Wrong on Rwanda's Third License - Or Were We?

Full Research Note - Download 12 02 08 RN Rwanda License

On November 15, the Rwanda Utility Regulatory Authority (RURA) announced that Millicom SA had emerged as the preferred bidder for the country’s third mobile license. Millicom bid of $60m, $4.5m higher than the next bidder, Telecel Globe. We had argued in a separate research note that based on fundamentals alone, this license was not worth more than $20m. So what do we have to say for ourselves?

 

The first possibility is that our initial valuation was wrong, potentially underestimating a number of key license elements. This would also mean that the resiliency of African mobile market is more remarkable than even we have previously assumed.

Our preferred view is that this license is overvalued. This would suggest that fundamentals matter little when it comes to valuing African mobile assets. If so, the African mobile market is still in the midst of an overvaluation bubble that looks increasingly anachronistic.