Rwanda: MTN Rwanda Turns to Banks to Fund Rwf91 Billion RURA Licence

MTN Rwanda has concluded its license renewal process with Rwanda Utilities Regulatory Authority (RURA), the telco confirmed in its half year statement.

The previous license expired on June 30 this year and the new one taking effect from July 1, 2021.

The 10-year license cost the telecom operator Rwf91 billion with the firm making a payment of 70 per cent, about Rwf64 billion. The remaining 30 per cent will be paid by July 2022.

According to the firm, the license fee along with MTN Rwanda's ongoing operational and investment requirements were funded by cash generated from operations and supplementary funding from local banks.

The New Times understands that MTN Rwanda is acquiring Rwf64 billion in a loan syndicated by 10 Rwandan banks to raise the cost of the licence. A syndicate is formed when a lender invites others to service a client's request for a loan.

In a recent interview with The New Times, Yolanda Cuba, the MTN Group Regional Vice President Southern and East Africa had expressed preference for debt as opposed to capital markets when seeking financing noting that it does not dilute shareholding.

"If there is ever a need to raise capital, we always look at it in terms of the context of the capital structure of the company at that point. What tends to happen is that debt is quite cheap compared to equity as it does not dilute our shareholding," she had said.

Charles Gahungu, General Manager ICT Regulation Department at RURA told The New Times that the license renewal process includes technical evaluation to assess a Telco's plan, business plan which informs an analysis of the license fee to be paid.

The license renewal cost will have an implication on dividend pay-out for shareholders.

In their half year financials, MTN Rwanda noted that their medium-term guidance provided a target minimum dividend payout ratio of 50 per cent of distributable net income.

"This was with the exception of 2021 where a pay-out ratio of at least 30 per cent was targeted in anticipation of the license renewal conclusion. Given the timing of the conclusion of the renewal process and fee payments, MTN Rwanda made an actual dividend pay-out of 50.4 per cent of its 2020 distributable net income, in July 2021.

The company will thus continue to target a 50 per cent pay-out over the medium term, with the exception now revised to 2022, where the aforementioned pay-out ratio of at least 30 per cent will now be targeted," the statement read in part.

The firm's debt to equity ratio stands at 37: 63 with external financing sourced entirely locally.

The debt to equity ratio is a measure of the contribution of the creditors and shareholders in the capital employed in the business. In this case, shareholder's capital is still dominant.

MTN Rwanda had in 2018 secured a Rwf50 billion loan from a syndicate of eight local banks with proceeds earmarked for expansion and modernization of the network and related IT systems.

MTN Rwanda reported an after tax profit of Rwf14.2 billion in the first half of 2021 compared to Rwf9.3 billion in the same period last year.

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