Cellular operators have a requirement for a national transmission backbone to backhaul cellular traffic between base stations and to the mobile central switches. Cellular operators lease capacity on the backbone of incumbent operators where it is cost-effective but in many cases have had to construct their own transmission networks in order to backhaul traffic between base stations and switches. These networks use a combination of both microwave and satellite to reach more remote locations. In total cellular operators have invested in the region of over US$500m on the construction of these networks within the last five years. Cellular operators in most countries now have more extensive coverage than fixed-line incumbents, and a transmission network to reach these locations.
Where the mobile operators have been unable to lease capacity on incumbent’s backbone infrastructure, this is achieved either by deploying their own microwave transmission infrastructure, or the deployment of VSATs and leased satellite capacity to backhaul traffic around the country, or both. Nigeria and Kenya are clear examples. In both countries, the mobile operators had to approach the national carrier (NITEL and Telkom Kenya) for lines, but when unable to procure the allocation of E1 lines that they required, they have had to build out their own microwave infrastructure. MTN in Nigeria leased a whole transponder on one satellite to backhaul traffic - effectively a satellite backbone – until it could build out its own microwave infrastructure in Nigeria. In November 2002, Vodacom International signed a five- year contract with Intelsat to lease C-band capacity on the IS -904 satellite so as to connect base stations and switching centres in the new markets of DR Congo, Mozambique and Tanzania.
There are ten pan-African regional cellular operators2 which are active in a number of countries with contiguous borders and are therefore in a good position to provide international backbones across these countries. Of these regional operators, three have contiguous borders within the East and Southern Africa regions: Celtel, MTN and Vodacom. A full inventory of the transmission network of mobile operators is beyond the scope of this study. However, as coverage grows the transmission networks begin to approach the borders in some countries (see map below). Taking into account that some of the transmission for this coverage is provided by satellite backhaul in more remote locations, it can therefore be inferred that the operators therefore have
transmission to service coverage in these areas. Of particular note on the map below is that GSM coverage within East Africa is approaching a number of borders.
2 Celtel, Econet, Investcom, Millicom International Cellular, MTN, Orange, Orascom Telecom, Vodacom, Gloria Trust and Atlantique Telecom (formerly Telecel)
Source: The World GSM Coverage Map 2004, GSM Association. Data as of February 2004.
In cases where mobile operators in contiguous neighbouring countries have been granted international licences, they have been able to build direct international links. For example, Celtel has done this between Brazzaville (Congo) and Kinshasa (DRC), and also between Uganda and Tanzania via Bukoba. MTN has been able to build links between Uganda and Rwanda, as it holds international gateway licences in both countries. Where they have not and/or there is a monopoly on international gateways, international traffic must therefore be routed through the incumbent. In the case of Celtel’s cellular traffic from Zambia to Malawi, for example, although it might have coverage close to the border in both countries, it must route traffic through the Zambian incumbent Zamtel. Where traffic from cellular neighbouring countries is carried by satellite this also impacts on the quality of calls, and substantially adds to the cost for the customer – with a mobile – to fixed interconnect, international satellite carriage, then fixed – to – mobile interconnect charges.
Mobile Operators with contiguous borders in Eastern and Southern Africa
Operator Countries International gateway licence? Notes
Celtel Burkina Faso Chad Congo DRCongo Kenya Gabon Malawi Niger Sierra Leone Sudan Tanzania Uganda Zambia X X P P X P X P P X P P X MTN South Africa Swaziland Uganda Rwanda Nigeria Cameroon X - P P P -
Vodacom South Africa Lesotho Mozambique Tanzania DRC X - - X
Formerly known as MSI Cellular Investment, Celtel International has the largest mobile footprint in Africa, operating in 14 countries. It ha d about 4 million customers in 2004, and currently covers over 30% of African continent and 25% of the
population. In Tanzania it recently acquired 35% of the incumbent national fixed line operator TTCL, together with the GSM licence. Celtel is also a major shareholder in mobile network operator, Mobitel Sudan, It was a founding shareholder and minority partner in Vodafone Egypt. Most recently in May 2004, Celtel acquired a 60 per cent stake in Kenyan operator KenCell Communication from Vivendi Universal, a dding 1.2 million subscribers to their user-base in a $250 million (Sh18 billion) deal. This also makes Celtel East Africa's only regional operator covering all three East African
Community (EAC) countries of Kenya, Uganda and Tanzania. Celtel intends to invest up to US$200 million in network expansion and the company is studying other opportunities for acquisitions.
As can be seen from the map above, Celtel's operations have tended toward countries with contiguous borders and with the steady growth of its national networks, it is now in a good position to capitalise on establishing its own international infrastructure to move traffic directly across borders and to establish trans-Africa backbone capacity. Celtel views land based infrastructure and backbones as an important investment need and the company could grow faster if more funds were available for this activity and regulatory constraints were relaxed. The cost of using existing monopoly backbones continues to be an issue3, and especially as cell density increases, it becomes
increasingly cost effective for Celtel to implement its own backbones rather than lease capacity from others.
Celtel has international licenses in most of the countries it operates4, and has so far developed cross-border infrastructure to link its subscribers in Tanzania with those in Uganda via Bukoba in north west Tanzania, and between Congo-Brazzaville and the DRC, via a microwave link across the River Congo (which now carries 6.6million minutes of traffic a year). Calls from its mobile networks in the the two Congos are charged at a local call rate, representing a saving of around 75% on the previous cost of calls and it plans to implement a similar system in East Africa. A backbone link between Gabon and Congo-Brazzaville (and thus to Kinshasa) is being implemented and will be complete before the end of the year. A subsidiary international carrier services company called Link Africa has also been established which provides
telecommunication links for Celtel's international traffic, as well as providing services to other operators in Africa5.
The Group is looking to provide the missing links in Celtel's cross-border
connectivity in the region, connecting the DRC 6 to Zambia and on through Tanzania and Malawi. This is a particularly cost effective route to establish as it lies along the population dense strip running through southern DRC and the Copperbelt and eastwards along the railway line to Dar es Salaam (see GSM coverage map). The regulatory environment in Zambia continues to remain an issue, as does access to SAT-3 in Gabon, for carrying the intercontinental traffic where it is still currently much cheaper to use VSAT due to the high tariffs charged by the incumbent Gabon Telecom7. If an East African cable lands in Dar es Salaam using TTCL infrastructure Celtel would likely have a lower cost cross -continental route in the future.
Another potential project would be to establish a trans-Sahel backbone, linking Burkina Faso, Niger, Chad, Sudan, Uganda (and thus to Kenya and Ta nzania). A redundant ring could also be created by linking with the above Central African backbone by continuing South through Chad via Cameroun to Gabon, taking
3
Access to PTO infrastructure is not always an option – in Zambia Celtel has been unable to use the incumbe nt Zamtel's infrastructure in many instances.
4
Celtel has international licenses in Malawi, Gabon, Congo-Brazzaville, DRC, Tanzania, Uganda, Niger and Sierra Leone. It hopes to obtain an international license in Kenya within a year.
5
Link Africa currently services clients in Burkina Faso, Burundi, Chad, Congo, Democratic Republic of Congo, Gabon, Gambia, Ghana, Guinea, Ivory Coast, Liberia, Madagascar, Malawi, Niger, Nigeria, Senegal, Sierra Leone, Tanzania, Uganda, Zambia.
7
advantage of the Cameroun-Chad fibre backbone that has been laid along the oil pipeline there. Strategically, it is likely that an East African Community (EAC) backbone to interlink Kenya, Uganda and Tanzania may be the most achievable segment of the project initially, and Celtel has proposed building this infrastructure at various international meetings. The key barrier noted by the company is the limited competition in the international segment in the region.