MTN agrees to pay US$8.5m Rwanda fine

MTN has reportedly agreed to settle a fine of US$8.5m (about R114m) with the Rwandan government after negotiations over the fine broke down.

The fine was imposed on the Rwandan subsidiary of the Johannesburg-headquartered and JSE-listed mobile telecommunications group after it allegedly failed to comply with a regulatory directive precluding it from including its operation there in the IT hub it runs in Uganda.

Early reports of this story quoted the local news website Rwanda Eye and The Independent was unable to independently verify it.

The website reported that MTN has agreed to pay the fine in full by the end of July. The amount will be settled by MTN Rwanda and not by the parent group.

The Rwanda fine is a tiny fraction of the one imposed on MTN by Nigerian authorities in 2015. Still, it is a reminder of the complex regulatory challenges the operator faces in some of its markets.

In 2015, the Nigerian Communications Commission imposed a US$5.2 billion fine on the group’s Nigerian subsidiary after it failed to disconnect more than five million unregistered Sim cards. That fine was later reduced to about $1 billion, but not before it had claimed the scalp of CEO Sifiso Dabengwa and led to a major group restructuring.

MTN operates in 22 countries in the Middle East in Africa. It’s most important markets are Nigeria, South Africa, and Iran.

The Rwanda Utilities Regulator Authority (RURA) announced the decision to fine MTN on May 17. It said in a ruling posted on its website that MTN Rwanda was hosting its IT services hub in Uganda, which RURA had prohibited.

“They are punished for relocating their IT services outside Rwanda, and this was deliberate,” said RURA Spokesman Anthony Kulamba said at the time.

Kulumba said: “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”.

MTN Rwanda, a division of South Africa’s MTN Group, is Rwanda’s leading mobile operator, with four million subscribers. It is 80 percent owned MTN Group while the remaining 20 percent is listed on the Rwanda Securities Exchange.

At the time, several telecom sector watchers analysing the RURA decision said the fine was not punitive in the context of MTN’s overall operations.

But Steven Ambrose, the CEO of Strategy Worx Consulting, a South African based business technology consultancy, according to a report by iTwebAfrica, described RURA’s decision as impractical and requiring further negotiation, according to the report.

“The motives of the regulator are unclear and appear heavy handed,” he said. He said MTN Rwanda’s currently deployment of its resources benefits Rwanda in lower costs and the latest technology. He added that moving the data centre to Rwanda is a complex matter that may be both expensive and disruptive.

He added 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.”

Another South African-based commentator, Dobek Pater, Managing Director at Africa Analysis, said MTN’s location in Uganda could be motivated by the economic benefit it would derive from creating a SEA IT Hub.

“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,” he says, “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.”

He added that there is trend developing among African regulatory authorities trying to entrench their authority in the market which may have been lax in the past.

According to him, MTN Rwanda could have plans to establish a separate hub for Rwanda but in the meantime is using a regional hub to deliver IT services.

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