MTN Rwanda Plc’s profit after tax fell by 307.1 per cent in the first half of 2024 to a loss of Rwf10.5 billion, despite posting a 7.5 per cent growth in total subscriber base to 7.5 million in the same period. Rwanda’s leading telecommunications firm said in its latest financial statement that this was due to increased depreciation and pressures on earnings before interest, taxes, depreciation, and amortisation (EBITDA). According to the firm, EBITDA, a metric for earnings from core operations, decreased by 29 per cent year-on-year to Rwf39 billion in H1, while EBITDA margin, which reflects profitability from core operations as a percentage of revenue, decreased by 13.8 percentage points to 31.3 per cent. MTN Rwanda also blamed the dip on the zero-rating of local mobile termination rates (MTR) directive put in place by the Rwanda Utilities Regulatory Authority (RURA) in August 2023. “We added about 500,000 [total] subscribers, and increased our subscriber base for mobile money by 15 percent. But our data subscribers was a little bit flat,” MTN Rwanda's Chief Finance Officer, Mark Nkurunziza, told The New Times in an exclusive interview on Wednesday, at the firm’s headquarters in Kigali. MTN Rwanda’s active data subscribers increased slightly by 0.6 per cent to 2.3 million, while active mobile money subscribers increased by 15 per cent to 5.1 million in the period under review. ALSO READ: MTN Rwanda's half-year net profit declines by 307% Zero rating weigh on earnings Despite an increase in traffic, Nkurunziza argued that the decline in earnings was largely hinged on the RURAdirective to cut local mobile termination rates to zero. This, according to him, continues to negatively affect MTN Rwanda’s financial performance, particularly voice revenues. “Our voice revenue was significantly affected and reduced by about 24 per cent year-on-year, mainly due to the regulatory directive from August last year (2023) to zero rate mobile termination rates,” he noted. The change of rules in MTR was introduced last year by RURA, which dictated that telecommunication companies would not get paid for calls received on their network from other networks in Rwanda for a period of one year. RURA introduced interconnection rules in August last year saying it was a step in the right direction to end the long-standing high charges among telecom operators. This is not the first-time interconnection rates were revised. Previously RURA revised down interconnection rates to level the playing field for the telecommunication market. “The rates that local partners or local operators pay each other had a significant impact on our revenues. Our voice revenues declined, and also had an impact on the pricing structure in the market. That led to a significant decline in voice revenue,” Nkurunziza said. MTN finance chief did not mention to what extent MTR ate into the company’s revenue. However, he had told this publication that MTR translated to about 18 per cent of overall voice revenues in the first quarter of 2024. ALSO READ: MTN Rwanda explains drop in earnings, projects better growth According to the firm’s financial statement, additional financial pressures stemmed from increased costs related to One Network Area (ONA) traffic for permanent roamers in South Sudan and Uganda. “We have a big community of Rwandans in those countries (South Sudan and Uganda), and because of the zero rating, traffic from MTN and Airtel increased investments significantly to accommodate the flow,” the CFO explained. “Yet, we don't get any revenues from that traffic, but we still pay a termination rate to those operators. So that also resulted in a decline in our earnings.” Talks under way According to MTN Rwanda executives, there are ongoing talks between the regulator and industry players to see that a win-win solution is reached. Nkurunziza claimed that the regime of zero rating has not been economically viable for shareholders. “We don't get that incoming revenue, yet we are increasing our investments in the network to accommodate the traffic growth. Obviously, there are also some forfeited revenues for the government, because once you have a decline in your revenues the taxes too are decreasing,” he asserted. When pressed for details on the ongoing discussions, he said, “I think the regulator is aware of that and we expect some solutions after the study. The solution is to return value in the market.” Nkurunziza said that there have been “a lot” of value distractions particularly for the pricing mechanism, even at a point where the firm is selling at a lower production cost than what it is offering. “That is a problem. We believe that a win-win situation should come through once the study is complete. And reinstate the mobile terminating rate,” he said. The telco’s finance chief also blamed the sharp decline on depreciation, mainly on the resettlement of prior accounts. “Depreciation costs increased because we invested heavily in the network over the last 12 months. We have been investing a lot, putting up sites to have coverage, and to increase the capacity,” he noted. Nkurunziza pointed out that the just-concluded campaign and election period where the firm contributed to ensuring the quality of mobile services. “Those are the main areas that affected the profitability in the first half of the year, but in the coming second half, we project to turn it around,” he said.
