The SADC (Southern African Development Community) Regional Information Infrastructure (SRII) identified at least 15 projects within the 14-country SADC region to close international gaps and upgrade existing links. Several options were considered for its ownership, including the formation of a regional company, but it was decided instead that the carriers involved in each country would secure the funding and implement projects themselves bilaterally, or appoint a third carrier to do so if one was forthcoming.
Of the proposed projects, a variety have been built so far: mainly the links between South Africa and Namibia, and Botswana. There is also a fibre link to Zimbabwe, although the leg from the South African border to Gweru (Zimbabwe) comprises digital microwave transmission. This arrangement differs slightly from the
conventional bilateral model: Telkom has installed the infrastructure at both ends, and is recovering the investment from Net*One (the Zimbabwean carrier) through an accounting rate arrangement which takes a cut out of revenues from both incoming and outgoing traffic until the cost is covered. Such an arrangement could serve as a model for other bilateral projects, although its attraction lies in the high volumes of international traffic that flow into and out of Zimbabwe.
The East Africa Digital Transmission Project project was conceived in 1997, and aimed to see the deployment of fibre optic cable and microwave radio to interconnect the three countries of the EAC: Kenya, Tanzania and Uganda. Again, this project feeds on close regional co-operation. The three carriers of the region were to contribute to the cost, but additional funding was conditional on the pr ivatisation of all three operators, which has fallen through because of delays in privatising Telkom (Kenya), and could be superseded by the advent of COMTEL.
According to the tender issued by the East African Telecommunications Companies in July 1999, the project had essentially two elements:
• Fibre optic links. The cable would thread through Tanzania, Kenya and Uganda, from Dar-es-Salaam - Tanga - Mombassa - Nairobi - Malaba - Kampala - Mbale - and Mbarara. The tender requirement was to lay the cable and sub-duct, together with associated civil works and services.
• Microwave radio links . Microwave would knit together the disparate nodes of the network, providing better connectivity and alternative routing in case of failure, linking Mombassa (Kenya) to Tanga (Tanzania), Nairobi (Kenya) to Arusha and Dodoma (both in Tanzania), and Masaka (Uganda) to Bukoba and Mwanza (both in Tanzania). The tender was to supply the radio equipment and antennae, synchronous digital hierarchy (SDH) multiplexing equipment, as well as the associated civil works and services.
With the project as originally conceived having fallen through, a new model for the completion of this network is appearing - one in which each of the three operators build their own sections, which can then be interconnected. Telkom Kenya
emphasised that it is strongly supportive of this project, and intends to roll it out as part of their strategic plan. Costing US$11.5m to build the Kenyan section of the network, this was estimated to take 13 months to complete and was scheduled to be ready before the end of 2003. Indeed, the route of this network will become the national backbone, as it route passes through the main cities and towns and will serve some 85% of national traffic. Also, Telkom Kenya’s existing IP backbone connects Mombasa, Nyeri, Nakuru, Kisumu and Eldoret to Nairobi, and from there to the earth stations at Kericho and Longonot.
The project also has the potential to enable Telkom to act as a regional hub. Should an East African submarine cable be built, this would interconnect to the national
backbone at Mombasa. Not only would this provide an outlet for international traffic for Kenya, but interconnect to the Ugandan and Tanzanian networks. Thus Telkom could then provide bandwidth to the whole East African region – perhaps even as far as Eastern DRCongo.
COMTEL is the embryonic telecommunications services company for the 21-country COMESA (Common Market Eastern and Southern Africa) region which aims to operate advanced voice and data services over a network that will stretch from Cape Town (South Africa) to Cairo (Egypt), predominantly with fibre, but also with some digital microwave or satellite links, especially in the early phases.
The COMTEL project aims to traverse the following countries; Angola, Botswana, Burundi, Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Malawi, Madagascar, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Uganda, D R Congo, Zambia and Zimbabwe.
In November 2001, the projected capital expenditure for the project had increased 25% from US$172m to US$215m. COMTEL’s ownership structure comprises 25% by national telecommunication operators (‘NTOs’), 30% to a strategic equity partner (SEP) and the remaining 45% from private sector investors. This ownership structure is seen as pivotal to the project’s success, because it overlaps with the need for national carriers to build or expand international capacity to their neighbours.
The network will not be built from scratch, rather it will lease capacity on the backbones of national carriers, and only lay new infrastructure to interconnect these backbones where international links do not exist. A key factor is that the project is could interconnect with submarine cable landing points at Cape Town, Luanda (Angola), Maputo (Mozambique), Dar es Salaam (Tanzania), Mombasa (Kenya), Djibouti and Cairo (Egypt). In theory, the project will therefore tessellate with national backbones, and overlay other regional projects including SRII the East African Digital Transmission project, and submarine cables.
COMTEL's core business will consist of providing a high quality carrier system for regional traffic in voice and data. Accordingly, wholesale telecommunications services will be charged at competitive rates via the licensed Comtel operator in each country. Leased circuit facilities will be available on regional and national basis for the national telecommunications/ICT operators.
Participation in company activities is not limited to COMESA countries only. Other African countries are at liberty to join. The Interim Board of Directors of CICL was formed during the 5th meeting of the COMTEL Steering Committee. The Interim Board comprises D.R. of Congo, Egypt, Kenya, Malawi, Mauritius, Sudan and Zambia . Egypt and Kenya were selected as Chairman and Vice Chairman,
respectively. The Eastern and Southern Africa Trade and Development Bank (PTA Bank) was appointed as Financial Advisors in the implementation process of the COMTEL project on a full project ris k basis.
Subsidiaries will be established in other project countries depending on operational requirements of the network. The current proposal is to have COMTEL Limited with an authorised share capital of USD 300 million comprising 3 million shares (ordinary and preference shares) of USD 100 each. The COMTEL Communications share structure has been devised in such a way as to ensure that private investors will have majority equity shareholding. Shareholders will be national telecommunications operators (NTO) from the project countries, the strategic Equity Partner (SEP) and other corporate or institutional bodies. Share allocations consist of SEP 30%, Private Sector Investors 45% and NTOs 25%. The basis on which the private sector investors will be invited into COMTEL will be an offering prospectus prepared by the financial advisers of COMTEL.
The private sector investors (PSI) will be invited into COMTEL Communications Company Ltd through an offering prospectus prepared by the financial advisers of COMTEL Project. The NTOs who need more shares in addition to that already allocated will be given first preference on the PSI shares window.
Based on work carried out by the PTA Bank, and on the basis of assumptions presented in the Business Plan, the COMTEL project proposal has been carefully analysed and found to be technically feasible, institutionally sound and financially and economically viable. The average project return on funds invested is in excess of 50% per annum while the overall Internal Rate of Return is projected at 44.34%. With an Economic Rate of Return (ERR) at 48.6%, COMTEL is forecast to have a positive impact to the sub-region's economies.
Ten NTOs have so far appended their signatures to the COMTEL Investment
Company Shareholders Agreement. Road shows are planned to the remaining NTO's to encourage them to sign the Agreement. In the same vein, negotiations for the signing of the COMTEL Interconnection and Co-operation Agreements will be undertaken. The regulatory environment of each of the countries will be examined in order to pave way for project implementation. The COMTEL Board/Steering
Committee recommended that the Strategic Equity Partner acquisition process should be finalised by May 2003 followed by share subscription remittance by National Telecommunications Operators. Negotiations with potential partners are currently on going with the expectation of meeting the timelines as set by the Board. Anderberg International is the new management company that has been engaged to carry the project forward.
SRII/Comtel Infrastructure Combined