Seacom cable deal lands big investors

By: Lesley Stones

AN UNDERSEA cable promising cheap bandwidth for Africa yesterday finally named its backers, signing up enough well-connected local investors to guarantee its landing rights in SA.

Investment heavyweight Venfin is sinking $75m into the project, taking a 25% stake in the 15000km cable linking SA to India and Europe.

Cyril Ramaphosa’s black investment house Shanduka is taking 12,5%, worth $37,5m. Another 12,5% goes to Convergence Partners, a group of black investors led by Andile Ngcaba, the chairman of Dimension Data Africa and a former director-general of the communications department. Nedbank and Investec will provide the financing for the R650m project.

SA’s second network operator, Neotel, is pumping in a far more modest R20m, and using its telecoms licence to guarantee that the cable can dock in SA.

The local ownership is sufficient to ensure that Seacom meets controversial new conditions being drawn up by Communications Minister Ivy Matsepe Casaburri, dictating who can land a cable in SA. The minister is insisting that any cable must be majority owned by African investors to come ashore.

South Africans hold 50% of Seacom, and that rises to 75% African ownership thanks to 25% held by the Aga Khan Fund for Economic Development’s Industrial Promotion Services, a development agency based in Kenya.

The remaining 25% lies with New York’s Herakles Telecom, a development group that has invested $4bn in Africa.

Neotel is investing only in the local landing station, but its licence to operate in SA confered on it the right to land a cable, said MD Ajay Pandey.

“Our understanding is that the country needs international capacity, and the way international cable landing protocols have been defined means we have the opportunity here.”

Venfin CEO Jannie Durand said Neotel’s licence to land a cable in SA meant everything had been done “legally and correctly”. Venfin was backing Seacom for two reasons, he said: “We are hopefully going to make a lot of money out of it and SA needs more bandwidth. We want to bring SA affordable bandwidth to the rest of the world.”

Although the cable will cost $650m, it would be partly funded by loans as well as equity, allowing Venfin to take 25% for less than the book value of the project, Durand said.

Pandey believes Seacom will be the only new telecoms cable completed in time to give SA enough international bandwidth to successfully broadcast the 2010 World Cup.

The consortium has already invested more than $10m in a marine survey and engineering of the cable. The actual production of the fibreoptic cable and undersea facilities will start next week.

Seacom will connect Mtunzini in SA to Mumbai in India and Marseilles in France via Mozambique, Madagascar, Kenya and Tanzania by June 2009.

Terrestrial links will be built to take its bandwidth to numerous other inland countries. Its capacity of 1,28 terabytes per second is 10 times the capacity on the existing Sat-3 cable around Africa’s west coast.

The consortium has promised that it will charge other voice and data carriers significantly less for its bandwidth than they pay to use Sat-3 or satellite services, which should trigger a massive decrease in the cost of phone calls, internet access and data transmissions for African consumers and businesses.

“Improved access for business and individuals in Africa to communications, broadband services and new technology offerings can improve lives and help grow the economies of our countries,” said Ngcaba, the chairman of Convergence Partners. “The linking of southern and east Africa with India and Europe is crucial for enhancing development and trade between these key regions.”