The approval of the acquisition deal of Tigo Rwanda operations, a subsidiary of Millicom International Cellular S.A., by Bharti Airtel marks a new dawn operators and will help strengthen the telecom industry, according to experts.
Rwanda Utilities Regulatory Authority (RURA), the sector regulator sanctioned the merger of Tigo and Airtel on Tuesday January 23, in a move it says will lead to industry stability and also benefit consumers in terms of improved quality of services, scalability of services and innovation of product.
On December 18, 2017, Bharti Airtel, a leading global telecom services provider with operations in 16 countries across Asia and Africa, announced it had signed an agreement with Millicom International Cellular S.A to takeover Tigo Rwanda operations, the second biggest telecom firm in the country by market share.
“We have authorised the transfer of all shares of Millicom in Tigo Rwanda to Airtel Rwanda...This decision effectively approves the agreement which had earlier been reached between Millicom Group and Bharti Airtel Group, subject to the approval by RURA’s regulatory board,” RURA said in a statement released yesterday.
RURA added that Tigo and Airtel will continue to operate their network and services under Airtel Rwanda’s control until the telecom firm (Airtel) is issued a revised license.
Tigo customers assured
The takeover “will not affect the existing subscribers of Tigo Rwanda in any way,” said RURA spokesman Anthony Kulamba.
“They will instead continue to be served seamlessly during and after merger. Subscribers will not be required to change their existing Tigo telephone numbers and existing Tigo cash services will not be affected,” Kulamba explained. It is the primary responsibility of the RURA to protect the consumers during this process, he added.
Strong subscriber base
Airtel said, yesterday, that the merged entity will have the largest customer base in Rwanda with 5.05 million subscribers, according to RURA mobile phone user figures for November 2017.
“The combined networks of the two companies will serve customers with voice/data services, global roaming and mobile banking services. It will also have Rwanda’s largest sales and distribution network,” the firm said in a statement.
Rwanda’s mobile telecom market boasts of 8,707,584 subscribers as at November 30, 2017. The approval of the takeover by RURA means that Airtel will leapfrog rivals and market leaders MTN Rwanda, which has more than 3.65 million users currently.
On completion, the acquisition will undergo seamless integration, both on the customer, as well as the network side and further strengthen Airtel’s market position in Rwanda, according to the Airtel statement.
“We would like to thank RURA for their support during the merger process,” Airtel said.
With a presence in 14 countries across Africa, Airtel is one of the largest telecom service providers on the continent in terms of geographical reach, and had close to 84 million customers as at the end of December 30, 2017.
Globally, Airtel is ranked as the third largest mobile services provider in terms of customer base. According to the statement by Airtel, the merger will result in the only negative ebitda operation, joining other 13 positive ebitda operations in Africa. Earnings before interest, tax, depreciation, and amortisation (ebitda) is a measure of a company’s operating performance.
Commenting on the development, Philip Amoateng, the Tigo Rwanda chief executive, said that the approval paves way for the two telecom companies to start on the merger process. Airtel and Tigo have already merged their operations in Ghana. It also acquired assets in Uganda (Warid) and Congo B (Warid), Kenya (yu Mobile).
Takeover “good for sector growth”
The takeover brings new industry dynamics and is tipped to tighten competition in the two-horse race for customers as well as support the sector’s growth.
Victor Nkindi, a senior consultant at Hooza, a digital media firm, said the Rwandan market is small, adding that with only be two telecom firms remaining, this will boost their revenues.
“It is important that the two remaining players use more innovative strategies to keep or increase their base, especially by providing competitive services and products. This is particularly with regard to the low purchasing power of the majority Rwandans,” he said.
Rwandans have low average revenue per user (ARPU) of about $2 per month, which telecom firms say is hurting profits compared with other countries in the region. Kenya’s ARPU is at $6.2, Tanzania $4.4, and $3.5 for Uganda.
The low ARPU means that majority of mobile phone users in Rwanda are low-end subscribers, whose tendency to spend on mobile value added solutions is small, which depresses the effective rate of revenue realisation per minute for the operators. In addition, telecom operators have long complained about the slow growth of the industry, saying that three players are too many for a small market like Rwanda.
The problem is compounded by the fact that Rwanda has the lowest spend per customer in the region, making it hard for telecoms to maximise returns.
Nkindi urged telecom operators to lower service costs for data and voice, saying this will stimulate consumption and retain/increase customers. He added: “Implementation of number portability was still an issue, now with two players it can be a reality, enabling users more freedom.”