By Jacques Leroueil, Kigali
THE STOCK ADVENTURE OF CRYSTAL TELECOM HAD BEGAN BEAUTIFULLY BEGIN. WHEN CRYSTAL VENTURES, THE FINANCIAL ARM OF THE RWANDAN PATRIOTIC FRONT, BASED ON THE POWER OF PRESIDENT PAUL KAGAMÉ, ANNOUNCES IN MAY 2015 THAT IT IS OFFERING THE FULL TITLE OF ITS SUBSIDIARY CRYSTAL TELECOM, THE NEW ONE IS RECEIVED WITH ENTHUSIASM BY INVESTORS.
Successfully introduced to the Kigali Stock Exchange in 2015, Crystal Telecom is now looking for a second wind: between the regulatory mishaps of MTN Rwanda, its unique asset, and the dissatisfaction of its shareholders, the company must regain lost trust.
Held in Kigali on May 22, the general meeting of shareholders of Crytal Telecom – the publicly traded investment vehicle that houses 20% of the capital of MTN Rwanda – was this year the scene of many challenges. And for good reason: the company registered for the year 2017 an unusual loss of 1.772 billion Rwandan francs (2.08 million dollars) because of several fines imposed by the Rwandan authorities.
penalties
It is the Authority of regulation of the public services (RURA) which launched, in April 2017, the first procedures against the firm telecom for non-respect of its engagements of license [1] before the tax administration does not fit him the pace, this time accusing MTN Rwanda of having reduced its tax returns for several years. In total, it is a cumulative amount of 15.5 billion francs (18.2 million dollars) that the operator – who decided to appeal in both cases – could be required to pay.
In turn, it is the shareholding of Crystal Telecom that could be impacted. For Lionel Musinga, financial analyst at African Alliance in Kigali, “these are potentially burdensome consequences that send a very bad signal to the investment community, which attaches great importance to compliance.” Contacted, the management of Crystal Telecom did not wish to speak publicly.
The financial sword of Damocles that hangs over MTN Rwanda has in any case heavily weighed on the share price of Crystal Telecom, over the past year: on the Kigali Stock Exchange, the shares of the company traded end of May around 55 francs against 90 francs in early 2017. A drop of almost 40%, and this is added to the non-payment of dividends this year. Shareholders have a hard time cashing. Jean de Dieu Bizimana, a Kigali entrepreneur active in the hospitality sector, is one of them. After learning about the first stock market successes of Bralirwa and the Bank of Kigali – the two main domestic securities of the Rwandan coast – he decided in March 2017 to bet on the future of the country’s largest telecom operator, buying 50,000 shares for a stake of 4.5 million francs ($ 5300).
Disappointment
Fourteen months later, it’s a disappointment. “I was definitely hoping for a better stock market performance but it is primarily the company’s negligence (MTN Rwanda) vis-à-vis its regulatory obligations that makes me the most angry,” says our interlocutor, disappointed. In keeping with this feeling of exasperation, many of the small investors directly questioned the management team of Crystal Telecom at the time of the AGM about the shortcomings attributed to the Rwandan subsidiary of the South African telecoms giant. “An uncomfortable position for the management of the firm,” decrypts Lionel Musinga since “it is caught between the small carriers, who make him responsible for these negative development, and the direction of MTN Rwanda, which sees Crystal Telecom as the minority shareholder (the parent company, MTN, holds 80% of the capital of the Rwandan operator) without effective power “.
Initial Public Offering
The stock market adventure of Crystal Telecom had started well. When Crystal Ventures, the financial arm of the Rwandan Patriotic Front (RPF, see box below), announces in May 2015 that it sells all of its subsidiary Crystal Telecom, the news is greeted with enthusiasm by investors .
The company made its entry on the Kigali stock exchange on July 16, 2015 and saw its share close its first session at 144 Rwandan francs ($ 0.16), up 37% from the initial subscription price of 105 francs ( $ 0.12). A price that then values Crystal Telecom at $ 50 million (against less than 25 million today). “After this initial phase of IPO, the volumes of exchange on the value have however quickly dried up”, recalls Olivier Muneza, broker at MBEA Securities in Kigali, for whom “many investors have understood late the limited potential of the title. Compared with the brewer Bralirwa and the Bank of Kigali, which have strong positions in their respective fields, Crystal Telecom is facing a mature and more competitive telecom environment, comparatively less profitable, “explains the market operator. A judgment that seems to echo what (already) said in 2015 Crystal Ventures on the subject. In the prospectus issued at the time of the IPO, the Rwandan fund recalled that “the sale of Crystal Telecom is an integral part of [Crystal Ventures] ‘strategy to monetize its mature holdings in order to redeploy the capital generated in new sectors. […] “. Clearly, “Crystal Ventures sells its holdings that have exhausted their growth potential. Crystal Telecom is one of those, “says Olivier Muneza.
Patience
The value continues to be favorably viewed by many analysts. George Mutabazi, a telecom consultant, points out that the poor performance of 2017 is only “a mishap” and is therefore “not representative of the operator’s performance history [MTN Rwanda] “. Marc Twahirwa, an analyst at Faida Securities, believes that it would be “premature to make a final judgment on the performance of Crystal Telecom, the MTN operator has not ceased to reinvent itself over time to find new growth drivers”.
The presentation of Crystal Telecom’s 2017 annual results in April confirmed that the operator still enjoys strong organic growth. “Notwithstanding the effect of the fines, MTN Rwanda recorded a good performance (+ 6% for the overall turnover) in all its business segments. A trend that should continue with the continued expansion of the market and the first beneficial effects of the consolidation of it (Airtel Rwanda bought end of 2017 Tigo Rwanda, bringing to two the number of operators in Rwanda), “recalled Iza Irame, the CEO of Crystal Telecom, in a statement. As for Jean de Dieu Bizimina, despite “his initial disappointment”, he continues to believe that “Crystal Telecom remains a beautiful value, and that in the long run, his patience will eventually pay.”
By Jacques Leroueil, correspondent for Kigali.
Crystal Ventures, the powerful fund of the RPF
Introduced on the stock market in July 2015, the launch of Crystal Telecom, has consecrated the end of a great adventure for the Crystal Ventures fund, present in the capital of MTN Rwanda since 1998, alongside the South African telecom giant MTN .
Neither sovereign fund nor investment fund in the classic sense of the word, Crystal Ventures is a state in the state. Launched in 1995, it is entirely owned by the Rwandan Patriotic Front (RPF), the current ruling party of President Paul Kagame, and today would have assets valued at over $ 500 million.
Apart from telecoms, Crystal Ventures is active in construction, real estate, agribusiness, aviation and private security services.
