New MTN underwater cable to fuel price war

Ben Uzor Jr

Nigeria’s submarine cable market with estimated investments of $2.24 billion is expected to witness heated competition with attendant price wars in the next four months. Benuzorreports learnt that MTN’s West Africa Cable System (WACS), a 14, 000km submarine cable, linking South Africa and the United Kingdom (UK) along the West Coast of Africa, is planning an aggressive entry strategy that would consist of significant reduction in bandwidth costs, sophisticated cross-border connectivity services, and value added solutions. It is expected that the cable would be completed by the first quarter of 2013.

The cable is expected to land in the following African countries: South Africa, Namibia, Angola, Democratic Republic of the Congo, the Republic of Congo, Cameroon, Nigeria, Togo, Ghana, Côte d’Ivoire, Cape Verde Islands, as well as the Canary Islands, Portugal and the UK.  The cable has already landed in Nigeria and has also begun commercial services on Business-to-Business (B2B). Interestingly, the arrival of Main One and Glo-1 cables, two years ago, ushered in significant reduction of bandwidth costs by over 50 percent, with the resultant drop in prices of Blackberry Internet Services (BIS).

But sources told Benuzorreports, that the cable managed by MTN from its landing point to the last mile operated service in Nigeria has the unique advantage of MTN’s pre-existing Terrestrial Internet Protocol (IP) and broadband backbone infrastructure. This, according to them, would enable WACS to deliver high grade and highly available internet capacity anywhere and everywhere in Nigeria and across West Africa. In the West African sub-region, MTN is active in Nigeria, Ghana, Liberia, Ivory Coast, Guinea Bissau (Investcom), Republic of Guinea (Investcom).

It was gathered that WACS has already started luring prospective customers, internet service providers (ISPs), backhaul providers and telecom operators, with scintillating propositions, including bandwidth for as low as $10 per megabyte. This is more than a 3,000 percent reduction in the current prices being offered by existing cable system providers, and could further assist in bridging the digital divide in Nigeria. Apparently in response to MTN likely challenge, Main One is bringing down its prices with rates as low as $400 per mega byte per month. Lanre Ajayi, president of the Association of Telecommunications Companies of Nigeria (ATCON) told Benuzorreports in a phone interview that “Nothing is impossible”.

According to him, “There are submarine cable operators that offer bandwidth capacity for next to nothing, sometimes for free. But their business models are designed in a way that they do not make revenue from bandwidth sales. There are other sophisticated communications services they can offer to their customers, to generate revenue.” “This is the beauty of having more than one international cable coming into the country. WACS’s entry will further deepen competition, making these cable operators much more innovative and efficient. The prices of bandwidth capacity will drop further and help resuscitate ailing Internet Service Providers (ISPs). Consumers will get access to effective and reasonably priced internet services.”

Other analysts are not convinced that this pricing regime is achievable in Nigeria at the moment. But sources at MTN told Benuzorreports that the cable would be able to sell at this radical price because the project is not meant for profit making, as most of the capacity is for members of the consortium. Investors in the $650 million project include the MTN Group, Angola Cables, Broadband Infraco, Cable and Wireless Worldwide, Cabo Verde Telecom, Congo Telecom, Portugal Telecom, SCPT (DRC), Tata Communications/Neotel, Telecom Namibia, Telkom SA, Togo Telecom, Vodacom Group and Vodafone Spain. The consortium was granted licence by the Nigerian Communications Commission (NCC) to land the cable in Nigeria. Before the coming of Main One, the price of bandwidth was as high as $800 per mega byte. The reason for the prohibitive cost being that the bulk of the country’s Internet traffic, as found in most parts of the African continent, depends on satellite connections.

Satellite connections are however slower and costlier than fibre optic links between the United States and Europe, up to Asia. Mohammed Rudman, managing director, Internet Exchange Point of Nigeria (IXPN), pointed out that the price war in the business of bandwidth capacity is synonymous with competition in the sector. He further added that this would in turn make broadband service affordable and assist in resuscitating ailing ISPs and cybercafés. Inspite of the growing number of submarine cable systems, Nigerians are yet to feel the impact of these infrastructures, as the internet access market is still characterised by slow and exasperating access to the cyberspace.

The challenge, according to industry watchers, is really the unavailability of requisite distribution networks to move this available bandwidth capacity across the length and breadth of the country. This has slowed down the development of broadband. Main One of Main Street Technologies, has reportedly invested about $240 million on its 700 kilometre submarine cable system, which runs from Portugal to Nigeria and Ghana, branching out to Morocco, the Canary Islands, Senegal and Cote d’Ivoire. Globacom, owners of Glo-1 said that between $600 million and $800 million has gone into the 9,800-km Glo-1 submarine fibre cable with 16 landing points in Europe, North and West Africa.