Crystal Telecom suffers effects of MTN $8.5 million fine

Thursday June 1 2017

An MTN service centre in Kigali, Rwanda. PHOTO | FILE

An MTN service centre in Kigali, Rwanda. PHOTO | FILE 

By KABONA ESIARA

The Crystal Telecom share price has shed five percentage points after the regulator slapped a $8.5 million fine on MTN Rwanda for hosting its IT hub in Uganda.

Crystal Telecom is a special purpose vehicle that owns a 20 per cent equity stake in MTN Rwanda.

MTN Rwanda was fined for non-compliance with directives issued by the regulator prohibiting MTN Rwanda’s inclusion in the MTN South and East Africa IT hub based in Uganda.

The fine, according to deal markers has sent the share price tumbling by 5.5 per cent from Rwf90 ($0.11) to trade at Rwf85 ($0.10).

“The Rwanda capital market has not recovered from the low liquidity that has persisted for two straight years. Risk-averse investors are running away from the counter fearing the financial implications of the fine on their earnings,” broker told The EastAfrican.

On Thursday last week, trading opened with 2,142,100 shares on offer but there were no bids.

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“MTN Rwanda will either use its accumulated reserves to pay the fine or the shareholders will lose part of their earnings,” the dealer said.

The financial cost will further reduce Crystal Telecom’s earnings. The company declared a reduced dividend payout this year.

The telco approved a dividend payout of Rwf1.5 billion ($1.7 million) at Rwf5.5 ($0.006) per share during its annual general meeting in Kigali. The dividend is lower than last year’s after the company reported a dip in profits.

Profits dropped

Crystal Telecom’s profits dropped to Rwf1.03 billion ($1.39 million) in 2016 from Rwf1.14 billion ($1.25 million) in 2015.

The drop forced management to reduce earnings per share to Rwf3.82 ($0.4) in 2016 from Rwf4.26 ($0.5) in 2015.

The Rwanda Utilities Regulatory Authority said MTN breached licensing obligations by hosting its IT services outside the country, in contravention of an enforcement notice and directives in force.

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