Cape Town, 04 Sep 2008
Vodacom, Telkom, MTN, Broadband Infraco and Neotel last night signed a deal worth more than $400 million (about R3.12 billion) to build a 5.1Tb cable on the West Coast of Africa that will supplement the current SAT-3 system.
A memorandum of understanding, signed by all the parties, takes what is currently called "Cable-X" and makes this the de facto system. This will ensure the country's international connectivity costs tumble and the savings are passed on to consumers.
Using the traditional telecommunications model, the financial structure will see all parties contribute an equal amount to the project. This will give them an equal share of the capacity.
The cable will be renamed and three alternatives were presented at last night's meeting. The first is African Cable Enterprise, the second is West African Cable System, and the third is Fusion, symbolising the concept of the five shareholders coming together.
The cable will stretch from Telkom's Melbosstrand landing station, just outside Cape Town, and terminate in Europe.
The next step for the parties is to form a joint venture company, and sign a construction and maintenance agreement that will detail the construction timeline, set an operational date and appoint a company to survey the route and build the cable.
It is planned that the cable will land at as many African countries on the West Coast as possible. The new joint venture will enter into negotiations with the representative telecommunications operators. In some countries, the participants already have landing rights such as those that have already been granted to Telkom and MTN by Nigeria.
Replacements, exclusions
Sources close to the negotiations say this deal effectively combines what Broadband Infraco, championed by the Department of Public Enterprises (DPE), was trying to achieve, but failed to because of its cumbersome financing structure.
It also replaces Telkom's SAT-4 cable project, which it had been planning for some time, and would have been modelled on its previous systems, such as the current SAT-3 system.
The deal also excludes any other international player making a move to link up one of the fastest growing telecommunications markets in the world - the African hinterland. US Internet giant Google was in discussions with some of the individual parties, but these talks have now ended.
A press release announcing the joint venture is expected either later today or tomorrow, following a briefing by the joint venture to the Department of Communications (DOC). The meeting is taking place as this story is published.
Senior government sources, who do not want to be named as the official announcement is not ready yet, say this joint venture meets the objectives the presidency and the DPE have set in terms of reducing connectivity costs. However, it effectively snubs the DOC's own pet project, Uhurunet, which aims to encircle the continent with fibre optic.
Filling the gaps
Twelve countries, 10 of which are Southern African Development Community members, have signed the protocol governing Uhurunet, but only six have ratified it.
During a parliamentary press briefing yesterday, DOC deputy director-general for ICT infrastructure Keith Shongwe said Uhurnet was making progress.
He said representatives from Nigeria and Kenya were due to meet with the Uhurunet consultants, the US company 5P, within the next day or two to sign a memorandum of understanding over their participation.
"The objective of Uhurunet is to fill in the gaps between the different cable systems," he said.
However, the new joint venture has expressed its intention not to keep any stake open for Uhurunet. At last night's meeting it resolved that if any DOC-led organisation should participate, then it should be national signal distributor Sentech and that its stake must be fully funded.
"For what ever reason, the DOC tried to muscle their way and found that instead they got muscled out," one of the participants in last night's meeting said.
Related story:
Google eyes cable as Infraco flounders
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