India’s Reliance Communications to help slash internet & business costs

Reuters reports on what may eventually facilitate the emergence of investments in service industries such as call centers in English-speaking Kenya and South Africa.

By Rebecca Harrison

 JOHANNESBURG (Reuters) – India’s Reliance Communications plans to build a submarine cable around the east of Africa that could help slash Internet costs and rival the continent’s own much-delayed plans for a cable.

Flag Telecom, a unit of Reliance, has said it will build a cable linking South Africa to Kenya via Mozambique, Tanzania, Madagascar and Mauritius as part of a plan to revamp its global network by the end of 2009.

The company said in December it was investing $1.5 billion to build the world’s biggest Internet Protocol network over submarine cable systems covering 60 countries.

A spokesman on Wednesday confirmed reports Flag wanted to build an east African cable but declined further details.

African countries have been planning their own cable to link South Africa to Sudan, boosting Internet capacity and slashing bandwidth costs in the east of the continent. But the project has been delayed due to wrangles over financing and access.

The East African Submarine Cable System (EASSy) project won backing from a 12th African country in December, meaning it can push ahead with construction. The cable is set to launch by the end of 2008 — later than originally planned.

An advisor to the body spearheading the EASSy project played down the threat of second new cable to EASSy and noted that Flag would need to get approval from African governments.

“Our (cable) will be operated on a cost-recovery basis so anyone wanting to compete with that will have to operate on the same basis,” Edmund Katiti, policy and regulatory advisor to Nepad’s E-Africa Commission, told Reuters.

Even though only a handful of African countries have signed up to the EASSy plan, Katiti said he was confident the cable would eventually link all east African countries.

No one at the South African or Kenya communication ministries could immediately be reached for comment.

An undersea cable is expected to cut Internet costs in east African countries by up to a third over five years and stimulate investment, particularly in countries such as Kenya and South Africa, which are keen to nurture call-centre industries.

South Africa’s fixed-line operator Telkom controls international bandwidth in the continent’s biggest economy via an existing undersea cable to Europe via west Africa.

A second cable around the east of the continent could break that stranglehold and force prices lower, attracting investment and making services affordable for the poor.

South Africa’s second national operator Neotel, which is managed by India’s Videsh Sanchar Nigam Ltd, launched wholesale services late last year. Reliance competes with VSNL in the bandwidth market.

Reliance, which may take on Britain’s Vodafone in a bidding war for India’s Hutchinson Essar, plans to list a stake in Flag Telecom on the London Stock Exchange to raise $500-550 million, Indian newspapers reported this week.

© Reuters 2007. All Rights Reserved.

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