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Since 2003, the telecommunications sector has been operated by a duopoly: the incumbent Rwandatel (now the Terracom) and MTN. Terracom is licensed to offer all services and MTN will be shortly be authorised to do the same. Exclusivity on both licences will last until 2008 but there is apparently already talk in Government of finding ways to extend competition. Terracom maintains that its exclusivity extends five years goes from point of privatisation rather than for the initial licence granted Rwandatel.

Rwanda’s framing telecoms legislation describes processes through which operators can be identified as “dominant operators”. But as the wording of the legislation is fairly slight on this subject, it is hard to imagine much can be done. Understandably both operators would resist the process and the regulator RURA (see below) does not currently have the staff capacity to mount a challenge of this kind.

The regulator RURA first started operations in January 2003. It is a horizontal regulator (at the suggestion of the World Bank) covering energy, transport, gas and waste management. All its major decisions go to Government for ratification. But decisions not relating to the two major operators are taken by the RURA board. Longer term, its management would like to see its different regulatory areas separated off into separate commissions. With only a relatively small number of staff covering communications, it has a capacity problem when faced with introducing any of the major changes required.

There is also a licensed voice and Internet operator for the under-serviced areas called ARTEL (African Rural Telecoms), which is described later in this article.

Terracom has 20,000 fixed lines, of which 60% are in Kigali. Terracom was originally an ISP set up in 2003/4 set up by a group of four private investors. One is these is an American called Greg Thane-Wyler.

Terracom bought 99% of Rwandatel from Government when it was tendered for privatisation. 1% is still owned by different organisations in Rwanda and Terracom wants to buy this remaining shareholding out and merge two companies: the ISP and the former incumbent.

When it bought the two companies together it had a fixed line and ISP licence. In October 2005 the regulator RURA gave it a mobile licence, making it the second entrant in the mobile market. As its COO Garry Clark told us:”We’re trying to modernise how people see the company. Everything we do is now branded Terracom.” However most people we interviewed still refered to the company as Rwandatel. Staffing is now 400, down from 520.

Its current fixed line prices are as follows (exc VAT):

Local calls: RWF14 per minute in Kigali
Trunk: RWF 56 per minute
Fixed to mobile: RWF84 per minute

It has launched a fixed wireless service originally using CDMA IX provided by UTStarcom but now using Huawei phones branded EasyCall. Users get free calls between EasyCall customers and the most recent phones come with an EVDO card in them. Currently there are 3,500 customers but the Internet service has not yet been implemented as there are network capacity issues to be resolved. Once implemented, they will have a data capability of 156 kbps download.

As the phones are not locked to a single cell, they have been taken up by security companies and taxi companies and used as a “walkie-talkie”. It is also currently testing real “push-to-talk” with equipment supplied by UTStarcom.

It is planning to launch its mobile service shortly and anticipates that it will have 100,000 subscribers by the end of the year. It will charge RWF55 a minute against MTN’s RWF145 a minute. It will start with 50% population coverage and this will rise to 60-70% by September 2006.

MTN has just over 300,000 subscribers, 2% of which are post-paid. It anticipates the market growing to 1.5 million in five years time. But as Per Eriksson, CEO, MTN Rwanda told us:”The growth of subscribers is tied to the economic development of the country. If we get the economic development that’s potentially possible, that figure’s not out of the range.” One constraint on growth is the currently high retail prices. According to RURA’s Jean-Baptiste Mutabazi:”Prices are too high which means the market has not grown as quickly as it might have done.” MTN’s approximate average prices are:

Post-paid: RWF112 per minute
Pre-paid: RWF155 per minute

MTN covers about 80% of the population and is in all the main population centres. MTN believes that Terracom may take 30% of an enlarged market. According to Ericsson:”With a competitor, we will see price reduction. One of the things we’re doing is per second billing. They will probably be forced to do so.” However he believes it will be a while before Terracom catches up in terms of coverage.

SMS messaging is increasing by about 50% a year. Ericsson says:” Customers are using it more and more and we’re using it to drive new services. EVA will be introduced in June 2005”.

As everywhere in Africa, interconnection agreements have proved troublesome. Operators are about to sign an agreement for the following rates:

Mobile to Fixed: RWF30 a minute
Fixed to mobile: RWF40 a minute

Mobile (Terracom) to mobile (MTN) has not yet been decided but the regulator RURA is suggesting RWF40 a minute but the final figure is subject to negotiation between the two companies.

(Only two weeks ago the two companies were in an interconnection spat with MTN Rwanda denying that it was blocking calls from the Terracom network, saying only that it was waiting for the paperwork to be completed by regulator RURA)

MTN will start offering a fixed wireless service once its full-service licence is in place. Most of these lines will be delivered using Wi-MAX that it has already started putting in place for data purposes (see below). MTN is looking to achieve 10% data revenue in 3 years. Ericsson says:“If we do that, we will have done very well.”

Terracom’s infrastructure is based on a PONS network and MTN has 300 kms of fibre in Kigali. Terracom is currently putting in place a Kigale-Butare link and is linking 30 sites to the fibre including its own offices, Government facilities and banks. MTN Rwanda and MTN Uganda are building fibre to their respective borders and the two ends are meant to meet in 2007. Terracom is part of the EASSy backhaul group. According to Terracom’s Clark: “It’s no use signing the EASSy MOU without having a backhaul in place. But if EASSy comes, the whole market will change.”

The Government has signed a contract with the power utility Electrogaz to put fibre on electricity pylons. 1000 kms of 24 core fibre will be laid. The Rwanda IT Agency (RITA) which has overall responsibility for the project says that it will hand over ownership of this fibre to RURA. The aim is that it will offer it for free plus maintenance cost to those who want to provide services on the cable. However those close to the project say that there is as yet no clear pattern of implementation and that this is important because much of the planned power network only goes within 20 kms of towns and much of it traverses relatively unpopulated areas. However these issues notwithstanding, RITA says it will be completed two years from August 2006.

Both of Rwanda’s telecoms operators are involved in providing service to the eastern part of the DRC, including Bukavu and Goma. Rwandatel had a partnership with the DRC’s largely defunct incumbent OPCT that started under Rwandatel. Under this partnership, there are almost 1,000 fixed wireless subscribers (using the former Lucent system). As Clark tells it:” We give OPCT part of the revenue. They run it more than we do. They provide shops and maintenance”. MTN also has a small subsidiary called Supercell that operates in the same territory.

VoIP is not legal and whilst there is a grey market it is not very visible. The current duopoly licences allow MTN and Terracom to use and offer VoIP services as their licences are all-encompassing. Privately the regulator will admit that ISP licences should include the provision to allow VoIP and it would like to licence it widely. As Jean-Baptiste Mutabaza, RURA says:”You can’t block technology.” However the legalisation of VoIP by the regulator is still at the preliminary ideas stage with it looking at convergence as one route for resolving these issues.

The grey market is not immediately obvious. There are lots of cyber-cafes but few seem to be advertising international traffic. Terracom’s Clark reckons it to be “negligible” where MTN’s Eriksson says: “I assume there is a grey market. I would have expected a bigger increase in international traffic.”

The price arbitrage opportunity certainly exists. A Terracom fixed line call to Washington DC currently costs $1 a minute but it is looking to adjust that figure downwards. Its fixed wireless offer on EasyCall is US58 cents a minute and MTN’s rate is RWF472 (71 cents). Skype is being used both by individuals and a number of offices and the quality has got considerably better.

Current costs to Washington DC: Terracom: $1 per minute but looking to adjust downwards. Fixed wireless: 58 cents. MTN: RWF472 (71 cents)

A companyt called BCS runs a GSM public payphone network called Tuvugane (Let’s Talk). It offers per second billing. Launched in April 2004, it has 4,000 payphones and is the only company offering this service in Rwanda. It buys airtime from MTN and is offering the same service in Burundi (with Vodacom) and the east of the DRC (with MTN’s Supercell). The revenue is split as follows:

Phone partner: 20%
BCS: 13%
MTN: 67%

It charges RWF20 per unit (2.5 seconds) which works out at RWF150 per minute. In March 2006 it carried 2.5 million minutes. Its service partners are businesses and people financed by NGOs. There is a Genocide Fund and it buys phones for communities as it sees them as an income-generating source for local people.

Payphone coverage is currently reaching saturation point in Kigali and BCS isnow going to the rural areas. It encourage partners to do site research and has payphones in places like hospitals and schools. As BCS’s Chief of Operations told us:”It’s a business opportunity. We have offices all over the country selling and servicing the payphones”.

It has a call centre business which is used to service Tuvugane and its taxi business as internal clients. It is looking for other companies locally to develop a customer portfolio for the call centre.

And the business is set to continue to expand. Kagabo says:”MTN want us to develop the vending part of its recently launched GPRS service. We are finalising EVD (Electronic Voucher Distribution) system and talking to Electrogaz, the banks and MTN about mobile banking. We are creating a specific IT division in BCS to support the delivery of VoIP but as this will be a threat to Terracom and MTN if we do it ourselves, we will team up with one of them to do it.”

In terms of universal access, there is a Presidential order that says each operator has to pay 2% of their turnover to it, exclusive of taxes and interconnect fees to create a Fund to be used to connect rural areas. According to Jean-Baptiste Mutabaza, RURA:” We are currently investigating areas to see what to do. There’s a call for tenders to be issues and we look at a combination of cheapest price and technical issues”. Thus far it has subsidised a single organisation, ARTEL for 44 sites in 2004. However RURA keen to expand the pool of possible service providers in this area.