In light of our feature article in this edition of Africa Telecoms, briefly describe how you feel about Seacom assisting with breaching the digital divide in Africa?

SEACOM is providing a large broadband connection to global networks. Consumers will be using the internet in ways they wouldn’t think of today: on-demand movies, music, home-made video, watching news programs, etc. With new web applications and uses being discovered daily, the potential economic benefits of affordable bandwidth are endless. In Africa, it is projected that there will be a major demand for bandwidth driven by some of the following “hotspots”:

• Tanzania is growing a logistics hub for eight East & Central African countries

• Uganda and Zambia are set to develop strong pharmaceutical research centres

• Kenya is looking at becoming a call centre hub with a major focus on Small & Medium Enterprises

• Rwanda, which has developed a visionary broadband strategy, is looking to establish a hub of bilingual call centres.

SEACOM often hears stories about the impact of inexpensive bandwidth on global Internet content in Europe, North America and Asia; however, SEACOM has seen much African-produced content that will vastly benefit the world. Recently, we met with a research group that is gathering data from traditional healers on homeopathic medicines. We were amazed to learn of the information being gathered and the potential to add to medical research globally. SEACOM’s partnership with southern African research and education networks through TENET (Tertiary Education and Research Network of South Africa) will facilitate faster development by providing subsidised international bandwidth to research and education networks across 40 universities. These education and research institutions now have 50 times more bandwidth at the same annual cost prior to the arrival of SEACOM. Bandwidth now equals the amount which was available to the entire Southern African population in 2008. TENET owns the capacity for the remaining life of the cable, resulting in substantial annual savings whilst enabling the affiliated institutions to develop and increase their international research collaborations and distance learning programmes. SEACOM is working to replicate this programme in East Africa.

Do you have an example of this scenario already or is it too soon?

We’ve already seen a decline in international long haul prices at the end consumer level. In East Africa specifically, Kenya’s progressive approach to telecoms, has resulted in large amounts of bandwidth being made available at a fraction of the cost, resulting in a reported 200% increase in data traffic within 14 days of SEACOM’s launch. South Africa has disappointed SEACOM in translating low cost international bandwidth into reduced consumer price. This is largely due to the major operators investing in their own cables and slowing any adoption of our cable. They also have a large consumer dependence on the incumbent’s terrestrial backhaul and last mile, limiting the ability for ISPs and operators to pass on savings. There has been a marked improvement though. In September 2009, for example, MTN announced a 50% increase in capacity for certain corporate clients in South Africa while Telkom and M-web also announced similar increases. Connectivity is now available, and it's up to governments and internet service providers to pass on savings and capacity to their customers, circumventing constraints and bottlenecks wherever possible.

What is your opinion regarding cheaper broadband which will benefit those who already have access to the internet against those of those who currently have no access ?

Through supplying plentiful bandwidth at a fraction of the current cost, there is no doubt that SEACOM’s arrival opens up unprecedented opportunities for governments, business and ordinary citizens alike. They can finally make use of a network which forms a platform to compete globally, drive economic growth and enhance quality of life. Providing broader access to Information and Communications Technologies (ICT) in Africa is a catalyst to unlocking sustainable economic and social development. By supporting a broad range of stakeholders its possible to develop, create growth and promote the continent as a serious player in the global economy.

From this point onwards, what do you think the next step is?

Now that Africa has a solid fibre backbone what more is needed in order to finally bridge the digital divide? An open and liberal approach to telecommunications is essential. Governments hold the key in allowing businesses to exploit ICT-linked opportunities which will enable the acceleration of broadband penetration. There is also the catalyst effect that needs to be considered. Undersea cables will justify an investment in national fibre, fibre to the home, new wireless networks, data centres, call centres and BPOs.

What has been the biggest hurdle thus far with the Seacom Project?

SEACOM is offering one, seamless product to end-users, across 11 sovereign nations. Some of our challenges were tax and contract related. SEACOM, as an international entity, had to figure out how to sign contracts at a local level and then deliver that product throughout all the countries we were involved with. SEACOM had to use its subsidiaries and local partners in each one of these countries, who were already licensed and established, to carry communication infrastructure. You're trying to set that up in a very short period – keeping in mind that construction of the cable is really only 18 to 24 months. The availability of human resources which could interact with a venture such as SEACOM was also a challenge in some countries.

With only a small amount of capacity sold thus far and a total expected capacity of 1280Gbps, what is the projected time-frame that Seacom is working towards in having the full capacity sold and used throughout Africa?

We have seen capacity purchase continue at a healthy pace since the launch. In fact, we were pleasantly surprised to see East Africa leading the charge. As demand increases and users find new ways to utilise the Internet and overall connectivity, we will experience an exponential trend in capacity requirements leading to more purchases. From an investment perspective, we expect a return on this investment within five years.

In your estimation, what effect will the partnership with Altech’s KDN have on Broadband access in Central Africa?

From the outset of the project, we realised the importance of connecting inland countries to the international network and many countries set out to deploy massive terrestrial networks in anticipation of the arrival of real and affordable international bandwidth connectivity. With more and more countries getting connected to the rest of the world via the SEACOM system, it is only a matter of time before we see the direct socio-economic benefits this will have on the entire region. The African market for international bandwidth is expected to swell within a short period of time, with a significant portion of this new demand coming from East and central Africa. Altech and SEACOM have taken a giant step towards unlocking this enormous potential in East Africa. Our success would not be possible without the infrastructure which links our beach landing stations to metropolitan PoPs (Point of Presence). KDN’s extensive inland infrastructure in East Africa will link our landing station in Mombasa to Nairobi, then on to Kampala and Kigali. In addition, we hope to connect Kigali and Addis Ababa soon and will continue to explore further opportunities across central African countries.

Are there future plans to extend the SEACOM network to the west coast of Africa or is the current network as far as the project is planned at the moment?

Although no specific plans are in place at this point, we will continuously evaluate all opportunities and strategic options to compliment and improve our current offering.

What impact will SEACOM’s cable have on traditional voice communications in Africa or is SEACOM purely going to provide data services to the continent?

Access to previously unobtainable, cheap and easily available broadband will allow East and Southern Africa to connect to international broadband networks. The infrastructure should see Africa becoming a major competitor for call centres/business process outsourcing (BPO), research and education. Financial, manufacturing and other sectors will bring down their cost of doing business while increasing their productivity. This will, in part, be possible through the provision of cheaper traditional voice calls using fibre networks. As an example, Gateway Communications has purchase significant capacity on SEACOM.

Africa Telecoms attended the recent Inaugural Qualcomm CDMA Summit in Nairobi, Kenya, to find out more about the future of the technology. The goal of the Summit was to bring together the entire CDMA ecosystem in Africa for discussion, debate and information sharing. Each African market has its own unique challenges, and hence requires different solutions, and through collaboration with partners and peers, real innovation can occur within this ecosystem across the continent. For many years, the wireless world has been divided between the Code-Division Multiple Access (CDMA) standard and Global System for Mobile communications (GSM) technology. The need to provide essential ICT wireless services to the African continent through the use of high-speed mobile broadband can only be fulfilled by CDMA technology. James Munn, VP Sub-Sahara Africa, Qualcomm, states that CDMA is a minority player but has a pivotal role to play, through innovations such as EVDO Rev. B (EV-DO Rev. B is the next generation of CDMA mobile broadband technology) and has the potential to be the next movement in the Mobile Broadband space for Africa. In this regard, CDMA1x is a superior technology over its rival. GPRS/EDGE (General Packet Radio Service), usually offers a slower data bandwidth for wireless data connection than CDMA’s high-speed technology (1xRTT, short for single carrier radio transmission technology), which has the capability of providing ISDN (Integrated Services Digital Network)-like speeds of as much as 144Kbps (kilobits per second). However, 1xRTT requires a dedicated connection to the network for use, whereas GPRS sends in packets. This is the starting point where CDMA mobile broadband currently stands on networks that are EV-DO enabled. These networks are seeing download speeds of 3.1Mbps and with EV-DO Rev. A as the next evolution, download speeds will reach between 9.3Mbps and 14.7Mbps with Rev. B and DO advanced again increasing those rates to 32Mbps. Dr Bitange Ndemo, who has been a major advocate of CDMA technology, opened the summit, describing CDMA technologies as more robust than others currently used in Kenya, with CDMA being a great solution for the provision of Last Mile services in the country. He also reiterated that rural areas continue to be a priority area for the Kenyan Government through the formation of “Digital Villages and E-Learning Facilities” being very high on the government’s spending agenda. According to Dr Ndemo, 60% of the Kenyan population are covered by CDMA. He closed his address explaining that adoption rates for data usage had far exceeded the government’s expectations and that this is expected to continue. For Sachin Bhatmuley, Senior Director Business Development at Qualcomm Inc, there are some key drivers for development of the sector: “Qualcomm’s focus for Africa can be split into 3 areas; firstly, on the adoption of 3G services in Africa, secondly, the success of current 3G operators in Africa and increasing their market penetrations and finally, the conversion of 2G networks to 3G networks.” Three main trends were highlighted to improve rates of adoption for CDMA technology:

TREND ONE - Reduced price of Handsets

CDMA device costs are declining and have been for a number of years. In 2004, CDMA2000 devices were around the US$80 mark. By 2008, they had reduced in price to under US$17. There is strong evidence to suggest that as demand grows for CDMA handsets, these prices will continue to fall. There are 3 predominant reasons for this drastic reduction in price over the past few years; firstly, increased demand for CDMA devices is increasing the scale of production reducing the cost. Secondly, the Global CDMA Certification Forum (CCF) is reducing the time and development costs of taking new devices to market. Thirdly, the Open Market Handset Group (OMH) is assisting in the unification of standards across the CDMA ecosystem which is allowing for the handsets to be used across multiple networks. OMH is an industry initiative led by the CDMA Development Group to enhance the CDMA ecosystem by offering a greater selection of devices through multiple distribution channels. Similar to what is seen today with GSM phones and SIM cards, CDMA industry partners are working together to introduce devices where the complete set of configuration data to support operator and subscriber identification is stored onto Removable User Identity Modules (R-UIMs), or SIM cards for CDMA devices. OMH results in lower ASPs (Average Selling Price) due to volume aggregation, thus increasing device variety and affordability. The initiative is gaining momentum. Currently, Visafone and Starcomms in Nigeria, PT Bakrie and PT Smart in Indonesia, and Citycell in Bangladesh are all providing OMH-compliant CDMA networks. In August 2009, Samsung announced the world’s first OMH handset in India. Since then, several additional OMH handsets have been introduced and a number of Tier-1 and Tier-2 device OEMs are designing and producing OMH-compliant devices.

TREND TWO - Smartphone Proliferation

This is the fastest growing segment in the mobile phone market: Smartphones are expected to total 40% of total handsets shipped by 2014. Smartphone growth hit 34% in 2009 and 36% in 2010. According to Gartner, over the coming 12 months the number of smartphones on the market is expected to outnumber the number of PCs globally. This presents huge opportunities for African operators to bring the internet into the hands and mobile devices of communities across the continent. This is allowing operators the ability to increase subscriber ARPU by offering data services that would not previously have been accessible.

TREND THREE - Devices becoming more diverse & data oriented

Voice revenues are continuing to decline and operators are investing in capacity where they are seeing returns, and these returns are deriving from Data. Services such as mobile entertainment, e-readers, education, social networking, locationbased services, mobile commerce, mobile healthcare, mobile machine to machine are all potential lucrative revenue streams for operators.

What does all this mean? According to Bhatmuley, it is time to “Prepare your networks!” Think innovative VAS, as this will be crucial for increasing ARPUs on operator networks, and providing consumer-driven content. For Bhatmuley: “Think beyond phone: New devices, new services, new revenue streams.” The emphasis on data was repeated throughout. For Russell Southwood, Chief Executive, Balancing Act, we are now looking at a very different Africa from a few years back. Some key trends that are being seen in the African space include the shift from satellite to fibre, services such as mobile banking, mobile internet, and triple play. Handsets have historically been a serious issue for CDMA operators and potential subscribers as they have been more expensive than GSM devices with less choice. This is changing substantially with a wider range of handset options and reduced prices on the handsets. According to Said Said, CEO Tanzania Telecommunications Company Limited, the future is going to see fibre cables reducing broadband costs and then the true benefits of CDMA will become apparent as a superior data technology. It was hypothesized that LTE could in the future allow for WORD FROM THE GROUND Dr Bitange Ndemo, Kenya 1Peak rate for 3 EV-DO carriers supported by initial implementation. 2Peak rate for 3 EV-DO carriers with 64QAM in the DL. Rev. B standard supports up to 15 aggregated Rev. A carriers. 3DO Advanced peak rate for 4 EV-DO carriers, assumes 2x2 MIMO and 64QAM in the DL and 16 QAM in the UL. 4Capacity increase possible with new codec (EVRC-B) and handset interference cancellation (QLIC). 54x increase with receive diversity the evolution of CDMA The path to success the convergence of GSM and CDMA technologies. Until this happens, it is imperative to fairly represent CDMA technology as a practical and effective technology for the African continent.

Sidebar 1: CDMA's World War 2 Foundations - A Glamorous Past

Once described as the most beautiful woman in the world, actress Hedy Lamarr was one of Hollywood’s most glamorous silver screen goddesses of the 1930s and 40s. But Ms Lamarr had another talent: she was brilliant. Working together with avante-garde music composer George Antheil, Lamarr came up with the notion that multiple frequencies could be used to send a single radio transmission – a concept that’s now known as frequency hopping. The concept would eventually provide the basis for the CDMA airlink, which Qualcomm first commercialized in 1995. The idea remained dormant until 1957 when engineers at the Sylvania Electronic Systems Division in Buffalo, New York took up the idea, and after the Lamarr- Antheil patent expired, used it to secure communications for the US during the 1962 Cuban Missile Crisis. After becoming an integral part of government security technology, the US military, in the mid-80s, declassified what has now become CDMA technology, a technique based on spread-spectrum technology. The technology soon caught the attention of the nascent wireless industry. CDMA, incorporating spread-spectrum, works by digitizing multiple conversations, attaching a code known only to the sender and receiver, and then dicing the signals into bits and reassembling them. This meant that CDMA resulted in extremely secure transmissions. Qualcomm, which patented CDMA, was attracted to the technology because it enabled many simultaneous conversations, rather than the limited stop-and-go transmissions of analogue and previous digital options. In the prescient words of Hedy Lamarr : “Films have a certain place in a certain time period, but technology is forever.”

Sidebar 2: A Case Study Mickael Ghossein, CEO, Orange Kenya

Kenya is about 580,000 km2, of which only about 10% is covered by a power grid. This has a huge effect on opex costs for mobile operators, as power generation is then needed for their base stations. Telecoms in Kenya – 250,000 fixed lines and addressable market of 20 million wireless subscribers across CDMA and GSM networks, with two landed submarine cables (Seacom and TEAMS), with EASSY expected within the first half of 2010 (before going to print this was imminent in the last week of March). Telkom Kenya offers fixed line services for Voice and Data, a GSM mobile network and a CDMA mobile network for voice and fixed data. This makes it the only fully integrated telecoms network in Kenya. CDMA was the natural answer for Telkom Kenya as vandalism of copper cable into rural areas was becoming a problem and wireless was the route to take. The technology needed was to cover large areas and this is why CDMA was initially chosen. It works at a lower frequency than GSM (less than half), giving it a larger coverage area. An additional benefit is that capex and opex are reduced due to fewer base stations needed. In 2008 Telkom Kenya started to roll out green CDMA base stations to help manage capex and opex costs, as well as for environmental and conservation reasons. This has meant Telkom Kenya has seen cost savings of up to 60% of the opex for those sites.

As this issue of Africa Telecoms is focusing on satellite and fibre in Africa, do you feel that these communications technologies will work together concurrently in the future or will one or the other dominate within an African context?

We are already seeing the migration of international connectivity from satellite onto submarine fibre, with many carriers having announced plans to terminate satellite circuits at the end of existing contracts. As the availability of diversely-routed international submarine connectivity continues to expand, we would expect to see this trend continuing into the foreseeable future. Satellite will still have a part to play in extremely remote areas, but we expect to see fibre dominate in the future as we have seen in the rest of the world.

What do you see as the key differentiators between satellite and fibre connectivity?

Mainly, delay: for international connections satellites introduce long delays because of the often long communication path between the two locations. Fibre-optics tend to be deployed to minimise route distance, and submarine cables typically follow the most direct coastal route between major coastal locations, resulting in much lower delays. Secondly, scalability: fibre-optic systems are extremely scalable - once installed, fibre-optic connectivity is relatively cheap to upgrade. Capacity upgrades continue to be possible, even on old submarine systems. Once deployed, satellites cannot be physically upgraded. Lastly, cost: satellite costs are not distance dependent, making them particularly suited to delivering service between remote locations and where demand is low. The build cost of fibre is directly related to distance, so it is most costeffective when demand is high or growing fast and for meeting long-term, rather than low-demand, short-term requirements. Both are susceptible to service interruption, although weather features are much more common than earthquakes! In both cases, an alternative route is required for back-up.

Could you give us a synopsis of the rather complex ownership structure put in place for the construction of the EASSy cable and how WIOCC fits into this as an special purpose vehicle (SPV)? Was the creation of the SPV a regulatory requirement and/or why was it instituted?

Following extensive dialogue amongst all of the stakeholders, a mutual understanding was reached by governments concerned, telecom operators and a number of Development Finance Institutions (DFIs) in June 2006 around a hybrid project structure involving both direct consortium members and an SPV that met the Governments’ developmental objectives of ensuring low-cost open access to international connectivity, while providing for financing flexibility and maintaining the commercial appeal of the EASSy Project. The SPV was established to create a vehicle to leverage debt financing from the DFIs and to reduce the upfront equity requirements of certain operators who wished to avail themselves of financing. Thus, in this “hybrid” structure, the larger telecom companies invested directly in their own right, while a number of smaller ones invested through an SPV, named WIOCC.

How active, as a shareholder, has WIOCC been in the construction phase of the EASSy cable?

WIOCC has been extremely active, particularly in its chairmanship of the EASSy Technical Working Group and co-chairing of the Procurement Group. This involves directing the progress of engineering, provisioning, installation, bringing into service and the continued operation of EASSy. Specifically, WIOCC has driven negotiations on construction in Somalia, marine contracts, testing, landing station construction, Data Communications Network management and Operations & Maintenance budgets. WIOCC also chairs the Investment & Assignment sub-committee and co-chairs the Operations & Maintenance sub-committee.

The relationship between WIOCC and EASSy is quite an interesting one, particularly as WIOCC is still reselling capacity in the EASSy cable. Does this offer any benefits to WIOCC clients? Considering this, why would an operator work with WIOCC as opposed to directly with EASSy?

There are two key reasons for an operator to work directly with WIOCC: Firstly, as an SPV, WIOCC is able to offer connectivity into all nine landing countries (and onward to a further 11 countries), whereas other EASSy shareholders are only able to serve their own markets. For an operator this means simplification - they can buy connectivity into many locations through a single relationship (with WIOCC), and avoid having to maintain relationships with a number of different organisations. Additionally, WIOCC is the largest shareholder in EASSy, owning nearly a third of the capacity on the system. Whilst many other shareholder have invested for their own use (and this will take preference), WIOCC's capacity allocation is more than sufficient to service shareholders and other operators wanting EASSy capacity.

When is the cable expected to go live?

We are completing the construction phase right now. This will be followed by two months of comprehensive end-to-end testing of the system. The System Ready for Service Date is 30th June 2010.

With the Seacom cable having landed and a number of other cables being planned, does this change any of the initial business objectives set out by WIOCC?And will WIOCC be looking to invest in additional capacity on any of the other cables?

The short answer to the first question is “no”. There was never any doubt that East Africa would become a competitive market for submarine connectivity; the only question was when and how long would it take. WIOCC is backed by some of the key carriers in the region, and we believe that we offer customers a clear and compelling business proposition compared with competing systems. EASSy is being constructed with a high degree of resilience built in, but we are also considering options to further improve the physical diversity of our routing. Clearly, other cables along the east and west coasts present us with a variety of options that we are exploring.

With the EASSY cable having landed in Kenya, is WIOCC able to currently offer capacity to clients in East Africa? If so, how much capacity has already been sold? What percentage of WIOCC capacity has been taken up by your shareholders and how much is available to the open market?

As you would expect, WIOCC is working closely with its shareholders to quantify their needs, as well as meeting with other prospective customers to further discuss their requirements. WIOCC shareholders have all signed up to significant amounts of capacity, but as WIOCC has the largest shareholding in the EASSy system there is plenty of capacity to satisfy the demand from the open market.

WIOCC seems to have a number of key differentiators to its competitors. Could you please talk us through how you feel these aspects will benefit WIOCC customers as we move into the future?

There are a number of ways in which customers will benefit:

a) WIOCC will be the first to offer direct connectivity to Europe from East Africa. Unlike our competitors (who route via the Middle East or India), EASSy will connect directly between East Africa and the key internet exchanges in Europe and the US. This will offer WIOCC customers the opportunity to differentiate their services by offering the fastest possible route to many of the most popular sites on the Internet.

b) WIOCC customers will be able to take advantage of high-speed international connectivity from a wider variety of locations. Our 12 shareholders' extensive terrestrial, fibreoptic networks are being interconnected to create the most comprehensive access network in the region.

c) WIOCC offers customers truly affordable international connectivity, with a very different pricing model to our competitors. Our flexible contract terms enable carriers to start small and increase their connectivity in line with demand. This provides a level playing field for small, medium and large service providers to compete head-to-head, encouraging them to develop cost-effective, highperformance business solutions and services for the end user. We offer contracts as short as one month, and for as little as 2Mbps of capacity.

d) WIOCC will deliver very high levels of resilience and reliability. The way in which EASSy has been designed minimises outages. The cable itself is based on a 'collapsed ring' structure, meaning that we can route traffic the opposite way around the ring in the case of a cable break. Whilst this may increase delays a little, it means that a single break in the cable will not result in a complete loss of service. Interconnection of our shareholders' terrestrial networks will also offer alternative routes between many of the landing stations should there be a more extensive break in the cable. Finally, WIOCC is negotiating interconnection agreements with a variety of international cable operators, which will enable us to take advantage of a variety of international routing options. The key benefit to our customers is reduced risk of complete service outage, without having to purchase capacity on multiple cable or satellite systems.

Are there any plans in the future for the EASSy cable to be extended to continue up the West coast of Africa? If not do you feel there would be merit in evaluating the viability of a continuous fibre ring around Africa?

We have no plans to physically extend the EASSy cable up the West coast. However, there are clear benefits to our shareholders and customers in being able to extend their reach to other parts of Africa; and in having access to a diverse route for resilience. We are therefore exploring options for meeting these requirements with a variety of organisations.

With WIOCC’s Onward Connectivity seemingly having direct backhaul access to Europe, Asia, North America and notably in the Eastern and Southern regions of Africa, are there plans to link into the Central African Backbone (CAB) project once completed? Then, are there any plans to extend this connectivity through to Western and Northern Africa?

WIOCC has already announced that it will offer connectivity between 20 countries in Africa, including landlocked countries such as Uganda, Rwanda, Burundi, Zambia, Zimbabwe and Botswana. One of the countries to which we will connect is Sudan, which is eligible to participate in the CAB project. Whilst there are no formal plans in place right now to interconnect with CAB, we are exploring many avenues to broaden coverage including connectivity to other regions of Africa.

With 2G growth slowing down in Africa, 3G network rollout is starting to pick up pace in many urban areas across the continent

Mobile growth in Africa has been spectacular during the last decade. From pretty much a standing start, the continent now boasts an average mobile penetration of over 40%. In some countries, such as Ghana, Egypt, Nigeria and South Africa, mobile penetration is much higher. Yet the overall pace of annual African mobile growth is on the decline, and has been for a few years. Informa Telecoms & Media, a research firm, calculates that annual mobile subscriber growth in Africa was 26% during 2009, compared to a 35% growth rate in 2008 and a 42% jump in 2007. With 2G growth weaker than before, 3G is creeping up the agenda of many African operators as a potential way to bolster revenue growth through mobile data and internet access services, particularly in urban areas where fixed-line broadband is patchy and expensive. But it is still early days for African 3G. According to Informa, GSM represented 93% of the continent’s mobile subscriptions as of Q1 2010, with 3G/WCDMA and 3G/EV-DO accounting for market shares of only around 3.4% and 0.5% respectively. Moreover, of the 3.4% of WCDMA users (which represent 16 million subscriptions), Informa calculates that fewer than five million actively use the 3G data services. The remaining WCDMA subscribers in Africa use their 3G service only for voice. Despite the low 3G subscriber take-up so far, figures supplied by both the GSA (Global mobile Suppliers Association) and the CDG (CDMA Development Group) indicate that 3G network rollouts for both WCDMA and EV-DO are gathering pace in many parts of Africa, and not just in the comparatively more developed economies, such as Egypt and South Africa (see ‘HSPA brings faster 3G to Africa’ and ‘CDMA growth in Africa’). “In many African markets, the main revenue driver for 3G is still internet access rather than internet-enabled applications,” adds Said Irfan, a research manager at IDC who covers the African markets. “In Africa, there is a clear opportunity to give people their first experience of accessing the internet over a mobile network rather than through fixed, given the lack of a proper fixed infrastructure in many parts of the continent.” Irfan highlights the rapid headway that mobile broadband is making in Morocco, where the total number of mobile broadband subscribers has surpassed the number signed up to fixed broadband services. “Mobile broadband in Morocco has even caused a significant drop in fixed broadband growth,” adds Irfan. Greater enthusiasm for 3G in Africa cannot only be explained as a response to lower growth prospects from 2G. “Some regulators are only getting around to releasing 3G spectrum now,” says Robert Schumann, a lead consultant at Analysys Mason. “The prices for 3G equipment are also coming down, which, in some cases, means that 3G can be added at little extra cost in the course of normal equipment replacement cycles.”

THE BHARTI FACTOR

The arrival of India’s Bharti on the African continent, following its US$10.7 billion purchase of the majority of Zain Africa's mobile assets in March 2010, may well drive down 3G kit prices even further. Deep-pocketed Bharti, which is eyeing up large-scale 3G rollout in India, would have the purchasing muscle to drive better deals with 3G suppliers through greater economies of scale. “Although Bharti’s strategy has mainly been about keeping a low cost operation, I don't think they would be averse towards rolling out 3G in the continent, judging from their current bid for an Indian 3G licence,” says Irfan. “Nonetheless, the pace of the rollout depends on how high the license prices are initially set. Given that 3G spectrum is considered a scarce resource, governments in Africa tend to set a price that in the end could prove harmful for operators' business case in a low- ARPU market.” Thecla Mbongue, a senior research analyst and African markets specialist at Informa, points out that Bharti runs 3G networks in all of its other international operations: Guernsey, Jersey, Sri Lanka and Seychelles. But out of the 15 Zain operations sold to Bharti, 3G is only available in Ghana, Nigeria and Tanzania. So, one might reasonably conclude that 3G expansion in Africa is on Bharti’s agenda. “Bharti’s focus does lie in running more efficient networks, but we don’t think that it will refrain from following 3G opportunities if the market environment is favourable,” says Mbongue. But Schumann warns that 3G is unlikely to revolutionise mobile operations in Africa in the near to mid-term, and that some markets will have a much better chance of 3G success than others. “Mobile data still accounts for a small part of mobile revenue, and rollouts are concentrated in urban areas,” he says. “A key success factor for any mobile data proposition is revenue density, which makes Egypt [due to population concentration] and South Africa [due to urban income levels] more likely markets for 3G success, and, indeed, they are at the front of the pack now.” In Egypt, observes Schumann, Vodafone is already the leading broadband provider (ahead of Telecom Egypt in terms of subscriber numbers). In South Africa, Vodacom took the broadband subscriber lead from Telkom, the country’s fixed-line incumbent, in Q2 2009.

CABLING UP THE 3G BUSINESS CASE

Although licence terms and conditions, as well as the high-value contract wins for suppliers, invariably grab all the 3G headlines, there is a less glamorous but equally important side to the 3G business case. The ability to reduce network operating costs, particularly in highly competitive markets, will be necessary if operators are to provide attractively-priced retail mobile data packages without wreaking havoc on their profit margins. And for many mobile operators in Africa, particular in East Africa, the availability of more international and national bandwidth capacity – at cheaper prices – should increase their chances of achieving that. In July 2009, a second submarine fibre-optic cable connecting South Africa to the rest of the world went live. The 17,000- km cable, built by Seacom—a Mauritius-based private-sector vehicle—at a cost of US$600 million, runs from Mtunzini in KwaZulu-Natal to India and Europe, via landing stations in Madagascar, Tanzania and Kenya (and so connects East Africa to the global fibre-optic cable network for the first time). With a capacity of 1,280Gbps, Seacom is far larger than the existing SAT3 cable (120Gbps) that runs up the west coast of Africa, which is operated by South Africa’s state-owned Telkom. EASSY, another privately-held international submarine cable connecting East Africa, is due to be completed in June 2010, and will bring an additional 1,400Gbps capacity. Despite the availability of cheaper wholesale submarine cable prices, which reportedly undercut pre-Seacom prices by ten times or more, Schumann is cautious they will have a dramatic and positive impact on every mobile operator – and not simply because some operators are still tied into paying pre-Seacom prices on long-term contracts. “This is partly because there remain constraints on the radio capacity, on the backhaul from base stations to a switching centre, and on end-user devices that remain limited in their ability to consume large amounts of data,” he says. “Laptops also remain stubbornly above US$200, compared with US$20 for a 2G handset and approximately US$40-50 for a 3G handset. Inelasticity of customers’ demand, and marginal utility they derive from new technologies, will limit the uptake of mobile data.” Even so, some mobile operators, such as South Africa’s MTN, are making concerted efforts to boost network capacity by investing in terrestrial fibre-optical cables, which will also connect to the undersea cable systems. By investing heavily now in network capacity, MTN hopes to reduce operating costs in the long term. In partnership with Neotel, South Africa's second national operator – and Seacom's main anchor tenant – MTN is rolling out a 5,000-km internal fibre-optic cable network. During 2009, MTN reports that 245km of the fibre-optic cable was completed along the Gauteng-Durban route. The southern and northern rings of the Gauteng fibre projects are expected to be completed by July 2010. “We have been fairly active in the submarine cable area, not as a speculator but primarily to provide capacity for our own operations and hopefully, in the process, reduce the costs,” said Phuthuma Nhleko, president and CEO of the MTN Group, in a March 2010 analyst conference call to present the group’s 2009 financial results. “To date [we have invested] almost $85m and we've most probably got commitments close to $200m over the next few years.” MTN fibre-optic investment is running in parallel with 3G network rollout in Ghana, Nigeria and South Africa. In South Africa, MTN’s 3G capacity increased 22% during 2009 compared with a 12% increase in 2G capacity. Moreover, MTN’s 3G population coverage increased in South Africa from 35% in December 2008 to 48% in December 2009. “Operators that have a stake in cross-continent data networks, such as MTN's UUNet and Vodacom's Gateway, would certainly benefit in more ways from the availability of extra capacity than pure mobile operators by way of their ability to offer more services to clients,” adds IDC’s Irfan. “Also to benefit early are mobile operators with IRUs [indefeasible rights of use] on the subsea cables, as they would be able to gain a first advantage in accessing the extra capacity.”

FUTURE TRENDS

Moving forward, Schumann expects more 2.6GHz spectrum to become available in Africa in the near future, which fits well with 802.16e mobile standards). It is likely, however, that 802.16e – due to considerations of cost and regulatory restrictions – will be used more for fixed and nomadic broadband services rather than as a true mobile service (and a direct competitor to cellular 3G). UHF (TV) spectrum will also become available on the continent once the digital switchover gets moving – there is a regional deadline of 2015 for Africa to complete the transition from analogue to digital TV. Again, that should provide more opportunity for 3G growth across the continent. The availability of more spectrum does, of course, throw the spotlight on regulators as to how they allocate it. As in other regions of the world, Africa has not been immune to spectrum disputes. In Kenya, for example, operators aiming to break the 3G monopoly held by Safaricom have complained to the regulator that the US$25 million licence fee is too high and will jeopardise the 3G business case. “Some governments do indeed auction 2.1GHz spectrum at a high price, since it is a sought after spectrum band by GSM operators in need of upgrading to WCDMA,” says Informa’s Mbongue. “So far, the most expensive 3G spectrum fees [in the 2.1GHz band] were recorded in Egypt where the frequencies were sold for over US$700 million to Vodafone and Mobinil in 2002. Nigeria has recorded the second highest fees as four operators each paid US$165 million for 10MHz in the 2.1GHz band in 2007. Usually the price per population has been around US$1 [US$1.24 in Nigeria], but in Egypt it was around US$9.” Yet Africa, on the whole, appears to have learned some 3G licensing lessons from developed economies – at least according to Schumann. “Many regulators are now avoiding the temptation to consider 3G to be a cash cow,” says Schumann. “Mozambique and Botswana, for example, have not attached large price tags to 3G or WiMAX spectrum. This is both for pragmatic reasons. Governments recognise that the hype around Europe’s 3G licence awards was not replicable and because, in simple terms, the spectrum is only valuable when it is being used productively. Demanding exorbitant fees simply leads to delays, court battles, investor uncertainty and substantial fees paid to banks and financial advisors who help to raise new capital.” If governments can refrain from charging exorbitant licence fees, and mobile operators can reduce their network operational costs – and the price of devices continues to fall – 3G has every chance of success in Africa.

Sidebar 1: 3G TECHNOLOGY SNAPSHOT HSPA AND HSPA+

Suppliers of 3G equipment, based on WCDMA technology, talk enthusiastically about software upgrades that will allow operators to achieve peak downlink speeds of up to 14.4Mbps. The technology, known as HSPA (high-speed packet access), is available in three flavours: peak downlink speeds of 3.6Mbps, 7.2MBps or 14.4Mbps. The first two are becoming more and more popular in Africa, but no mobile operator on the continent has yet to adopt the 14.4Mbps version (see HSPA brings faster 3G to Africa). Beyond HSPA there is HSPA+, which uses higher order modulation schemes (from 16QAM up to 64QAM) and more advanced antenna technology (known as MIMO). The first HSPA+ step is to deliver peak downlink speeds of 21Mbps, but Germany, Italy, Singapore and Switzerland – according to survey information published by the Global mobile Suppliers Association (GSA) in April 2010 – already boast commercial HSPA+ networks that deliver up to 28Mbps on the downlink. Orange, which has invested heavily in HSPA networks in Africa, has gone one better. In Austria, Orange now offers a commercial 42Mbps peak downlink service in the town of Weiner Neustadt. Ericsson, the world’s largest supplier of mobile equipment in terms of sales, anticipates that the combination of multicarrier MIMO and 64QAM modulation will enable peak HSPA+ bit-rates of 84Mbps and, eventually, 168Mbps.

Sidebar 2: HSPA BRINGS FASTER 3G TO AFRICA

The overwhelming majority of WCDMA-based 3G operators are turning to HSPA (high-speed packet access) to boost downlink and uplink speeds. Africa is no exception. According to data supplied by the GSA (Global mobile Suppliers Association), 38 countries in the Middle East and Africa (MEA) had either commercial HSPA networks up and running by April 2010, or had operator commitments to do so. MEA, according to the GSA, accounts for 25% of countries in the world who either have HSPA commercial services or network rollout commitment. Europe (36%), Americas (20%) and APAC (19%) account for the remaining distribution of countries around the world that have commercial HSPA. The list of commercial HSPA rollouts in Africa is growing fast. According to the GSA, there are commercial HSPA operators in Angola, Botswana, Egypt, Ethiopia, Ghana, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Reunion, Rwanda, Senegal, Seychelles, South Africa, Sudan, Tanzania, Uganda and Zimbabwe. Of the 186 commercial HSPA networks around the world, just over half (54.5%) support a peak downlink of 7.2Mbps or above, says the GSA. The majority of HSPA operators in Africa, however, only deliver peak rates of 3.6Mbps or under. Even so, there is a growing list of HSPA operators on the continent that go beyond 3.6Mbps. Mobinil and Vodafone (Egypt); Safaricom (Kenya); Orange (Mauritius, Réunion and Senegal); Méditel (Morocco); MTC (Namibia); Vodacom and Telkom (South Africa); Sudatel, Zain and MTN (Sudan); and Vodacom and Zain (Tanzania) each offer peak downlink rates of 7.2Mbps. There are no African mobile operators, however, that offer HSPA at peak rates of 14.4Mbps, or any that has opted for HSPA+ that can reach to 21Mps, 28Mbps or 42Mbps. Of the 341 commercial HSPA operators around the world, GSA says that 52 have launched HSPA+ (across 32 countries). Although the majority of HSPA+ launches are in developed economies, there are exceptions: Bulgaria, Croatia, Greece and Turkey each have HSPA+ operators, which might suggest that HSPA+ will also have a place in some of Africa’s markets. CDMA GRO WTH IN AFRIC A Africa accounted for only 5.4% of all CDMA subscribers in the world as of December 2009, which translates into nearly 30 million, according to figures provided by the CDG (CDMA Development Group). However, the rate of CDMA subscriber growth in Africa between December 1997 and December 2009, at 31%, is faster than any other geographical region in the world. Although the CDMA subscriber statistics provided by the CDG include 2G CDMA2000, CDMA WLL (wireless local loop) systems – as well as 3G – it shows that Africa has a fairly large and strongly growing base from which to evolve CDMA networks to their faster and higher-capacity 3G versions, such as 1xEV-DO Rel. 0 (peak downlink speeds of 2.4Mbps) and 1xEV-DO Rev. A (3.1Mbps peak downlink rates). Yet of the EV-DO subscriber total worldwide as of December 2009 (142.1 million), Africa still only accounts for 3% (4.2 million). North America and the Asia-Pacific make up the bulk of the world’s 1xEV-DO subscribers with 54.3% and 34.3% market shares respectively. With nearly a doubling of 1xEV-DO subscribers during 2009, however, Africa is showing stronger CDMA-based 3G momentum than other regions in the world. According to the CDG database (as of April 2010), commercial 1xEV-DO Rel. 0 cellular networks are up and running in Angola, Cameroon, Lesotho, Liberia, Malawi, Mauritania, Mauritius, Morocco and Namibia. Commercial 1xEV-DO Rev. A cellular networks are available in the Democratic Republic of Congo, Morocco, Senegal, Sierra Leone, Sudan and Tanzania. The CDG also reports that Wana, a privately-held telco in Morocco – and which already operates commercial Rev. A and Rel. A networks – is planning to launch a 1xEV-DO Rev. B network. Rev. B networks can offer peak downlink speeds of up to 9.3Mbps (or up to 14.7Mbps with a hardware upgrade). A key driver for CDMA growth in Africa is Huawei and ZTE. Both Chinese vendors have invested heavily on the continent and have historically managed to undercut many of their western supplier counterparts on price. Again, referring to the CDG database, Huawei accounted for 64 of the publicallydisclosed CDMA contracts (2G, 3G and WLL) in Africa as of April 2010, while ZTE accounted for 37. Motorola, Nortel and Star Solutions are the only publicly-disclosed western suppliers with a CDMA presence in Africa, but they can only claim a handful of African CDMA contracts in total among them.

Plugging into the World

Mike van den Bergh, CEO of Gateway Communications gives his views on the numerous undersea cable projects presently underway and the growing demand for communications in Africa. He sees the African continent swiftly coming out of its digital dark age.

RIGHT AT THE FOREFRONT OF AFRICA'S EMERGENCE, are companies like Gateway Communications – who provide a variety of wireless, satellite and terrestrial network services to the African telco and business sectors. They are going from strength to strength. That's possibly one of the primary reasons Vodacom’s decision to acquire Gateway Communications a little more than a year and a half ago couldn’t have been more perfectly timed. Since the acquisition, Mike van den Bergh, Gateway Communications’ CEO says the company has restructured slightly and that efforts to become more tightly integrated with Vodacom are going well. “Prior to the acquisition, we were providing all forms of network services to carriers, large enterprises and multi-national corporations (MNCs). “A year ago however, we realized that this structure doesn’t make perfect sense – since telcos, large enterprises and MNCs have different needs,” he says.

WHERE’S THE REVENUE AT?

Another reason van den Bergh believes Vodacom will see a great deal of value from its acquisition of Gateway Communications is the fact that the revenue scales are beginning to tip in the direction of data. “There are a couple of realities telcos are having to deal with at present,” he says, “and one of the most sobering is the fact that although voice is still the dominant revenue driver in their business right now, data is where the real growth is taking place. “Data needs to be a big focus because voice rates are decreasing – a trend that’s driven predominantly by the increased competition in the market (and the drop in margin telcos are having to contend with in order to remain competitive), as well as the decrease in mobile termination rates,” he says. Interestingly enough, van den Bergh says SMS is a huge driver when it comes to mobile data – since it’s accessible to every mobile phone user and the barriers to entry are minimal. “There’s also the fact that research shows the youth market is more comfortable using text messaging than initiating a voice call to someone in their social circle,” he says. Showing just how important SMS is in the greater scheme of things, Vodacom reported that it had carried in excess of 600 million SMS messages between the start of the 2010 Soccer World Cup and the semi-finals, representing a 40% increase in traffic for that time of year. “Add to that, Pyramid research’s prediction that SMS revenues will double to $12 billion by 2013 and it’s clear why this is a focus for the mobile telcos,” he says. The popular market opinion that increasing data revenues and sliding voice revenues will ultimately mean the data market swallows the voice market and all forms of mobile communications traffic gets carried across a single, converged, IP-based network is inevitable. But, says van den Bergh, it’s further off than what many people think. “Five years from now, I still see voice as a separately reported component – and furthermore, one that is carried differently across the network,” he says. “Beyond that, we might see completely converged IP-based networks making their debut in more developed markets. “It will take longer for this trend to hit the emerging markets though,” he adds.

DATA HUNGRY MARKET

In a sense, van den Bergh says the world has always assumed that the adoption of broadband data capabilities will be different – or at least take place at a slower rate – in Africa than what has been the experience in other markets. But, he says, if you look at what happened when large amounts of submarine capacity suddenly became available with Seacom’s arrival, it’s clear that the only difference is that the adoption rate is far more accelerated. “I was in Kenya when the Seacom cable came ashore and, it was like Christmas, a couple of national birthdays and a few other celebrations rolled into one,” he chuckles. “The rate of uptake in Kenya, Tanzania and neighbouring countries has been astounding and despite the dearth of voice and data communications there, the focus has been on data and not voice,” he adds. As the trend continues, van den Bergh says the undersea cables that have yet to land will add another dimension to what’s possible. “In today’s context, we’re finally becoming able to provide world-class access to parts of the continent where nothing existed before. “And believe me, looking at adoption rates thus far, the more we provide, the higher the uptake will be. “With that increase in usage, the rates will drop,” he says. “The elasticity of demand is virtually unlimited in our market,” he enthuses.

THE BUSINESS OF NETWORK SERVICES

Turning to Gateway Communications' use of Seacom and what it has used that influx of capacity to achieve, van den Bergh says the company has provided increased levels of connectivity to mobile operators and ISPs, up the East coast of Africa – something it would never have been able to do under any other circumstances. “In fact, the first tranche of capacity we ordered was completely taken up in the first month and we’re currently scrambling to get more,” he says. Van den Bergh says Gateway Communications has also used that new capacity to establish the first Multiprotocol Label Switching (MPLS) network up the East coast of Africa. “In the wake of the new capacity Seacom has on offer, we’ve seen ISPs we never knew existed before creeping out of the woodwork and a number of new ISPs being formed. “The market has literally mushroomed overnight,” he says. Van den Bergh says that the landing of the Seacom cable has also allowed Gateway Communications to gain a range of new licenses – in countries like Kenya – for the building-out and provisioning of backhaul capacity. “We’ve also learnt valuable lessons and seen the market learn a couple of its own, specifically with regards to redundancy, putting all their eggs in the Seacom basket and paying dearly when the cable experienced issues,” he says. Thankfully, because of its legacy van den Bergh says Gateway Communications had configured resilience into its offerings and could very quickly cut over to other cable systems and satellite, where needed.

THRIVING UNDER ADVERSE CONDITIONS

While Gateway Communications has by all accounts been through an interesting time over the past 18 months, van den Bergh admits that the effects of the world economic crisis was at times cause for concern. “Over the past two years, we’ve seen the market become a great deal more cost aware, something that was driven by the increasing pressure on sales margins,” he says. “And unfortunately, nobody is immune to this, as operators and businesses feel pressure from their customers and in turn, have to drop their margins and place pressure on their entire chain of suppliers,” he says. “The opportunity we had at our disposal however, was to make smart investments for the future – not just in terms of choosing the right technologies and business practises, but in choosing investments that would allow us to be far more cost effective into the future,” he says. “We had to re-assess our own market priorities,” he continues, “and that’s’ one of the primary reasons we split the business into those two areas. “It gave us more focus and made us far more reliant on what our customers actually needed, forcing us to make a real effort to understand our customers and how we could do a better, more cost effective job of helping them navigate their challenges,” he says. Some of those investments were obvious, like increasing the company's investment in submarine cables, but also focusing on terrestrial network build-outs and getting high capacity backhaul to areas where it was needed.

LOOKING AHEAD

While the developments in the market over the past 18 months have been significant and the next 18 months are likely to eclipse even that, van den Bergh says we can only truly understand how far we’ve come if we cast our minds back in time. “And the truth is, things have changed immeasurably,” he says. “Ten years ago, Africa was without a doubt the dark continent and you’d be grateful for whatever form of connectivity you could find. “Now we have cables everywhere and as a result of that, MNCs have the same connectivity expectations in any African country as they would anywhere in the developed world,” he says. “Now, if we look forward five years, we won’t recognise Africa,” he adds. “As more and more cables land, we’ll begin asking what today sounds like a ridiculous question, like: ‘how good is the average Cameroonian’s access to Youtube on their smartphone?’ “With world-class infrastructure we will also begin asking what new, innovative services can be built,” he says. “We’ve all heard the example of a rural fisherman using SMS to check the stock levels at a market and potential selling price of his catch before actually going to one or another market. “Add convergence and world-class infrastructure into the mix and suddenly that same fisherman is able to send buyers a picture or video of his catch and actively begin engaging with his customers,” he says.

CHALLENGES REMAIN

The biggest challenge the African communications market faces however is over-regulation and the fact that often regulators don’t understand the market entirely and as such, draw on greedy international companies for input. “One of the worst sins we’ve seen committed in this industry over the years relates to companies who come along to regulators and governments and convince them that more money can be made out of things like international termination,” van den Bergh says. “In turn, the regulators raise these rates, which initially makes the government more money, but very quickly also drives down calling rates,” he adds. It doesn’t end there however. Van den Bergh says you then see grey markets emerging, shortcutting the usual telecoms infrastructure to offer much cheaper calling rates, but shocking call quality. The result is that even fewer people make use of telecoms and the GDP of the country is affected negatively. “Why not focus on making less money per unit of calling or Gigabyte of data usage, but doing so across a much larger volume of calling and data usage?” he asks. “This allows you to focus on quality and deliver truly compelling service levels – in turn encouraging even more usage,” he says. Van den Bergh says there’s an annoying myth out there, that Africans will accept what they can get. “In our experience however, if you give someone a high-quality service they will use it for longer and more often. “And it’s our belief that the revenues grow for everyone and markets flourish if this happens,” he concludes.

Sidebar: Aligning with Vodacom

While van den Bergh doesn’t say it directly, another reason for the restructuring is in all likelihood the fact that Vodacom saw a ton of value in enriching its core offerings as a telco with the services and intellectual property Gateway Communications has at its disposal. “In October 2009 this restructuring process started with us separating the business into two distinct parts. “One is focused on the carrier and wholesale services portion of the business – or that part of the business that typically interacts with telcos and Internet service providers (ISPs) – and the other is focused on the business sector and as such, providing services into the MNCs, banks and other large enterprises,” he explains. That shouldn’t suggest that the one part of the business works closely with Vodacom and the other doesn’t however. Van den Bergh is quick to point out the part of the company that’s focused on the business sector, namely Gateway Business, works well with the effort Vodacom is itself putting into providing services to businesses under the Vodacom Business banner. “The restructuring was a great idea, since it gives our telco and ISP focused business unit – known as Gateway Communications – the ability to deliver a range of highly-focused services into Africa. While this will obviously assist all of Vodacom’s operations across the continent, it will also target every other mobile carrier on the continent. “We remain independent in that way,” he says. “Not only can Vodacom now draw on our expertise when it comes to fine-tuning their mobile network, it can leverage our expertise in the management of large satellite networks as well as mobile and terrestrial communications solutions. “It’s also no secret that Vodacom is keen on the converged communications space – and since a great deal of our expertise is squarely in this space, there’s a great deal of value we’ve already added here,” he says.

The past 12 months can be written off as a dull kind of year for the telecoms industry, with economic turbulence making many players happy to survive rather than thrive. The chief development for Africa was undoubtedly the belated entry of the Indians, as Bharti Airtel took over the bulk of Zain’s African activities. Other than that there were a few price skirmishes, the axing of the telecoms minister in South Africa and the surprisingly low-key landing of the Eassy cable. Here’s a brief reminder of a few or the more interesting moments in a year that most of us have probably forgotten already. Let’s hope the industry regains its usual energy and joie de vivre in 2011.

January

The year began badly for Vodacom’s subsidiary in the Democratic Republic of Congo (DRC). A bitter clash with its 49% shareholder Congolese Wireless Network (CWN) saw CWN file papers in a Kinshasa court accusing Vodacom of “plundering” the company. CWN claims Vodacom illegally took up to US$180 million out of the DRC and repatriated the profits instead of reinvesting in the operations. Vodacom denied the allegations and initiated arbitration through the International Chamber of Commerce, which could take years to be resolved. Both parties agreed to keep discussions open to keep Vodacom DRC running, although Vodacom may decide to pull out of the country if arbitration looks likely to take too long, or if the relationship deteriorates further. South Africa’s third cellular operator Cell C had a better start to the year and awarded a US$378m contract to China’s ZTE Corporation to supply equipment and managed services to roll out a national 3G network. While ZTE was welcoming more open communications with the west, the Chinese government was less keen to embrace decadent western ways. Cyber attacks on Google and other companies led to escalated tensions between the US and China, although the government claimed it wasn’t to blame. US secretary of state Hillary Clinton called on the communist country to end online censorship, but Chinese officials said they would not tone down the way they censor the internet. The internet also went down for parts of Africa, although by error rather than design. A planned interruption on the Sat-3 cable connecting South Africa to Europe caused chaos with users unable to access international websites. Traffic was routed over a different cable to Asia, emphasising the need for multiple cables.

February

Nigeria’s government made yet another attempt to sell off its ailing incumbent operator Nitel. MTN Nigeria and Globacom were among six shortlisted bidders for a 75% stake, or to bid for stakes in some of its subsidiaries, including mobile arm M-Tel and its international gateway. The government went on to approve a US$2.5bn bid for Nitel, which was five times the US$500m that industry experts considered its maximum value. The deal went to the New Generation Telecommunications, a consortium of local and foreign investors including a Dubai investment house, Minerva Group. But by November, sources were saying some of the backers were getting cold feet and wanted an extension on the payment deadline. GiCell, a Nigerian company in the consortium, blamed the government for taking almost eight months to give final approval, making the foreign investors jittery about what exactly they were getting into. Further afield, the first images were transmitted back to Earth from South Africa’s Sumbandila satellite, a project that cost more than ZAR20 million to build and ZAR12 million to launch. The satellite is designed to strengthen the country’s technological capabilities, space resources and satellite engineering skills. Sumbandila can also collect imaging data during a national emergency such as floods. While the government can organise a presence in space, it’s struggling with the more mundane concept of TV. Plans to migrate from analogue to digital transmissions were delayed until April 2013 at the earliest, at least 18 months later than originally envisaged. The regulatory authority partly blamed anticipated delays in the availability of the set-top boxes needed to receive the new digital signals. It forgot to say that the delays were being caused by the government prevaricating over which technology standard to adopt.

March

After two aborted efforts to merge with MTN, the Indian operator Bharti Airtel finally began its African adventure by acquiring Zain’s African activities. The US$10.7 billion deals saw Bharti take over operations in 15 countries, and excluded Zain’s operations in Morocco and Sudan. Bharti is handing over a tidy sum of US$9 billion in cash and discounting US$1.7 billion of debt. Hopefully it still likes what it got, because the remaining US$700 million is due this March. Zain had been trying to sell its African networks for more than a year, despite initially denying that any such plans were afoot. Bharti now has 163 million subscribers, with Zain Africa’s 41.9 million looking rather paltry compared to Bharti’s home-grown user base of 121 million. So at least the feisty Indians should teach Zain a thing or two about economies of scale and serving low-income consumers. Bharti is expected to be a more formidable operator than Zain was, and is now a rival to MTN instead of the potential partner it tried to be. Yet MTN CEO Phuthuma Nhleko described suggestions that Bharti posed a serious threat and could trigger potential price wars as “exaggeration and oversimplification.” His comments were based on the opinion that a business model that works in India may not transport easily to a totally different environment. How well Bharti will manage to replicate its operations is still playing out, with a business model designed to serve millions of people in densely crowded areas now having to adapt to sparsely populated regions lacking basic facilities. Zain has rebranded as Airtel and has already slashed prices in Kenya to steal market share from Safaricom, Kenya’s dominant player.

April

After two aborted efforts to merge with MTN, the Indian operator Bharti Airtel finally began its African adventure by acquiring Zain’s African activities. The US$10.7 billion deals saw Bharti take over operations in 15 countries, and excluded Zain’s operations in Morocco and Sudan. Bharti is handing over a tidy sum of US$9 billion in cash and discounting US$1.7 billion of debt. Hopefully it still likes what it got, because the remaining US$700 million is due this March. Plans for Egypt’s Orascom Telecom to sell all or some of its African assets suffered a setback when the Algerian government said it would block the sale of Orascom’s subsidiary in that country. Orascom is the majority owner of Algeria’s Djezzy network, which is a key part of its operations and contributes 47% of its revenue. Algeria’s government would rather buy Djezzy using its pre-emptive rights as a minority shareholder than see it sold to a foreign entity. Analysts warned that the inability to sell Djezzy could scupper the sale of Orascom’s assets to potential buyers including MTN. That proved true, with MTN walking away from the deal. By November Russia’s Vimpelcom had agreed to buy a controlling stake in Orascom for US$6.6 billion. But as the year drew to a close those plans began to look increasingly shaky as Algeria remained a hurdle and regulatory issues also emerged in other countries. Orascom operates GSM networks in Algeria, Tunisia, North Korea, Canada, Pakistan, Bangladesh, the Central African Republic, Zimbabwe, Burundi and Namibia. As usual, Africa’s elite got looked after a whole lot better than its poor, when wellheeled consumers welcomed Apple’s new iPad device. The first models arrived via the grey market without the official support of Apple. The tablet computer is a multifunctional device with a 9.7-inch high-resolution screen, making it perfect for watching podcasts, videos, browsing the web, checking e-mail, reading magazines, watching movies and listening to music. It also runs close to 200,000 applications.

May

Network operator MTN said it had invested nearly ZAR450 million specifically for the 2010 Soccer World Cup in South Africa. It rolled out infrastructure to all the stadiums so fans could make calls and connect to the internet without sucking up all the bandwidth from businesses and consumers in the neighbourhood. At Soccer City in Soweto alone it erected 22 base stations. May also saw two of those occasions where something we already know is finally admitted in public. Firstly, the outgoing chairman of the Independent Communications Authority of South Africa (Icasa) admitted that the regulatory authority had failed the sector. “I concede we have failed you,” Paris Mashile told his stakeholders. In reply to complaints about how long Icasa took to deal with industry issues, Mashile said its performance had been “inexcusable and unacceptable” and had affected the telecoms companies in very serious ways. Mashile complained that the industry poached Icasa’s best staff and that it was beholden to the government for its budget. “We are not serving the sector well and it requires a turnaround strategy,” he said. The mea culpa was welcome, but there was little clue as to when or how a turnaround strategy may begin. The second “yes, we already knew that” came when a study by Ookla confirmed that Africa is poorly served for broadband. Ookla’s Net Index, based on millions of tests, ranks South Africa 93rd in the world for broadband download speeds. Uganda fares just a fraction better in 92nd place. The index found the average global consumer download speed is 7.7MB per second. The average in South Africa is 2.2Mbps. The worst countries in which to attempt a data download include Mali and Sudan.

June 

June was a month in which plans went awry for several companies. MTN formally ended negotiations to buy the African assets of Orascom Telecom. The deal probably fell through because the Algerian government blocked the sale of the Djezzy network, which was perhaps the asset MTN most wanted to get its hands on. MTN instantly bounced back by declaring that growth in Nigeria is far from over, and announcing that it had raised another ZAR16 billion to expand its network there. The new infrastructure investment follows heavy investments in 2008 and 2009, which now lets MTN cover 83% of Nigeria’s land and 84% of its people. While MTN was raising money, Neotel was losing it in vast amounts. The operator licensed to rival Telkom in South Africa suffered a net loss of nearly ZAR1.6 billion in the 2010 financial year. It was the first time its majority stakeholder, India’s Tata Communications, had revealed the extent of the losses being clocked up by its subsidiary. Neotel was initially seen as a much-needed, much-delayed alternative to Telkom, so businesses and consumers had high hopes of enjoying decent competition at last. But Neotel has failed to set the market alight. Plans at Telkom also went wonky when the company announced that CEO Reuben September was resigning – in other words, his contract wasn’t renewed. Politics turned out to be the chief reason, with September and his chairman:

– government appointed Jeff Molobela

– repeatedly clashing.

He was replaced by Jeffrey Hedberg as acting CEO, with no news yet of who will become the permanent head.

July

The East African Submarine System (Eassy) undersea cable started commercial operations on July 30, remarkably ahead of schedule and about 10% below its US$300- million budget. Not bad for a project that’s literally been in the pipeline for seven years. The 10,000km fibre optic cable on Africa’s east coast links South Africa, Mozambique, Madagascar, Tanzania, Kenya, Somalia, Djibouti and Sudan with other submarine cables from Europe, Asia, the Middle East and the US. One change of plan was unexpectedly caused by pirates, as the consortium has chosen not to build a landing point in Mogadishu in Somalia yet because of pirate activities. About 25 telecoms operators are buying its bandwidth so far, and its investors include international bandwidth prices, as Eassy, Seacom and Sat-3 cables all charge roughly the same. Hay said Eassy simply wasn’t big enough to make a large impact, but it was a valuable redundancy option for telecoms operators and internet service providers, which still have vivid memories of the lengthy breakdown of Seacom. South Africa’s MTN, Vodacom, Telkom and Neotel, as well as Dalkom Somalia, Comoros Telecom and Mauritius Telecom. Chairman Trevor Martins said the cable had been launched with an initial 60Gb per second of capacity, which would be increased as demand grew. He expects to see a broadband capacity explosion in Africa between 2012 and 2014. Although Martins said the cable would provoke another sharp reduction in wholesale international bandwidth prices and cheaper broadband for consumers, that hasn’t been particularly noticeable. South African internet service providers say the cable has had little impact on the price of bandwidth so far. Neotel’s Angus Hay agreed that Eassy’s arrival hadn’t had a big impact on international bandwidth prices, as Eassy, Seacom and Sat-3 cables all charge roughly the same. Hay said Eassy simply wasn’t big enough to make a large impact, but it was a valuable redundancy option for telecoms operators and internet service providers, which still have vivid memories of the lengthy breakdown of Seacom.

August

South Africa’s largest cellular network Vodacom teamed up with Nedbank to launch the M-Pesa money transfer service. M-Pesa is already enormously popular in Kenya, where it’s operated by Safaricom and used by 10 million people. It’s also available from Vodacom in Tanzania. The technology was developed by the Vodafone Group to let cellphone users transfer money quickly, easily and securely from person to person. Vodacom CEO Pieter Uys said: “The beauty of this service is the ease and speed with which people can send money to each other anywhere in the country. As anyone can receive M-Pesa without having to be an M-Pesa customer or even a Vodacom subscriber, it has the power to reach all cellphone users.” Only Vodacom customers can send M-Pesa, but anyone on any cellphone network can receive it. Nedbank chief executive Mike Brown said cellphone penetration was extremely high in South Africa, but banking was far less widespread, with more than 13 million economically active South Africans not having a bank account. M-Pesa would make basic financial services accessible to all and help bring marginalised individuals into the economic mainstream, he said. Customers can register for the service and deposit money into their M-Pesa account at outlets including shops, spazas and all Nedbank branches. Once they have money in their account, they can send it to any other cellphone user in South Africa, and the receiver can collect the cash at any M-Pesa outlet or a Nedbank ATM. Customers access their accounts using a four-digit PIN code and as long as that PIN remains secret their transactions are secure.

September

Price war skirmishes have become a regular feature in East Africa, and bubbled up again as Kenya made some drastic cuts in mobile call fees. Analysts said that posed a huge competitiveness challenge to its regional counterparts following the launch of the East African Common Market. High cross-network call rates force many subscribers to buy multiple Sim cards to call cheaply on one network then swap cards to call another network. Kenyans had been making crossnetwork calls at the equivalent of Ushs 300 a minute, with Uganda charging Ushs 340. But the price difference changed dramatically after the Communications "South Africa’s largest cellular network Vodacom teamed up with Nedbank to launch the M-Pesa money transfer service." Commission of Kenya halved the interconnection rate. Kenyans now call for an equivalent of Ushs 75 a minute across all networks. In Rwanda, the rate is about Ushs 270 a minute, while Tanzanians pay about Ushs 7.5 per second, and MTN Uganda charges Ushs 9 per second. When the Uganda Communications Commission tried to force down interconnection rates from USh180 to Ushs 131 last year it was immediately sued by MTN, which claimed that was well below the actual cost of the service and the fee should not drop below Ushs 151. Then Warid Telecom instigated a price war by slashing cross-network calls to Ushs 5 per second, making it the cheapest in the market. Warid said the new rate was half its previous fee, and was designed to make cellphone services affordable to more people. Next Bharti Airtel led a price war in Kenya by cutting call rates by up to 45%. Bharti said usage soared by 50% after the cuts, and within eight weeks its revenue was back to normal as higher usage offset the lower call fees.

October

Few tears were shed when a shake-up in South Africa’s cabinet saw Communications Minister Siphiwe Nyanda unceremoniously axed. Nyanda was replaced by the former deputy communications minister Roy Padayachie, seeing the return of a man who once showed far greater promise than the late minister he served under, Ivy Matsepe-Casaburri. Nyanda had allowed the department to totter from crisis to crisis. First he bought two extravagant BMWs then racked up massive hotel bills at the taxpayer’s expense. He never shook off allegations that he benefited from dodgy tenders. Then a spectacular clash saw him fire director-general Mamodupi Mohlala, who wanted to change the tendering processes. As internal wrangling absorbed much of the minister’s time, the state-owned signal distributor Sentech and the SABC were allowed to keep spiralling downwards through mismanagement, corruption, boardroom spats and failure to deliver on business plans. Analysts agree that Padayachie is a great choice, but given the department’s appalling track record for more than a decade, anyone with a touch of common sense and motivation ought to be an improvement. October also saw South Africa’s fixed line monopoly Telkom launch its new mobile services. The mobile offerings, dubbed 8ta, include a full range of prepaid and contract packages for consumers and corporate customers. Its “ultra-competitive contract offers” starting at R90 a month were designed to encourage more usage of mobile voice and data services, said 8ta’s Managing Executive Amith Maharaj. “We will provide more minutes for your money than any other network.” Telkom has erected 800 base stations of its own and has a roaming agreement with MTN to cover areas it has not yet reached. The initiative has already cost ZAR205m in operating expenditure and a further 3,200 of its own base stations are planned.

November

The long-awaited switch from analogue to digital broadcasting in SADC countries by 2015 looked set to be delayed by another five years as countries argued over which technology to adopt. The prediction of long delays came from Mgqibelo Gasela, head of regulatory affairs for MultiChoice Africa. He advised SADC leaders not to bow to pressure from Japan and Brazil to adopt a technology that is cheaper but less robust than the one they initially supported. Engineers in the Southern African Digital Broadcasting Association strongly recommend the adoption of DVB-T over the Brazilian and Japanese ISDB system, but politicians were being swayed by political pressure from those countries. “SADC should choose a standard that is the best standard worldwide and the latest,” Gasela said. And that meant DVB-T. He urged ministers to vote in the best interests of the region and not for political expediency. In January 2011, everyone breathed a sign of relief when South Africa’s Communications Ministry announced that SA would adopt DVB-T2, the latest version of the European standard. The Southern African Digital Broadcasting Association called the decision “visionary. Meanwhile, research by Informa Telecom declared that Africa now has 506 million active cellphone subscribers. Africa accounts for 10% of the world’s mobile subscriptions as user numbers in the continent rose 18% from last year due to demand for new services such as mobile internet access. In Ghana, a change of ownership took place as Kasapa Network was sold to Dubaibased Expresso Telecom. Kasapa serves 400,000 customers as the fourth operator behind MTN, Tigo and Vodafone. Expresso operates the Intercellular network in Nigeria and holds new licences in Mauritania and Senegal. CEO Isham Ayub said his company would upgrade the network across Ghana to enhance coverage, attract more users and offer a more customer-oriented service.

December

As the year limped to a close, MTN finally declared that outgoing CEO Phuthuma Nhleko would be replaced by Sifiso Dabengwa on Apri 1. Nhleko will stay on as non-executive deputy chairman. Dabengwa is currently the chief operating officer (COO) and was seen as the obvious choice, since he worked closely with Nhleko in driving MTN’s growth strategy. The COO position will be scrapped and a new position, CEO of MTN International, will be created to focus intensely on opportunities abroad. No candidate has been name for that yet. Christmas was grim for employees at South Africa’s fixed and mobile operator Neotel with retrenchments looming. Neotel has more than 1,000 staff, which cynics would say almost outnumbers its customers. The company’s debt providers have apparently brought in independent management consultants to assess the situation. Neotel will consult staff in January and February, with retrenchments expected in April. Neotel says it is evaluating its business strategy, operational performance, efficiency and competitiveness with a view to achieving long-term sustainability. Staying in South Africa, the government pledged to build 18 information and communications technology centres in 2011 to take technology to the rural poor. The ZAR180 million scheme will provide broadband internet access and computing resources in underserviced areas to help raise the country’s appalling low broadband penetration rate of 4% to double digits. Bringing us full circle, we end back in the Democratic Republic of Congo (DRC), where Vodacom and its minority shareholder Congolese Wireless Network (CWN) have agreed to appoint investment bank NM Rothschild & Sons to explore options to settle their acrimonious dispute and keep their network viable.

And a quick look at what's brewing for 2011:

Bharti should make a big impact in the countries where it aquired the networks of Zain. Expect more price wars, more innovative offerings and a general slashing of any flabby bits in the operating expenses. In South Africa the mobile interconnection fees finally fell, but the Independent Communications Authority of SA (Icasa) didn’t really get its way against wily operators Vodacom and MTN. It will try again in 2011 with plans to cut call termination rates in March. Consumers are advised not to hold their breath.

In just ten years, Africa has gone from almost relying almost solely on satellite connections to the rest of the world, to a blooming ecosystem of undersea cables that are changing the way almost

everything is done.

When the SAT-3/SAFE cables came online, in 2001, their design capacity of 120Gbit/s and 130Gbit/s was projected to be more than enough for the coming years. In fact, the long-awaited SEACOM cable, which went live in 2009, only has about 110Gbit/s lit up – or made active – of its total 1.28Tbit/s capacity. But are these design capacities, and current utilization, indicative of the demand? The past few years have seen some fantastic activity along the African coastline. While the rest of the world surged ahead, bolstering infrastructure with fibre-to-home offerings and investing in cross-Atlantic links, the African continent hobbled along on hamstrung international connections. Slow link speeds provided little incentive for telcos and governments to offer faster connectivity options, which saw little progress in the early 2000s. This was also not helped by exceedingly expensive bandwidth costs on the ageing SAT-3/ SAFE link – monthly costs for 1Mbit/s block could be up to 50 times more expensive than a similar link in Europe or North America. However, when SEACOM landed in 2009 it was hyped to be the solution for Africa’s Internet requirements. This fast, open link running along the continent’s Eastern coast was the first major new cable in about 8 years, and spearheaded the arrival of cables we’ve heard more about, since then. 2009 saw two more cables: LION, a 1.28Tbit/s system linking Madagascar, Réunion and Mauritius, and TEAMs, a 40Gbit/s direct link for Kenya to the Middle East. The U n c l u t t e r e d Cables following year saw three major links go live. MainOne is another 1.28Tbit/s cable running from Spain, along the hump of Africa, and terminates in South Africa. EASSy (3.8Tbit/s) comes down along the East coast, from Sudan to South Africa. MainOne is supplemented by a different cable system, GLO1 – a 640Gbit/s link that runs from the UK all the way to Nigeria. Later this year will see the arrival of the biggest fibre link, yet. The 5.12Tbit/s WACS undersea cable is scheduled to go live. It will link South Africa, Namibia, Angola, DRC, Cameroon, Nigeria, Togo, Ghana, Ivory Coast, Cape Verde and the Canary Islands with Portugal and the United Kingdom. Despite its high design capacity, it’s expected that only a fraction of this will be made available at first. Joining WACS is the EIG (Europe Indiage Gateway) cable. Despite its name, this 3.84Tbit/s cable will shore in Libya, Egypt and Djibouti. Later in 2011 the SEAS cable will link the Seychelles to Kenya, for access to its outgoing cables. It’s clear, then, that the last two years have brought a surplus of connectivity to Africa. Most of the cables mentioned are running below capacity though. African countries are equipped with the backhaul capacity to bring the world to their doorsteps, and offer both businesses and citizens with fantastic, high-speed access to the growing pool of information on the Internet, but there are still major obstacles to be overcome. Each country has its regulations and rules that determine how telecommunications operators may go about their business. Stephen Song, a South African broadband activist, says, “The biggest challenge we face with all these multiterabit cables is stimulating effective competition in national distribution of international bandwidth.” It is up to the governments and regulatory bodies in developing countries to make sure that they nurture an environment where growth will be promoted. Regulations need to change swiftly, to accommodate the rapid adoption of new technologies. Song adds, “Both Seacom and MainOne have been stifled by incumbents who own the national backbone infrastructure and have not bent over backwards to be helpful because of their interests in other cables.” Companies that are stakeholders in existing, older cables stand to gain more from sticking to the bandwidth or services from that connection, rather than forking out cash for capacity on an alternative solution – especially if there’s no need to. It also highlights how the success of an undersea cable is dependent on a healthy backbone infrastructure. Stephen goes on to say, “Governments face the challenge of addressing the clear strategic need for investment in national fibre infrastructure without disincentivising industry investment. Getting public-private partnership right in this area is essential.” How this is approached is not set in stone. A one-sizefits- all solution cannot be used, especially with drastically different economical and geographical factors playing a role. One country might need a full wireless deployment to reach communities in far-flung areas, where it may be uneconomical to deploy fibre or copper cables. Another country could be more suited to the conventional cable deployments. In both cases it is up to the governments, with the regulations they’ve put in place, to help promote the technologies. Once the stage has been set, it will be up to telecoms operators and ISPs to toe the line. How will they make better use of the bandwidth that’s being provided by the undersea cables? What sort of offers can made available to users, to promote usage of the services? It’s all good and well if we’ve been given unlimited high-speed Internet access, but after we’ve browsed a thousand sites and checked all our free e-mail accounts, what is left to do? Assuming a metropolitan area has had its roads dug up and an extensive fibre network has been constructed, with the co-operation of all parties that stand to benefit, they will want to start looking at ways of making that investment work. One of the best value-add propositions is a triple-play offering. Traditional use won’t see home users saturating a 50Mbit/s fibre link with regular Internet usage on two computers. But present consumers one link, with a fixed price and multiple services, and things start making more sense. A portion of that downlink can be dedicated to browsing and high-speed download services, while the rest can be reserved for additional services. Highdefinition digital TV can be delivered on a fibre connection, and internationally there are many established services offering video entertainment over an Internet connection. In the US, services like Netflix and Vudu provide on-demand streaming of full-length movies, while Hulu is a free solution that cable TV subscribers can use to watch television shows online. The examples cited are US-specific, but show how an open market and highcapacity local loop can provide more business opportunities. Internet subscribers may not have paid a telco more for the privilege of consuming entertainment, but they’re happy to pay a separate content provider a reasonable subscription fee for guaranteed entertainment. The third component of this triple-play solution is voice. There are already hardware voice-over-IP solutions that just require an Internet connection to replace analogue voice equipment. Marketing this as a cheaper solution for calls will see people use the service more often. Telcos can also remove themselves from the direct retail chain. Rather than monetizing and managing a number of services, they should see themselves as a provider of a raw material – bandwidth – while a middleman takes care of packaging and selling the product. Even in the example of a triple-play solution, an operator can give consumers the choice of who they’d like to provide e-mail, video and voice services. In essence, they can go wholesale. Let’s say a telecoms operator has a data centre with huge data capacity. They don’t have to deal with a consumer customer base, but instead let out the capacity to smaller companies that are willing to be facilitators. A video streaming service can choose to set up customer operations and a call centre, while it pays for servers and bandwidth, without having to worry about maintaining the hardware or infrastructure. The more successful the video service, the more servers and bandwidth it has to pay for. It’s a mutually beneficial relationship. One example of where triple-play has already been deployed is Kenya, through Zuku. At its most expensive, with 82 English TV channels and an 8Mbit/s Internet connection, this fibre service costs home users less than US$70 a month. Zuku’s coverage map for fibre-to-home is very limited, but it’s a great example of fast deployment and value-added services. Stephen Song also points out how certain countries have immediately recognised the strategic importance of national broadband, citing Rwanda and Kenya as examples. He says that these countries have quickly realised what is needed, and those results are now being seen. He points out that South Africa, one of the continent’s strongest economies, has sacrificed its leadership position in this area because there is no one politician or company championing the cause for highspeed Internet. It boils down to the fact that the Internet isn’t just there for watching YouTube videos and browsing websites. There are a number of services and devices that offer content to an increasing number of smart devices. High definition televisions are now being equipped with technology that will make it possible to access services like Skype, Flickr and Picasa. In jurisdictions where it is offered, video services are bundled with the TVs. The most important feature of a smartphones is no longer how it handles phone calls and text messaging, but how well its data services and application ecosystem perform. Surveys consistently show smartphone users to use more data than users of regular phones, something that is made possible by having better access to the Internet. Even more traditional services are now in need of fast, reliable Internet access. Hotels, coffee shops and conference venues can lose a customer just on the basis of wireless access. People do not want to be limited in how they use the Internet, and if more venues can affordably offer these services, the ultimate usage will escalate and the company running the cables will see more traffic – which means more money. Looking back ten years, Africa now has more than 30 times the bandwidth it had in 2001. Technology’s also become a lot cheaper, and consumers smarter. It’s been pointed out many times before that the lack of legacy infrastructure in many African countries makes it easier to adopt newer technologies and rapidly deploy them. At the moment, the biggest hurdles we face are anticompetitive practices and ageing regulations. Broadband has become a necessity, rather than a luxury. Governments can use Internet access as a tool to educate people and create a skilled workforce that will draw foreign investments. International companies no longer need to import talent, but should be able to draw from a local pool of experts, adding true diversity. Jobs can be created by having an open resource that is fairly regulated and policed – entrepreneurs should not need to worry about the insurmountable obstacles and red tape, should they decide to start an Internetbased venture. Be that venture to supply information and entertainment, or setting up a cable or wireless infrastructure for connecting citizens to the fast-expanding online world.

Satellite's here to Stay

With the wealth of fibre optic cabling being laid along Africa's coastline and the array of projects underway to connect landlocked countries to cables such as SEACOM, EASSY and WACS, you'd be forgiven for predicting a swift departure of the satellite communications services that have connected Africa to the rest of the world for so long. However, in reality, satellite technology isn't going

anywhere. As fibre becomes a more prolific part of Africa's infrastructural landscape, so the usage model for satellite will merely change.

Fibre’s cheap … well, cheaper than satellite. And with all the fibre being laid – both undersea and at a local level – satellite will soon be on its way out. Right? Wrong! Scott Sprague, Senior Vice President of Global Sales at SES says that today satellite is still an intrinsic part of the communications infrastructure of countries in the developing world, regardless of how much fibre they have in the ground. The difference is, where those countries classically relied on satellite for point-to-point communications, now fibre – a far more cost effective way of providing point-to-point connectivity – is the favoured technology. And satellite has moved onto other applications. “When I joined SES 10 years ago, fibre connectivity was making its way into the Indian market and the same predictions surfaced,” Sprague explains. “Instead of satellite disappearing however, the business model changed from one that was focused on point-topoint applications, to one that favoured point-to-multipoint applications. “Fast forward to today and we’re doing more satellite business in India than ever. The only difference is the business model,” he says. Sprague believes the same will be true in Africa over the coming decade. After all, it’s no secret that fibre cabling is more competitive on a cost per megabyte, point-to-point basis. And similarly, nothing competes with the cost efficiency satellite can offer in point-to-multipoint applications, such as Very Small Aperture Terminal (VSAT) and Direct-to- Home TV. But, when you’re faced with an expensive solution versus no solution at all, the expensive solution is better than nothing. And with a dearth of better options on the connectivity front, satellite has been somewhat of a godsend for Africa.

Perfect for failover

Aside from satellite beginning to take on a role that’ s more centred on point-to-multipoint applications, Sprague says that satellite will continue to be a valuable failover for fibre connectivity. “Because it’s not quite as reliant on other infrastructure (such as electricity supply) as fibre optic networks are, satellite tends to be more reliable,” Sprague says. “And this in turn makes it a perfect backup solution for a fibre backbone,” he says. A great example of this in practice, Sprague says, is French Polynesia where satellite technology was  the islands together.  “When a large fibre cable was run to the main island, there wasn’t any real need for the satellite to stay in service, but instead of it going away completely, the satellite technology was kept around as a failover,” he says. “And considering a failure in the fibre cable results in all communications being interrupted, the satellite has been used from time to time,” he adds.

Direct-to-HOME TV

Looking at the future, Sprague says there’s very little that’s capable of competing with satellite when one considers an entire continent like Africa can be covered with a single beam. “It’s easy to deploy, cost effective to manage and above all, reliable,” he says. And this is the primary reason Sprague says that SES currently has six customers in the Direct-to-Home TV space today. “While they’re still in the early stages of their development, there’s interest in increasing the number of Direct-to-Home TV services available within both regional markets and the pan-African market,” he says. And one of the most interesting changes this has effected in the market as a whole, Sprague says, is the amount of TV content being developed in Africa, and being consumed in Africa. “Three or four years ago, Africa was pulling the vast majority of its content from other parts of the world. Now there’s a wealth of content being developed on the continent, for consumption on the continent,” he says. And history shows that this is only the start. As more consumers get their hands on the technology and devices begin making their way into the hands of the man in the street, this will scale upwards at a blistering pace.

Banking, rural telcos and more

Outside of entertainment, Sprague says SES looks after a number of banking institutions throughout Africa that rely heavily on the star configuration of their multipoint network when it comes to providing the backbone for very data intensive applications. “Here we use satellite as the main mechanism for pushing and pulling large volumes of banking data from branches,” he says. The same applies when it comes to enabling rural telco networks for villages throughout Africa. Satellite provides an asymmetrical link, so it’s perfect for applications, such as browsing the Internet and downloading media, since the requests for the download are small but the downloads are exponentially bigger. Sprague says that there’s also strong opportunity for satellite when it comes to providing services to mobile telcos, especially if one considers the strong push underway for triple-play offerings in Africa. “Mobile telcos are looking at hybrid networks that consist of both terrestrial and satellite infrastructure in providing for their customers,” he says. “Also, this is often not just about companies that exist inside Africa,” he adds. “In many cases we’re engaging with service providers outside of Africa – most commonly, from India and China – that are looking to take advantage of market dynamics here,” he says.

Still a fibre competitor

Satellite’s better suitability to point-to-multipoint doesn’t mean it’s completely out of the ballpark when it comes to point-to-point applications, however. SES’s work with O3b Networks and its fleet of low orbiting satellites makes satellite a strong competitor to fibre. O3b’s focus on a specific geographical area and the fact that coverage can be easily moved or reconfigured  as needs dictate makes it far more versatile than fibre. “Add to that the fact that some geographic regions and their harsh terrain just don’t lend themselves well to the rollout of fibre and it’s clear that low orbiting satellites have an important role to play,” he says. Sprague says the challenge for satellite operators is to keep costs as attractive as possible, while simultaneously replacing their assets often enough for reliability to be maintained. “It’s a balancing act,” he says.

Onwards and upwards

Sprague says that SES sees a bright future for satellite on the African continent and out of the six launches it has scheduled for this year, two will be dedicated to Africa. That will increase the number of satellites it has servicing Africa from seven to nine, on the backdrop of a current fleet that consists of 44 satellites in 30 orbital locations and will consist of 50 satellites by the end of this year . At the end of 2011, 18% of SES’s satellite fleet will be dedicated to servicing the African market. Outside of putting new satellite capacity in the sky , Sprague says that SES is increasing its focus on the ground too. It plans to add offices in East and South Central Africa to its office in South Africa over the course of the year. “In reality, Africa consists of 52 very interesting and different markets with varying demands and opportunities,” he says. “We are increasing our on-the-ground presence so it can understand these dynamics and stay close to our customers’ needs. We believe in understanding our target markets and that too many multinational companies have made the mistake of managing all of the countries within Africa in the same way. There’s a ton of opportunity for companies that are able to adapt to changing market conditions and assist their customers in their endeavors for growth. We’re aiming to be one the companies at the core of that phenomenon,” Sprague concludes.

As global economies continue to recover from the worldwide recession of 2008 and 2009, with a number of developed economies still struggling, the emerging economies of the world have shown the strongest growth, especially in Africa. One area where this is most evident is the information and communication technologies (ICT) sector. This sector is a key socio-economic driver, as it has a huge beneficial impact on social and economic development and contributes significantly to GDP growth. The vast investment going into fixed-line and wireless communication technologies in Africa, South America and parts of Asia is helping to open up these economies and accelerate growth and development more rapidly than in developed nations. These trends are clearly illustrated in the annual Connectivity Scorecard study commissioned by Nokia Siemens Networks and conducted by Professor Leonard Waverman, Dean of the Haskayne School of Business, University of Calgary in Canada, in conjunction with the economic consulting group LECG. The Connectivity Scorecard is the first study to rank 50 countries around the world in terms of useful connectivity: that is, the extent to which governments, businesses and consumers make use of ICT to enhance a country's social and economic prosperity. The study groups economies into two separate indexes, to account for differences in the level of their development. The indexes rank economies according to the World Economic Forum's definition of innovation, resource and efficiencydriven economies. Developed economies, which are driven largely by the intersection of technological innovation, globalisation and deregulation, fall into the innovation-driven economy index; developing and emerging economies are classified as resource and efficiencydriven economies, and are grouped together for the purpose of the study. The scores are determined by the measurement of a series of indicators for each country in two areas –infrastructure and usage, plus skills – in the categories of business, government and consumer markets. Individual weightings are allocated to each sub-category of the country, with a larger weighting applied to business, since it is a key contributor to productivity growth. The Connectivity Scorecard therefore measures countries on a relative basis rather than on an absolute basis, with low scores reflecting gaps in a country's infrastructure and/or usage. Historically, African countries have done well in the study, with South Africa leading the pack in 2009 and 2010. Other key African nations that feature prominently in the study include Nigeria, Egypt, Tunisia, Kenya and Botswana. This is mainly due to the large scale investment going into fixed-line and wireless connectivity infrastructure, as service providers look to expand reach and market share in these burgeoning markets. South Africa has done particularly well in the study, placing fourth in 2009 and second in 2010, due largely to the robust spending and investments being made into ICT by the business and public sector, as well as the high level of business usage and ICT skills in the market. This reflects the fact that the larger South African corporations are sophisticated IT users, especially compared with other resource and efficiency-driven economies. However, there is room for improvement in the consumer segment, as the country displays low Internet subscription levels, as well as usage. The case is different in the mobile sector as South Africa's mobile telephony penetration and coverage range from good to very good, with high level SMS usage; but it is lacking voice minute usage when compared with other resource and efficiency-driven economies. This robust investment is being driven mainly by large-scale fibre infrastructure projects aimed at harnessing the massive amounts of international bandwidth available from a number of undersea fibre optic cable systems that have come online in recent years. The SEACOM and Eastern Africa Submarine Cable System (EASSy) along the East coast of Africa, along with the West African Cable System (WACS) and the incumbent SAT-3 cable system along the West coast, has increased international broadband capacity exponentially, to the point where it is now cheaper than local bandwidth capacity. The major hurdle in the advancement of the local connectivity market has been the widespread inability of service providers to access the incumbent operator's local loop, as well as a lack of suitable infrastructure to deliver all this capacity to the door of businesses and consumers. This has resulted in some level of fixed-mobile substitution, where home users adopt mobile data as their primary source of connectivity. However, Nokia Siemens Networks (NSN) has experienced a great deal of demand for our 40G technology on fibre, and there are a number of new fibre infrastructure projects rolling out in South Africa, driven either by government or consortiums of service providers and network operators. Due to the restraints of the local loop in the country, NSN also expects that the broadband access market for home use will be dominated by wireless and DSL services for some time to come. From a satellite perspective, large bluechip corporates – for whom connectivity is mission critical – still rely on satellite services to provide an essential level of redundancy. A number of projects aimed at providing connectivity services to rural and remote areas are also using a combination of satellite services and next generation wireless networks to reach these untapped markets. Satellite projects such as the Google-backed O3b and Intelsat SA's New Dawn satellite will benefit both South Africa and Africa, as more high capacity broadband services will be provisioned to the African continent in the near future. Despite these factors, South Africa dropped down the Connectivity Scorecard rankings in 2011, but this was mainly due to the more robust data and methodology used – specifically, a re-weighting that affected the business components of the scorecard; and also the use of new data and indicators, such as usage, that adversely affected South Africa. In 2011 South Africa fell seven places to rank ninth among the resource and efficiency-driven economies. However, when these fibre and satellite services come online we can expect a marked increase in the connectivity capabilities of a number of African countries, including South Africa, as they will bypass the barriers currently in place around the provisioning of ICT services, specifically high speed connectivity. This will make the Internet a part of everyone's life and will increase capacity from Kbits per second to Mbits per seconds. The key element, relating to the Connectivity Scorecard, is a country's ability to utilise these services to improve its level of socio-economic growth. Taking a closer look at the scorecard, a similar pattern can be seen in the performance of all the other African nations discussed, with the exception of South Africa. They display a satisfactory performance in the consumer segment, driven by adequate mobile network penetration. However, focused development in areas such as human capital and regulatory frameworks needs the most work, as these areas will enable the countries to look beyond the mobile sector for growth. The challenges and potential are evenly matched, thereby calling for sustained efforts across all segments to harness existing potential, with fixed-line fibre infrastructure playing the primary role in provisioning affordable high speed connectivity services. More specifically, Botswana has moderate consumer and weak business infrastructure, yet it has strong business usage of ICT. The country needs to further develop ICT infrastructure, especially fibre infrastructure, to improve measures like broadband penetration and Internet connectivity. Despite its high mobile penetration, Kenya's low ICT investments by businesses and the government affect its overall ICT development. However, the telecommunications sector is progressive and increased investment into fibre and satellite capacity can greatly enhance its capabilities. Tunisia has a strong consumer segment as a result of heavy investments in the telecom sector since the mid-1990s, which has created one of the most developed telecommunications infrastructures in Northern Africa. A high penetration rate driven by nearly 100% mobile network coverage is the country's biggest advantage. However, the country is held back by mediocre to low performances across the business and government segments and will do well to focus on a supportive regulatory framework, while developing basic human capital to boost overall ICT development. Supported by a strong showing in mobile telephony, Nigeria's relative strengths lie in the consumer segment. Poor performance across business and government is holding back its overall ICT development. Lastly, Egypt remains at the lower end of Africa's resource and efficiency-driven economies due to its weak business and consumer categories. Its relative strength lies in the government segment, but it needs sustained growth across all sectors to see real advancement. It is clear that significant investment into the provisioning of fibre infrastructure will greatly assist the majority of Africa's strongest resource and efficiency-driven economies in the Connectivity Scorecard study. This should see them improve their rankings in years to come, especially as it will allow them to tap into the wealth of international bandwidth capacity running up and down the African coastline. For land-locked nations, satellite services will greatly boost ICT capabilities in the short term; as they build out more sustainable, lower cost connectivity capabilities, such as fibre and next generation wireless networks.