South Korean telco incurs losses over low 4G Internet uptake

Monday November 5 2018

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According to KtRN,Currently  Rwanda has the highest 4G spread in Africa, but also the lowest penetration.PHOTO | Cyril NDEGEYA 

By MOSES K. GAHIGI
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Uptake of 4G Internet in the country is still low leading to losses for the sole provider of the network Korea Telecom Rwanda Networks (KtRN).

Rwanda Today has learnt that KtRN has so far incurred a total loss of Rwf63.7 billion in the past three years, according a report compiled by the United States Securities and Exchanges Commission.

However, the management of KtRN attributes the low uptake to higher pricing by retailers. Hansung Yoon Patrick, the CEO of KtRN said retailers are charging exorbitant prices for the product, which they get at a low wholesale price.

Internet service providers, he argues, including the two telecoms MTN Rwanda and Airtel have been overcharging customers, which has made 4G expensive, affecting wider adoption.

For instance, a 5GB of 4G data that KT sells at a wholesale price of Rwf9,000 is sold at Rwf16,000 by Airtel, and Rwf18,000 by MTN Rwanda. A 4G package that KT sells at Rwf12,000 is sold at Rwf35,000 by Airtel and Rwf50,000 by MTN Rwanda.

Big difference

“The big difference between the 4G wholesale price and the retail price is a big issue and it has discouraged migration of many people to 4G. I even wonder how customers accept these prices,” said Mr Hansung.

The 4G LTE now covers 96.6 per cent of the country, but the resource is still largely redundant. “Right now Rwanda has the highest 4G spread in Africa, but also the lowest penetration. This pauses a problem and from a company perspective we are losing money,” he said.

Mr Han-Sung said the lack of Virtual Network Operation (VNO) has kept data prices high forconsumers, which if given a green light by the regulator can make things better.

VNO is a mechanism where an entity does not own a telecom network infrastructure, but provides telecom services by purchasing capacity from telecoms. The company has engaged the government on this issue, but no response has been given yet.

“If we continue like this, we might have to cut costs by closing some operations in the rural areas, but this would be the last option, we have to exhaust options of increasing revenues,” said Mr Han-Sung.

Mobile phone operators deny overcharging consumers, saying the margins they make are reasonable. “We don't make much on 4G. It is expensive for MTN to buy 4G and until recently 4G was even making losses for MTN Rwanda.

Additional costs

With the new tariffs our average gross margin on 4G is still less than 25 per cent. Out of the gross margin we pay marketing, sales, distribution, customer care etc, the gross margin is closer to 20 per cent,” said Bart Hofker MTN Rwanda CEO.

Mr Hofker said 4G is generally more expensive for customers because it comes with additional costs.

“Customers also need an expensive 4G smartphone; smartphone penetration even on 3G is still low. Fortunately, we see now a rapid increase in 3G-smartphone penetration.There are different phases the mobile market will go through,” Mr Hofker said.

Efforts to get a comment from Airtel were futile by press time. However, 4G infrastructure is facilitating investments in the country’s information, communication and technology sector with IT start ups and academic institutions opening shop.

Recent entrants to the market include IT Company Andela, which trains software developers, and is opening a new hub in Rwanda this year. It is targeting to train at least 500 Rwandan software engineers.

Ghislain Nkeramugaba, a technology expert attributes low 4G uptake to limited content production. Businesses, he argued, need to develop local content in key sectors to make use of the 4G infrastructure.

“The entertainment sector is still under-developed and this is a big factor. Innovations and development of local content can drive 4G going forward,” he said.