INMS technology is its security features; including the eavesdropping capability. This technology will also bring the government closer to knowing how much money exactly telecoms make in their operations.
Since telecoms started operating, they have been doing what is called self-declaration to the sector regulator, Uganda Communications Commission (UCC).
As such, UCC and the Uganda Revenue Authority (URA) have been levying fees and taxes based on what the telecoms say they earned.
UCC, for example, collects an annual levy on telecoms gross revenue of 2 percent. The levy constituted 27% of UCC's projected revenues in the financial year 2014/2015. And UCC is required to remit 1% of the operators' of this levy to the Consolidated Fund.
In the 2015 report published this year, the Auditor General, John Muwanga, added his voice to those that have raised a red flag on the regulator's reliance on the operators audited financial statements to raise invoices of the 2% levy on the revenue. The Auditor General noted that a review of the revenue collection system revealed that the UCC has not yet built capacity to independently verify the revenue figures reflected in the operators audited financial statements to counter the likelihood of audit risk/ or collusion.
"As such, there is a risk of under collecting revenue for the Commission in the circumstance," the Auditor General's report said.
In his audit, the AG noted that the regulator said that procurement of a traffic monitoring system is on-going and will enable monitoring of telecom traffic and verification of revenues submitted by operators.
A month-long investigation by Radio Katwe has learnt that the procurement of the INMS, which is expected to also deal with this, was for years kept off the table because of an intense fight between Uganda's major procurement brokers over who gets the deal. The process moved recently when President Museveni intervened.
Procurement of the technology started in the early 2000s. At the time, different companies were being pushed by different brokers in cabinet. Sam Kutesa, the current Foreign Affairs Minister was pushing for one of the companies, one of the president's son-in-laws, another. There were other brokers who were backing Nytex, a Belgian company and another Lebanese company.
Former Presidential candidate Amama Mbabazi, who was Security Minister in 2006, also got involved at some point and reportedly blocked the procurement saying it had a security dimension. Others claim he had taken the deal off Kutesa's table.
The deal was revived and gained serious momentum when Aggrey Awori was the Minister in charge of Information and Communication Technology.
The closest the deal came to getting concluded was under spy-turned businessman, Abu Mukasa. Abu Mukasa used to work for the External Security Organisation (ESO) but with the right god fathers, he became a big time broker.
He was at one point an aide de camp to Justice Minister Kahinda Otafiire and later switched camps and got closer to Mbabazi. Mukasa, who had cofounded Hits telecom, which was later sold to Orange, making him Orange's first Ugandan director, brought a company to procure the technology. The company known as GlobalVoice, was founded by former Haiti President- Laurent Lamothe.
Under this company, Mukasa had pitched to run the technology in the arrangement of Build Operate and Transfer (BoT) because the government at the time didn't readily have the money to procure it.
However, the deal went off the table because there are some documents that were missing. Some say it was fought by competitors. That round of procurement collapsed. Radio Katwe could not confirm whether Abu Mukasa was going to use China's ZTE as the supplier of the technology but we understand that ZTE emerged the best bidder in the last round of procurement.
On February 25, 2014, UCC advertised a tender for the procurement under reference No: UCC/ SRVCS/13-14/00389. Eng. Godfrey Mutabazi came with his own pitch of an upgraded capacity system that would cost a staggering $120 million (about Shs400 billion), he told Museveni. Police chief Kale Kayihura had also offered to have the technology procured under classified expenditure.
But when Museveni heard of the bill tabled by Mutabazi, he discretely directed his spies to do due diligence. Some went to Israel. At most, Museveni was told that the system could cost $ 30 million but it could be got at even $20 million. This sparked off a fall out between Mutabazi and Museveni. Museveni was enraged that Mutabazi had inflated the cost. As a result, UCC was kicked off the procurement process.
Museveni at some point also consulted with Peter Kahiji, the director technical services of IT sector regulator, NITA-U. Finally, Museveni brought on board Josephine Wapakhabulo, the daughter to the late James Wapakhabulo, who was Uganda's speaker, foreign affairs minister and Deputy Prime Minister.
With State House sponsorship, Josephine had secured a Phd in Information Science from Loughborough University in the UK. She holds a degree in Electronics and Electrical Engineering, a Masters in Information Technology and some of her papers have published in reputable scientific journals. She previously worked with carmaker Rolls Royce.
Details of her terms remain scanty but Radio Katwe can report that she is also being considered as the feature boss of Uganda's National Oil Company. She was shortlisted among the top four for the job.
With Josephine on board, the procurement of the technology, seems to be just a stroke of a pen away. By press time she was outside the country,but Radio Katwe has learnt those involved had zeroed on about four companies and are close to picking a winner.
Radio Katwe could not establish the extent of involvement of the Public Procurement and Disposal of Public Assets Authority (PPDA) in vetting this deal. State House often bypasses PPDA legal mandate when engaging in so-called "classified expenditure".
Should the procurement succeed this time, insiders say, the technology might bring the country closer to dealing with a telecom fraud known as voice traffic termination fraud or SIM - box fraud, which costs telecom companies revenue and the government taxes.
International studies have indicated that network operators lose about 3% of the annual revenue due to fraudulent and illegal services. The biggest operator, MTN, last year suffered a huge decline in profits but still managed to rake in Shs177 billion profit.
A 3% loss of that to SIMbox operators amounts to about Shs5.5billion. The Communications Fraud Control Association (CFCA), states that telecoms lose over 15 per cent of their interconnection termination revenue through SIM boxing.
Some researchers put the total global losses from the underground mobile network industry to be $58 billion in 2011.
How it works
If you have ever received a call from a person who says they are abroad yet the number they are using to call you is local, then you have interacted with a SIMbox operation.
At the centre of the operation is a SIMbox or SIM bank, which holds several Simcards and is part of a Voice of Internet Protocol (VoIP). When used fraudulently, it enables costly international calls to be routed as cheaper local calls.
The technology terminates international calls through local phone numbers such as MTN, Warid, UTL, or whatever and make the calls appear as local. Apparently, fraudulent SIMboxes hijack international voice calls and transfer them over the Internet to a cellular device, which injects them back into the cellular network.
As a result, the calls become local at the destination local network and the cellular operators of the intermediate and destination networks do not receive payments for the call routing and termination.
Experts say that a fraudster can operate thousands of SIM cards from different SIM boxes through one server. The calls, they explain, are sent through the Internet to a SIM box-- that houses ten to 30 illegal SIM cards-- which redirects the illegal Voiceover Internet Protocol (VoIP) traffic to mobile networks.
The major players in this under - ground telecom business are mainly two--those based in the terminating country and the illegal international carriers from across the border.
Besides causing the financial loss, an international study shows that SIM - boxes degrade the local service where they operate. Often, cells are overloaded, and voice calls routed over a SIMbox have poor quality, which results in customer dissatisfaction, the study adds.
In Uganda, Radio Katwe has learnt that the kingpins of the fraudulent trade also happen to be major players in the telecom sector, senior officials in cabinet and some Chinese dealers. Radio Katwe, for now, cannot name these individuals for legal reasons.
One might wonder why an individual with a stake in a telecom company would want to operate a SIMbox which effectively harms the big company. The answer is simple; SIMbox operators make a lot of money.
The SIMboxes , apart from the initial capital injection, there are literally no expenses, no taxes at all since it is an underground business. An owner of a SIMbox can earn up to $10,000 dollars a day (Approx.Shs33 million) from just one simbox, those with knowledge on the dark industry say. That is about US$ 3.6 million a year per SIMbox. Operators usually run several and rake in several million dollars. But as simbox operators make these millions, registered operators and government are the major losers.
