Rwanda’s Government to buy back Terracom Communications

Telecoms

After months of uncertainty and blame game, the Rwandan cabinet has decided to buy-back its telecommunications company from controversial youthful American Tech entrepreneur Greg Wyler.

Essentially the highest political decision making body, cabinet in its weekly meeting chaired by President Paul Kagame instructed the Finance Ministry to sign a new agreement with Terracom Communications.

The Ministry was also authorized to buy-back all the shares that Terracom executives owned in the company. The name will also change to Rwandatel - making the final seal in changes that are noticeable. For months now, all Terracom offices and Kiosks have been painted pink with 'Rwandatel' inscription from the Dark Red.

"The cabinet meeting grants authority to MINECOFIN (Ministry of Finance and Economic Planning) to sign an agreement that allows Government to takeover Terracom as well as buy-back all the shares owned by the company", reads one of the resolutions of the meeting.

Government has had a very controversial relationship with its once enviable entrepreneur who in 2003 bought 99% shares of Rwandatel, the country's national telecommunications company for $20 million. Mr. Wyler, 37, was granted a contract 300 schools - especially primary and secondary - to the Internet.

The acquisition of the company included an antiquated fixed-line phone network, about 25,000 customers and 530 employees.

By end of 2004, Mr. Wyler was struggling replace a battered communications tower atop this 14,787-foot volcanic peak - famously now called the Kalisimbi project. He hired a South African mountain-rescue company to advise on navigating the steeper sections and soon a 1,300-pound transformer was in place.

Terracom has also been continuing to lay fiber optic cables to connect Rwanda to several other African countries, eliminating a need for phone calls and Internet traffic to be routed via European or American networks.

By mid this year according to Rwandan officials, only handful of schools has been minimally hired up. The project was supposed to be completed in 2006. But officials are bitter that four years down the road most of the promises and dreams he brought by have failed to materialize.

Instead Terracom moved into phone services. Government figures indicate that Terracom had 200.000 phone subscribers and only about 20.000 customers. This did not go down well with Government that wants to reorient the Rwanda economy into a knowledge-based one.

Interestingly back in 2003, when President Paul Kagame talked to Mr. Wyler about a $50-million government project to give schools Internet access via satellite. Mr. Wyler explained to The Wall Street Journal in August last year that he told the president the deal was overpriced and that satellite Internet access was slow and unreliable.

In July 2006 the rosy relationship was not about to continue. Terracom announced a share-swap deal with telecommunication giant GV Telecom Ltd, with reports indicating that after the swap - operations would switch from Terracom's unique CDMA system to GSM.

Hardly a week away, Energy and Communications State Minister Ing. Albert Butare declared the deal "null and void" - citing none compliance to contractual agreements. The Minister said Government was "not consulted". In the Wyler-Government deal, the authorities retained decisional authority over any undertakings by the company.

Mr. Butare accused Mr. Wyler of running Terracom from the United States, visiting Rwanda just a few weeks at a time. Mr. Wyler left day-to-day management to a poorly trained staff. This often left the customers complaining from the bad services.

A few weeks later, Mr. Wyler and Minister Butare agreed behind closed doors to have the former hand over recurrent management of the company to Mr. Christopher Lundh as new chief executive.

Mr. Lundh - a former executive of Gateway Communications in London who has worked in several African countries has also pointed fingers at Government saying it simply "over reacted" on several issues.

Last June, the government fined Terracom nearly $400,000 for failing to comply with its licensing obligations, failing to provide information about its operations and failing to pay several fees.

In a July 22 New York Times (NYT) article, Mr. Wyler said "Terracom has done everything it can, ". Adding: "Because of the technical challenges, the Internet service is as good as it's going to get. But given what we started from, I still think we have accomplished a lot. In the beginning there were a few people with Internet service; now there are thousands."

Mr. Wyler said though that he would not address the government's criticism, saying he did not want to be quoted as saying anything negative. But added there were some things he had not anticipated, particularly the technical challenges of linking Rwanda's Internet network to the rest of the world.

Cited in the same NYT article as well, Mr. Lundh who has been in the country fulltime said the Rwandan government is to blame for some of the delays.

"We would get to schools that don't even have electricity or computers," he said. "That is not our fault." In addition, he said that many of the complaints about the company concerned things beyond its ability to control. Getting adequate bandwidth remains a constant challenge.

"The contract signed between the two parties was very clear that no other black deals can be carried out on the sides; if anything is done the trap in the contract will catch whoever messes up," President Kagame told journalists in August 2006.

He went on; "There are the technical and financial offers that I believe are so crucial; we could have sold it (Rwandatel) and have money and we call that the end of the deal, but we also thought of the technical part in purposes of communication."

The President said the technical components include standards, increase of access to communications and affordability - maintaining that the technical components outweighed the financial gains.

"I would even have given it out free if only I was sure of the long term achievements," he asserted.

As the Terracom-Government debacle continued coupled with the methane gas drawbacks, Mr. Kagame recently said government would "throw out" non compliant investors "until the right one is found".

(Source: Rwanda News Agency)