Second telecom operator may lose licence

Monday February 28 2011

A Rwandatel shop in Kigali. Photo/MORGAN MBABAZI

A Rwandatel shop in Kigali. Photo/MORGAN MBABAZI 

By BERNA NAMATA

The licence held by Rwandatel, the country’s second telecom operator, is at stake following an enforcement notice issued by the Rwanda Utilities Regulatory Agency over failure to meet its obligations.

Rwandatel is a subsidiary of Green Network, which is part of the Libya Africa Investment Portfolio (LAP), a $5 billion foreign investment.

LAP Green has an 80 per cent stake in Rwandatel while the Social Security Fund of Rwanda has the remaining 20 per cent.

Through a legal enforcement notice signed by Rwanda Utilities Regulatory Agency (Rura) chairman Eugène Kazige, Rwandatel has been notified of its failure to implement its licence requirements, including coverage, rollout obligations, quality of services and investment plan.

The notice, seen by The EastAfrican, underlines Rwandatel’s non-compliance with the agreed investment plan as a telecom operator.

“During their licence acquisition — when we privatised Rwandatel in 2007 through a competitive process — LAP Green came up as the best bidder because of its technical proposal and financial proposal,” said Regis Gatarayiha, the acting director general of Rura.

Lap Green paid the $100m for the financial proposal, but Mr Gatarayiha said it has not fulfilled its technical proposal obligations.

“We found it (technical proposal) very good if implemented. The technical proposal is the annex to the licence that they get, with clear deliverables per year,” he said.

LAP Green was selected from four bidders, including South African giant Vodaphone, as it presented the best offer, including the highest purchase price.

It was the second time the government was privatising the telecom company after Terracom, an American firm that had initially taken over in 2005, failed to meet its licence obligations.

The Libyan company committed itself to invest $87 million in the first year, and another $177 million spread over five years from 2007.

“Now they have been in the market for almost four years yet we see something like 40 per cent of what was supposed to be invested,” said Mr Gatarayiha.

Rwandatel’s commitments also included upgrading the network, but this has not been done for the data and mobile segments.

“When we privatised, they were on CDMA. They had to change to GSM, with a clear rollout plan to cover the whole country. The target by 2010 was 70 per cent coverage in urban areas and 60 per cent in rural areas. Today, they have about 50 per cent for both,” Mr Gatarayiha said.

The regulator has also received a series of complaints from the company’s subscribers regarding the ineffectiveness of the company’s Internet modems and high rate of dropped calls.

“Their data network (UMTS) or 3G, is not consistent. They say they have a 3G network but what it achieves in terms of data... is actually below second generation GPRS,” Mr Gatarayiha said.

He added: “Rwandatel has an impact on other sectors of our economy; we can not let matters stay as they are.”

As at September 2010, statistics from Rura indicated that Rwandatel had 535,710 subscribers, putting it third behind MTN Rwanda with 2.3 million and Tigo Rwanda, the new market entrant, with 685,000 users.

Rwandatel has also been sued by MTN Rwanda over an accumulated interconnection fee estimated at $3m.

Sources familiar with the case say both companies are currently seeking an arbitrator after the case could not be handled by Rwanda’s commercial court.

Rwandatel produced a document signed by the two companies indicating that such grievances would be settled through arbitration.

Under the telecommunication services provision regulations, companies should assess and pay each other whatever interconnection fees are due at the end of every month.

In 2008, MTN Rwanda was told to pay Rwf 70 million (about $140,000) in fines to the government regulator for failure to meet contractual obligations, specifically failing to upgrade its network as stipulated in the licence. 

Rura says Rwandatel is compelled to comply with the enforcement within one month and is also required to submit an implementation report to the regulator on how it intends to comply.

However, Rwandatel’s communications manager Cleophas Kabasiita says they have appealed against the regulator’s notice.

“It is a decision the management did not agree with as we felt it was unwarranted and unjust, especially at a time when the quality of our network has improved,” he said.

Rwanda’s overall teledensity stands at 31.7 per cent with MTN Rwanda claiming 22 per cent, Tigo 5.3 per cent and Rwandatel 4.4 per cent.