Altech's 10% investment in The East African Marine System (Teams) will link its African telecommunications businesses with the bandwidth they need.
According to CEO Craig Venter, speaking at Altech's results presentation last night, the investment is in line with the company's strategy to maintain an annuity revenue over revenue generated through hardware.
The company generates annuity through its subscription-based services, such as Altech Autopage Cellular and its Netstar division. The company also sells backhaul capacity to businesses in Africa.
Venter added that the company is uniquely positioned to capitalise on international connectivity through its investment in undersea fibre optic cables. While the company did not disclose the value of the investment, Venter says the revenue should become available as of next year.
Teams' 4 900km, 1.28TB submarine cable network, linking Kenya and the United Arab Emirates, is expected to be the first of the African cables to land. The IDC research group says the cable should be in operation by the end of 2009 and will cost around $82 million.
Altech joins Alcatel-Lucent as an investor in the project. Alcatel-Lucent signed a $79 million turnkey contract, last year, with Teams.
“We are now in a strategic position to link the African countries that we have invested in using the undersea cable. It will give us the bandwidth we will require to provide broadband services in those countries, which will replace the satellite services they are bound to at the moment,” added Venter.
The cable investment joins Altech's decision to acquire a 51% stake in Kenya's Sameer ICT group, which includes Kenya Data Networks, Swift Global and Infocom.
Venter added: “This investment has placed Altech East Africa as the leading data operator in the region and has supported Altech's globalisation strategy; in particular, our focus on the African continent.”
India wants decoders
The company also indicated it has had a significant increase in revenue, up to R800 million, generated by its foreign operations.
According to Venter, the primary generator of the international revenue is its multimedia business, Altech UEC. “The majority of our international revenue comes from UEC, with operations in 48 countries and its healthy business in India.”
The company made a significant investment in getting an Indian operation off the ground this year. “We are happy to allow the margins to drop for this one, because we believe the demand for set-top boxes in India will justify the investment.”
Altech UEC has already shipped 500 000 set-top boxes to the Indian market and, according to Venter, the country is looking for an additional million devices over the next year. “Now that we have accessed the market, we expect the area will start growing. The UEC business will show far better results in the second half of this year.”
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