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Thursday, Oct 17th

Analysts question rationality of MTN Rwanda fine

Analysts question rationality of MTN Rwanda fine

US$8,5m penalty imposed by Rwanda Utilities Regulatory Authority has been described as 'heavy handed'.

ICT industry analysts have questioned the rationale behind a fine of over 7bn Rwandan Francs (US$8,5mn) imposed on MTN Rwanda by the country's industry regulator, the Rwanda Utilities Regulator Authority (RURA).

The penalty was announced yesterday following the conclusion of deliberations between RURA and MTN last week.

Anthony Kulamba, spokesperson for RURA says the administrative sanctions imposed on MTN Rwanda Ltd are as a result of failure to comply with license obligations.

"MTN Rwanda Ltd provided services in contravention of Enforcement Notice and Directives issued by the Regulator against hosting its IT services outside the country. By doing so, MTN Rwanda breached its license obligation requiring it to comply with all applicable laws, regulations and any other regulatory instruments issued by the competent authority. On 4th May 2017, the Regulatory Board of RURA conducted a hearing session in which MTN Rwanda Ltd was informed of the breach of its license obligations and given the opportunity to be heard, whereby MTN Rwanda Ltd admitted the above-mentioned breach," said Kulamba.

MTN Rwanda has since acknowledged receipt of notification of the fine from RURA which it says relates to non-compliance with the Directives issued by the regulator prohibiting the inclusion of MTN Rwanda in the MTN South and East Africa (SEA) IT hub based in Uganda.

"MTN has been engaging with the regulator on this matter over the past four months. MTN Rwanda is currently studying the official notification and will continue to engage with the regulator on this matter," read a statement issued by the telco.

Heavy handed approach

Steven Ambrose, CEO of Strategy Worx Consulting has described RURA's finding as impractical.

"The motives of the regulator are unclear and appear heavy handed, as it's not a simple matter to move the data centre to Rwanda as this may be both expensive and disruptive."

Ambrose says the latest fine for MTN should not necessarily be equated to the 330 billion naira ($1.7 billion) that the operator had to pay in Nigeria last year.

He adds that the MTN Rwanda situation is an example of the difficulties with doing business in Africa.

"The regulatory arena is always fluid and highly changeable. The disproportionate size and apparent wealth of the operators makes them targets for governmental interference. MTN and the other mobile operators have an enormous impact on the countries they operate in and the legal and regulatory framework they operate in is complex and fraught with challenges."

Ambrose believes the allocation of resources by MTN benefits Rwanda in lower costs and the latest technology.

He says while the fine amount is not large in the context of MTN's overall operations, there will have to be a negotiated solution between the parties.

Dobek Pater, Managing Director at Africa Analysis shares the view that MTN is likely to be motivated by the economic benefit it would derive from creating a SEA IT Hub.

"I think, these cases need to be considered on their own merits. It could be, for instance, that MTN Rwanda does intend to establish a separate hub for Rwanda but in the meantime is using a regional hub to deliver IT services. It would be more economical to deliver services from a centralised location and, for instance, in the case of some IT services provided by global vendors (e.g., Microsoft, IBM) this is the case. It is peculiar that a country would require a local hub for the delivery of IT services, unless storage of client data is involved. In such a case, there are often laws regulating data storage outside of national borders. Another reason could be that Rwanda is trying to retain more revenue in the country and create more work opportunities through such requirements.

Pater says a trend is developing among African regulatory authorities who are becoming more heavy-handed in a bid to entrench their authority in the market which may have been lax in the past.

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