Joint Venture Over?
On March 10, 2013, KT entered into a Memorandum of Understanding (MOU) with the Rwandan government to establish a joint venture aimed at constructing an ultra-high-speed wireless network based on 4G LTE technology.
According to industry sources on Sept. 4, KT recently filed a lawsuit against the Rwandan government, alleging unjust revocation of its 4G Long-Term Evolution (LTE) exclusive business rights. Through this, KT is understood to be seeking compensation from the Rwandan government for the revocation of their monopoly.
Previously, the Rwanda Utilities Regulatory Authority (RURA) announced its decision to revoke KT’s monopoly on June 19 to foster fair competition in the LTE market.
RURA stated, “Following the national bandwidth policy and strategy approved on Oct. 14 last year, we are revoking KTRN’s monopoly.” It added, “Along with this, we are also retracting the exclusive rights granted to KTRN for frequency usage. Furthermore, KTRN did not express intent for license renewal. KTRN can now operate in the open market competing with other operators.”
KT believes that the regulatory authority’s revocation of business rights breaches the shareholder agreement, considering that the joint venture, KT Rwanda Network (KTRN), was established to build LTE infrastructure. Initially, the Rwandan government granted KTRN an exclusive license to install and operate the 4G LTE network until 2038. Through this agreement, by January 2018 KTRN had successfully established an LTE network accessible to 95% of the Rwandan population. KTRN was jointly founded in 2013 with KT owning 51% and the Rwandan government owning 49%.
The issue is the entry of multinational operators into the Rwandan LTE market following the revocation of KT’s monopoly. Observers speculate that even if KT wins the lawsuit, it might not regain its dominant position.
South Africa’s MTN and India’s Airtel have already begun their LTE businesses in Rwanda. Both giants, with respective customer bases of 7 million and 4 million in Rwanda, are aggressively pricing their LTE services at the same rate as their 3G services.
Given the circumstances, there are allegations that the Rwandan government revoked the business rights to capitalize on the profits from the LTE network established by KT. Notably, KTRN turned profitable in the second half of last year and has been recognized for securing profitability locally.