KT is understood to have entered international arbitration after attempting to pull out of its 4G LTE (fourth-generation mobile communication) infrastructure project jointly pursued with the Rwandan government. The overseas telecom infrastructure project, which started on the basis of a 25-year exclusive right, has turned into a dispute over policy changes in the country and the recovery of investment funds.
According to the industry on the 22nd, KT exercised a put option on all of its equity in KT Rwanda Networks at the end of March under a shareholders' agreement signed with the Rwandan government. A put option is the right to sell one's holdings to the counterparty under specified conditions. An industry official familiar with KT said, "Due to the Rwandan government's objection, arbitration proceedings are underway under the jurisdiction of an international arbitration body in Mauritius, and the outcome is uncertain."
KT Rwanda Networks is a consolidated subsidiary of KT that installs and manages networks in Rwanda. KT's equity stake is 51%. As of the first quarter of this year, the company's asset was 116.38 billion won and liability was 159.31 billion won, with liability exceeding asset. During the same period, revenue was 5.247 billion won, and the quarterly net loss was 4.521 billion won.
KT's Rwanda project began in 2013 as a public-private partnership with the Rwandan government. At the time, KT invested in a joint venture to build a 4G LTE broadband network in Rwanda, while the Rwandan government provided the fiber-optic network, spectrum, and a wholesale-only business license. In the early stages, it drew attention as an overseas infrastructure export case that built a high-speed wireless internet network for the majority of Rwandans. The key was exclusivity. The joint venture was said to have been granted exclusive spectrum usage rights for 25 years while handling the construction and operation of the LTE network. Because telecom network investments require a long time to recoup, long-term exclusivity was the core premise of the business case.
However, the business foundation was shaken as Rwanda's telecom policy changed. In 2023, the Rwanda Utilities Regulatory Authority decided to remove the exclusivity related to 4G and higher-technology services granted to KT Rwanda Networks. The decision stated that the existing license did not align with Rwanda's national broadband policy and current information and communications technology (ICT) regulations.
With the exclusivity gone, local telecom companies and other operators in Rwanda were able to build and operate 4G networks directly. KT Rwanda Networks' status as a wholesale network operator inevitably weakened. KT's exercise of a put option on all of its equity is seen as not unrelated to these changes in the business environment. In the telecom industry, the Rwanda case is viewed as highlighting the policy risk of overseas telecom infrastructure projects. Given that spectrum and network permits hinge on government decisions, overseas investments premised on long-term exclusivity can see their revenue structures heavily disrupted by changes in local regulations.
This arbitration is expected to determine how much of its investment KT can recover from its overseas telecom infrastructure business. With the local entity in a capital impairment state and the Rwandan government disputing the very exercise of the put option, the amount KT can recover depends on the arbitration outcome. Depending on the result, it may also be necessary to reassess the value of the related equity or the recoverable amount.
KT's put option amount, arbitration claim amount, and expected timeline have not been disclosed externally.