Private investors sign up for stake in cable project

http://www.bdafrica.com/index.php?option=com_content&task=view&id=6661&Itemid=5847

March 27, 2008: The construction of the undersea fibre optic cable that is to connect Kenya to the world of high speed Internet has received a big boost with the signing of an agreement that paves the way for the private sector to contribute to its financing.

The agreement which makes the signatories co-owners of the East African Marine System project with the Government, was signed last week even as the new shareholders forced out two prospective buyers.

The new shareholder agreement leaves Safaricom and the Government of Kenya as the anchor shareholders with a 20 per cent stake each in the project and Wananchi Telecom with 10 per cent. Kenya Data Network and Celtel jointly acquired a 10 per cent stake in the company while France Telecom  and Econet Kenya have a 10 per cent share each.

Jamii Telkom got four per cent although it had initially expressed interest in buying 3.75 per cent.

Two firms, Gilat Satcom and Internet Research, a Ghanaian company, were knocked out of the ownership agreement for failing to meet the 20 per cent local representation requirement. Each had expressed an interest in acquiring a 1.25 per cent stake.

The identity of two local companies that had expressed interest in the project remains unknown. The companies are, however, said to be associated with Brian Longwe, a Kenyan IT sector businessman.

The signing of the shareholder pact, also known as an Escrow agreement comes after the Government  signed an initial shareholder agreement with Etisalat of United Arab Emirates.  

The Government paid 12 per cent of its total 85 per cent ownership in the cable. Etisalat also made a down payment of $1.2 million to cover 12 per cent of its total 15 per cent ownership of the cable.

These two payments gave Alcatel-Lucent, the company that won the tender to build the cable from Fujairah to the port of Mombasa .

Manufacturing the cables was  to begin on March 15, this year, but started three days later. Information ministry Permanent secretary, Bitange Ndemo, said Alcatel-Lucent has appointed a team to oversee construction.

The timeline for the TEAMs project indicates that it should be ready by the second quarter of next year.

Other than TEAMs, two other fibre optic cables, SEACOM and EASSy are competing to connect East Africa to the global network of highspeed internet.

EASSy concluded financial closure in the last week of February having raised $248 million that enabled it to make a down payment to the contractor Alcatel-Lucent.  According to the EASSy secretariat, the first phase of construction kicked off on March 14, this year and is expected to be ready in the first half of 2010.

The EASSy cable will run 10,500 kilometres from South Africa, through Mozambique, Madagascar, Comoros, Mayotte, Tanzania, Kenya, Somalia, Djibouti and Sudan.
Thirteen land locked countries will also be linked to the system through terrestrial backbone networks.

This includes, Bostwana, Burundi, Central Africa Republic, the Democratic Republic of Congo, Chad, Ethiopia, Lesotho, Malawi, Rwanda Swaziland, Uganda, Zambia and Zimbabwe.

Jamii Telecom Limited, a subsidiary of the AdGroup of Companies' investment in TEAMS project is meant to complement its Metro Fiber Network whose construction began last year.

Technology company AccessKenya has a 1.25 per cent stake in the project and aims at increasing its bandwidth capacity 10 times. Access Kenya is yet to disclose the amount of money it plans to pump into the project.

So far Jamii has spent more than Sh500 million on the Nairobi Metro Fibre –– targeting a market that is currently dominated by Telkom Kenya and Kenya Data Networks (KDN) ––and plans to spend additional Sh700 million in the network.

By buying into TEAMS, Jamii and Access Kenya hope to provide terrestrial connectivity that will ultimately hook consumers to the global network of high speed Internet.

John Kamau, the general manager at Jamii said the firm hoped to leverage on the National Fiber Optic backbone to enhance international connectivity.

Kenya's information communication technology (ICT) sector is expected to grow tremendously once the fibre optic cables are up and running.

The cables will stop reliance on the more expensive satellite technologies, bringing down costs and attracting new players especially in the Business Process Outsourcing, call centres, segment.

Mr Kamau says that the Jamii's Metro Fiber network, is able to support High Definition Video, Voice and Data is ideal for Telco's, businesses with branch networks like  banks, BPOs, disaster recovery sites, SMEs, ISP's, Media Houses and residential users among others.