Telcos jittery over foreign-backed subsea cables landing in Africa

Foreign-backed subsea cables landing in Africa are sending jitters to local subsea cable operators in the telecommunication sector in Nigeria and Africa.

Less than a month after it landed in the Republic of Togo, Equiano, a subsea cable powered by Google, is heading to Lagos, Nigeria’s commercial capital in April. It is the third subsea cable backed by three big tech companies that are targeting the continent.

There are various active fibre optic cables in Africa including SEACOM (12 terabytes or TB), TEAMS (1.2TB), MainOne (10TB), SAT3/SAFE (800 gigabytes); Glo1 (2.5TB); ACE (5TB); NCSCS (12.8TB); WACS (14.5TB); SAIL (32 TB); SACS (40TB); EASSY (10TB); and LION2 (1.2TB). The carriers – about 30 of them – have invested more than $1 billion as of 2019.

In West Africa, where five major cables, namely MainOne, SAT3/SAFE; Glo1, ACE, and WACS with a combined capacity of 32.800 terabytes per second (TBps), are responsible for providing high-speed internet services, just about 10 percent of the existing capacity has been utilised so far.

Some of the operators who spoke to BusinessDay on condition of anonymity said the inability to deploy more capacity is not entirely their fault as the operating environment remains difficult for them.

But Ajibola Olude, chief operating officer of the Association for Telecommunication Operators of Nigeria, said the entrance of the foreign-backed subsea cables would benefit the consumers and ensure the quality of the internet is improved in the market.

“One thing you should note is that the market is not a monopoly and everyone is free to do whatever is best for the company,” said Olude. “It will lead to a fall in the price of bandwidth, which is good for the consumer.

There is really nothing about it because it is a free market – free entry, free exit. In the long run, they may have to merge. The market is becoming more competitive.”

Sub-Saharan Africa has the lowest internet penetration rate at 39.3 percent compared to the average world rate of 58.8 percent. Investments in subsea cables are seen as a way to bridge the gap.

It is also seen as big tech companies’ answer to the perpetual poor internet services businesses on the continent are faced with. Many of these tech companies also have huge digital investments on the continent but are not operating optimally due to low-quality internet services.

Google, Meta, and Huawei are currently locked in a race for landing the largest subsea cables with the most amount of terabytes on the continent.

Meta’s 2Africa, which was announced in 2020, is expected to lay 37,000 km (22,990 miles) of cables, making it the longest cable in the world when completed with a potential capacity of 180 Kbps. The cables interconnect Europe, via Egypt, and the Middle East, via Saudi Arabia, and 21 landings in 16 African countries.

The subsea cable is being built by a consortium comprising China Mobile International, Facebook, MTN GlobalConnect, Orange, Saudi Telecom Company, Telecom Egypt, Vodafone, and WIOCC. Facebook said in 2021 that it planned to land the cable in Southeast Nigeria and extend connectivity to Seychelles, the Comoros Islands, and Angola.

Google’s Equiano, on the other hand, features 12 fibre pairs and a design capacity of 150 Kbps. The cable, which ironically is named after Olaudah Equiano, a former Nigerian slave, seaman, and merchant who wrote an autobiography depicting the horrors of slavery and lobbied the UK parliament for its abolition, is expected to start from Portugal’s capital in Lisbon and run down Africa’s west coast to connect with South Africa and Nigeria. The cable, which is Google’s fourteenth subsea cable investment and the third international cable funded entirely by the company, is expected to cost around $300 million.

Google had planned that when phase one was completed by 2021, Equiano might have used between 12 fibre pairs (large for a subsea cable) and 16 fibre pairs, coupled with the latest optical networking technology, to deliver a design capacity of about 120TBps or 360 Kbps far in excess of anything that has been built around Africa to date. However, the COVID-19 pandemic delayed the plans. But with post-COVID in full swing, Google now seems to be accelerating the deployment of Equiano.

Huawei’s Peace cable may not be targeting Africa’s largest economy directly, but it is no less a threat for telecom operators with exposure to subsea cables. This is because the cable project is a critical component of China’s “digital silk road,” launched in 2015 as a part of Asian power’s vast vision for global connectivity.

The 15,000-km undersea cable landed in the coastal city of Mombasa, Kenya in March, in a push to meet the sharp rise in demand for internet services on a continent where internet adoption has trailed the rest of the world. Huawei is a shareholder in the $425 million Peace cable, which stands for ‘Pakistan and East Africa Connecting Europe’ and stretches from Asia to Africa and then into France, where it terminates.

One of the concerns for local subsea cable investors is that the huge capacity that the three cables are coming with will almost obliterate the total capacity of those already laid by local investors.

For example, 2Africa cable by Meta promises to provide nearly three times the total network capacity of all the subsea cables serving Africa today, making it by far the largest network operator in Nigeria and Africa.

Also, it is expected to deliver an expansive internet capacity, redundancy, and reliability across Africa, supplement a rapidly increasing demand for capacity in the Middle East; and support further growth of 4G, 5G, and broadband access for hundreds of millions of people.

A primary challenge is the cost of deploying cables on land; this includes foreseen and unforeseen expenses. Apart from taxes imposed by the federal government, there are state-controlled charges like Right of Way and many others that accumulate to make the cost almost prohibitive for operators or infrastructure companies.

Read also: Why telecom market attracts low capital imports in recent years

In its 2020 report, the Nigerian Communications Commission (NCC) said the total submarine fibre deployment in kilometres was 25,128.3km as against 24,729.3km in the year 2019. This is an increase of 1.36 percent within the year under consideration. The fibre deployment by four mobile operators is as follows: MTN-15,244km; GLO – 9,800km; Airtel – 14km and NTEL – 70km.

The total on land fibre deployment was 43,898.8km as against 43,898.10 km in the year 2019. The on-land fibre deployment was reported as follows: MTN – 14,612km; GLO – 13,306km; Airtel – 11,151km; EMTS – 4,650km and NTEL – 180km.

This brings the total to 69,027.1km of fibre (on-land and submarine) deployed as of December 2020. According to the NCC, Nigeria needs about 120,000km of fibre optics to achieve full connectivity.

An investor in one of the local subsea cables told BusinessDay that the new cables would not really add much in terms of additional bandwidth capacity as they will face the same challenges that local cable operators are exposed to. However, the market stands to benefit from an open competition.

“At the end of the day trying to control profitability for ‘local’ operators will end up costing end users more. They took a risk in investing. If they ended up with a monopoly they would share those excess profits with the consumers. So I’m not sure why the consumers should end up paying if their bets didn’t end up paying off as well as expected,” the investor said.

Rotimi Akapo, partner and head of telecommunications, media and technology practice group, Advocaat Law Practice, noted that beyond the taxes and levies is the challenge with return on investment as a result of lack of infrastructure to deliver the capacity to the hinterlands from the cable landing station.

“They will still face the same challenges. MainOne’s experience is very instructive that even with local entities they still face the same challenges,” Akapo said.

He is however confident that the regulations in place will encourage fair competition.

“The African market is still largely untapped. Also the big tech companies don’t want to continue to rely on telcos for connectivity; they want to run their end-to-end connections and even have excess capacity for expansion,” he said.