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FibreCo awards R5bn deal to ZTE

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 23 Sept 2011

Chinese telecoms firm ZTE has been tasked with building a R5 billion nationwide 12 000km fibre network by FibreCo Telecommunications, a joint venture between Cell C, Convergence Partners and Internet Solutions.

The local telecom sector's use of Chinese companies such as ZTE and Huawei, to roll out communications infrastructure, previously sparked criticism from civil society that the companies are exploiting foreign nationals and not transferring skills to local workers.

Both companies are involved in rolling out mobile infrastructure for SA's cellular operators. ZTE has a R2.9 billion contract to upgrade Cell C's network, while Huawei provides equipment to MTN, Vodacom, Neotel, Telkom and Cell C.

ZTE has been accused of illegally bringing in Chinese foreign nationals to work on its projects, and has twice been the subject of raids by Home Affairs, which has led to several arrests.

However, this new project is expected to benefit local companies, as between 70% and 80% of the work will be parcelled out to South African construction firms.

In addition, skills transfer is a key requirement of the deal, and at least 100 technicians will be trained to maintain the network throughout SA so that people do not have to relocate to fulfil that function.

The project will be rolled out in phases, at a total cost of R5 billion. Work on the initial leg of the first phase, a 1 900km cable that will link Johannesburg to Cape Town through the Free State and Eastern Cape, has already started.

Connectivity boost

FibreCo chairman Andile Ngcaba says the “landmark investment will provide affordable, reliable and fast Internet access to ordinary South Africans”.

The open-access network will be built over five years and will eventually span 12 000km, linking metropolitan areas across SA.

The first phase is a 4 500km redundant core ring linking Gauteng, Cape Town and Durban to international cable landing stations, which will be completed by the end of next year. The next two phases will see additional routes across SA and linking neighbouring countries.

FibreCo expects that the entire first phase will create 2 300 direct and indirect job opportunities. The company will also facilitate training of at least 100 fibre-optic technicians, to be certified under the internationally recognised Fibre Optic Association, who will be involved during construction and maintain the network.

FibreCo CEO Arif Hussain explains construction will start on the other links, connecting SA's major metropolitan areas, within the next three to four months.

Hussain says the bulk of the investment will go into construction work, which will be handled by local contractors. “It's very much a construction project... It's not like we don't know how to dig a trench.”

ZTE will manage the project and has been appointed as a turnkey provider, says Hussain. He says the cables will be rolled out in phases, and the first link is expected to be available for use by the first quarter of 2013.

The entire project is expected to take about five years to complete, although the timeframe could be less than that, explains Hussain. “The construction capacity in this country is sufficient.”

ZTE is a specialist in optical equipment and invests in research and development, which is not available locally, notes Hussain. He claims the company is at the “forefront” of optical transmission.

The Chinese firm has 15 global research and development centres in the US, France, Sweden, India and China. It employs 30 000 researchers around the world who develop new products.

ZTE SA executive director Tumi Magasa says part of the agreement is that skills will be transferred. Hussain adds the network will require maintaining to ensure it is kept at carrier-grade level. This is a function that South Africans will fulfil in each province, he adds.

Super-fast

The open-access network has a theoretical capacity of 1 600GBps on each fibre pair, and there will be several fibre pairs, says Hussain. However, the user's experience in terms of speed will depend on what bespoke networks the telecoms operators build to access the infrastructure, he adds.

FibreCo is “creating a landscape where we can do things we don't even think about,” comments Hussain. Access to fast connectivity will change the way South Africans communicate, he notes.

The R5 billion investment is being funded by a combination of equity from its joint venture partners and debt. Hussain explains that securing customers upfront enabled the company to source debt.

FibreCo has also signed capacity purchase agreements with BT, Cell C and Internet Solutions, which allows them to own infrastructure and build bespoke optical transmission networks.

“We wouldn't be moving forward if the funding wasn't in place,” says Hussain. FibreCo will also offer access to the cable at “heavily” subsidised rates to academic and research institutions.

Hussain adds that the network will not compete with Dark Fibre Africa (DFA), which has laid cable between Johannesburg and Durban, and within metropolitan areas. He explains the companies will complement each other as FibreCo will not replicate DFA's work, but rather provide connectivity between metropolitans, which will drive traffic onto DFA's network.

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