An MTN service centre in Kigali, Rwanda. PHOTO | FILE
What you need to know:
Crystal Telecom, a listed public company, owns a 20 per cent stake in MTN Rwanda while MTN Group owns 80 per cent.
The fine is expected to impact the Crystal Telecom dividend payout.
MTN Rwanda is accused of outsourcing a highly sensitive service, that grants access to the personal data of subscribers, to the MTN IT service hub in Uganda.
Investors in Rwanda’s Crystal Telecom have reason to worry after Rwanda’s leading telecommunications firm MTN was hit with a $8.5 million fine by the sector regulator.
Crystal Telecom, a listed public company, owns a 20 per cent stake in MTN Rwanda while MTN Group owns 80 per cent. The Rwanda Utilities Regulatory Authority (Rura) slapped the fine on MTN Rwanda for failing to comply with licence obligations, a development that has unsettled investors.
The fine is expected to impact the Crystal Telecom dividend payout. A meeting of shareholders was scheduled last Friday to appraise them of the implications of the penalty.
“Investors will be aware of the official notification of sanction against MTN Rwandacell by Rura… Crystal Telecom has submitted a request to better understand the issue and communicate the subsequent outcome from their [Rura and MTN] engagement,” a statement from Crystal Telecom reads.
By press time, the outcome of the meeting was not available, but sources said the fine will bear heavily on the dividends, considering that it is only slightly lower than what the telco makes in a month.
Crystal Telecom floated 270,177,320 of its shares in MTN Rwanda in April 2015, accumulating Rwf28.3bn ($33.4 million) in proceeds.
While most stocks listed on Rwanda Stock Exchange have lost value due to low liquidity, dealmakers are concerned the fine from the regulator could further bring down the stock prices.
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 the management to reduce earnings per share to Rwf3.82 ($0.4) in 2016 from Rwf4.26 ($0.5) in 2015.
The company’s market value, which was Rwf28.3 billion ($33.4 million) during the share offer in 2015 had declined to Rwf25.5 billion during the first week of May 2017. The stock was trading at Rwf90, which is below the Rwf105 offer price per share in 2015.
MTN Rwanda is accused of outsourcing a highly sensitive service, that grants access to the personal data of subscribers, to the MTN IT service hub in Uganda.
“MTN Rwanda Ltd provided services in contravention of an enforcement notice and directives issued by the regulator against hosting its IT services outside the country,” Anthony Kulamba, Rura’s spokesperson said in a statement Wednesday.
“On May 4, the regulatory board of Rura conducted a hearing session in which MTN Rwanda Ltd was informed of the breach of its licence obligations and given the opportunity to be heard, whereby MTN Rwanda Ltd admitted the breach.
Administrative fine
“In accordance with the applicable laws, the regulatory board of Rura decided to impose on MTN Rwanda Ltd an administrative fine of Rwf7.03 billion ($8.5 million),” Mr Kulamba said.
A letter signed by Rura director general Patrick Nyirishema addressed to the MTN chief executive confirms the news of MTN bypassing regulations to outsource the highly sensitive service outside the country.
Mr Nyirishema confirmed in the letter that the sanction was in line with MTN Rwanda’s failure to comply with directives issued by Rura prohibiting the company from joining the IT hub in Uganda.
