[Satellite News 09-14-09] Sea Submarine Communication’s (Seacom) plans to compete with satellite companies in Africa for valuable emerging market connectivity contracts through its submarine cable service, launched in July, are being challenged by satellite’s strong returns in the African rural markets.
    SES World Skies has been particularly strong in response to Seacom’s challenge, by winning a slew of African government and rural connectivity deals. The limitations of submarine connectivity were directly mentioned by Intersat Africa, an SES customer, in an announcement that SES was bringing its Astra2Connect service to the continent in 2010. “East Africa has recently been connected to the Information Superhighway on submarine fiber, but unfortunately, only the users in urban areas will benefit from this Internet revolution. The last mile connectivity is still a challenge and this is where SES’ broadband service and satellite capacity fit in. The Astra2Connect service also complements our Rural Internet Kiosk (RIK) program which will empower thousands of Africans with high-speed Internet,” said Intersat Africa CEO Abdul Bakhrani.
    SES followed that deal up with a multiyear, two-transponder agreement with Galaxy Backbone, a public enterprise of the federal government of Nigeria, to deliver a range of information and communication technology services to rural and remote government offices, schools and hospitals in communities throughout all 36 Nigerian states via the Astra 2B satellite on Sept 14.
    The contracted capacity aims to enable Galaxy Backbone to offer broadband, long distance learning, telemedicine and videoconferencing services out of mobile, solar-powered vehicles that take to the streets of rural towns and villages.
    “Demand for connectivity is spreading across Nigeria at levels we’ve never seen before, much of it driven by the huge economic growth in the country,” said Martin Ahachi, CTO of Galaxy Backbone, in a statement.
    Seacom’s intentions to compete with satellite in Africa were not subtle or hidden. In March, the company called out satellite as “too expensive for market customers,” and named The Communication Commission of Kenya (CCK) as its ally. CCK then approved Seacom’s license to offer broadband services in Kenya by laying 15,000 kilometers of fiber-optic undersea cable to be activated in June 2009.
    The construction of the cable was expensive and faced a one-month delay due to interference from pirates. When the service was launched in July, Seacom once again targeted the satellite industry. “On the West African Coast, the SAT-3/WASC/SAFE cable is controlled by incumbent operators at its landing points, through their membership of the SAT-3/WASC/SAFE consortium. As they have national monopolies on cable access, given that there are no competing cables, these operators set their prices accordingly; many alternative operators are priced out of the cable market and hence are reliant on satellite connectivity,” Seacom spokesman Suveer Ramdhani said in a statement.
    However, since launching the service, Seacom has not found a major investor to bring its network beyond major African coastal cities. The company has, instead, seen small contracts to link up to the existing network. Botswana’s Abari Communications consortium secured a $38 million deal with Seacom to link to the cable. Seacom will use the existing fiber-optic networks in Botswana to provide connectivity.
Satellite, on the other hand, have announced several investment partners and have increased their own stakes in the market with plans to expand and build new networks.
    Convergence Partners, which also owns a share in Seacom, is providing 25 percent of the $250 million in financing necessary to complete Intelsat’s New Dawn satellite project, announced in December. "We believe this is certainly going to have a strong impact on the African communications and mobile market. This is a commercial deal and a commercial satellite from which we expect to derive a return on investment,” said Andile Ngcaba, chairman of Convergence Partners.
    Intelsat New Dawn, will be located at 33 degrees East to serve the African continent. “None of the other telecoms or satellite operators have engaged in such a project. The satellite will be operational in early 2011. Once in orbit, Intelsat New Dawn will join the other 25 satellites within Intelsat’s global fleet that provide Africa with critical transmission services. Today, we have a number of initiatives underway that will add refreshed capacity to the region,” said Flavien Bachabi, Intelsat’s regional vice president.
    Citi Venture Capital announced Sept. 14 that it was investing $25 million in SkyVision Holdings Ltd., a provider of global IP services over satellite and terrestrial fiber optic systems for enterprise, ISP and carrier-class customers in Africa’s emerging markets;
    Investment firms Cyphertech and Shamrock, which will hold approximately 30 percent of the investment each, control SkyVision.  Citi will hold approximately 23 percent, and SkyVision’s management and employees will hold the remainder. 
    SkyVision has coverage over 120 countries and currently operates in more than 50 countries around the world with sales in 2009 estimated to exceed $80 million. The company has achieved growth rates of approximately 50 percent per-year over the past five years.
    While Seacom claims that it is lowering prices in the markets it serves by 30 percent, it has not provided specific figures. The company, which is more than 76 percent owned by an arm of Aga Khan Fund for Economic Development, Venfin Ltd., Convergence Partners and Shanduka Group, with the remainder owned by Herakles Telecom, is aggressively seeking deals to stretch its network across East Africa. While the intentions have been well publicized, the major investor, which will have to inject hundreds of millions of dollars into the company to cover the cost of the submarine construction itself, is still absent.
    Seacom could not be reached for comment.