The low Average Revenue per User (ARPU) in Rwanda’s telecom industry is negatively affecting the ultimate profits for operators compared with other countries in the region.

According to ARPU data released last year, Rwanda’s $2 per month was the lowest in the region as Kenya leads with $6.2 followed by Tanzania and Ugandan at $4.4 and $3.5 respectively.

The low ARPU means that majority of mobile phone users in Rwanda are low-end subscribers, whose tendency to spend on mobile value added solutions is low; thereby depressing the effective rate of revenue realisation per minute for the operators.

With the low propensity to consume the products on the telecom, operators are finding it difficult to make returns on investments.

Rwanda unlike other countries in the region whose markets have multiple telecom players, is served by only three operators.

According to the operators, telecom revenue is mostly driven by pricing and quantity of products offered on the market and Rwanda has some of the lowest prices in the world.

Telecoms are also suffering low business because there is lower usage of their services by some customers.

“From an investment perspective, it is always hard to get returns with low pricing but we are offering low prices because we believe that will grow our business over long term basis. We can see potential in future and all these aspects are put into consideration when making these strategic decisions,” said Tongai Maramba, chief executive of Tigo Rwanda.

However, with the low prices for the products on the market, consumers are expected to buy in bulk with operators gaining from huge volumes consumed, which is not the case in Rwanda.

With a high ARPU in regional countries it means that Kenyan, Tanzanian and Ugandan telecom markets are more profitable than the Rwandan market.

According to a Deloitte study carried out last year, Kenya’s ARPU was expected to rise to $6.5 this year, $3.7 for Uganda while Tanzania’s was expected to remain unchanged at $4.4. The study did not capture Rwanda.

“The economy of the country relates to the ARPU in terms of the disposable income of an individual and although the average GDP per capita is almost the same across the region, however, the cost of living is higher in Rwanda,” added Mr Tongai.

The cost of living is higher in Rwanda partly because the country is landlocked, which makes the cost of operations high.

Telecoms have been launching new products to improve revenue generation.

Mr Tongai said the more services the industry shall offer to the clients, the more revenues and operators need to introduce products that are relevant to customers.

Telecoms are suffering from low ARPU at a time when government is planning to increase tax on airtime which could further discourage users from consuming the services offered by telecoms.

In the proposed 2014/2015 budget, the government is set to charge an excise tax on airtime of 10 per cent up from 8 per cent.

READ: Mobile calls to cost more as duty on airtime is increased

However, the low ARPU has not stopped all the operators from growing their profits as all of them have been posting revenue growth.

A fortnight ago, efforts to improve quality of services offered by telecommunication companies received a boost of Rwf27 billion from the International Finance Corporation (IFC).

The funds were given to IHS Rwanda, a telecommunications infrastructure company to expand and improve the quality of network.

Rwanda’s telecom operators have in the past penalised by the industry regulators for poor quality of network services.

Although the operators have taken measures to upgrade their network, cases of drop calls are still rampant.

Operators have been unable to meet some standards set for telecom companies, which include good quality call completion rate, call set up success rate, dropped calls, blocked calls, speech quality, handover success rate, call set up time and signal strength.