Altech, through its subsidiary Kenya Data Networks Limited (KDN), has acquired an 8,5% stake in The East Africa Marine System Limited (TEAMS) cable for an amount of $11-million.
The investment will give KDN a 10% voting right and an effective 8,5% equity stake in TEAMS. Altech will fund its portion of the purchase price from cash reserves.
“Africa is in the infancy stages of a sustained growth trajectory in broadband across multiple technologies, services and geographies," says Altech CEO Craig Venter. "The acquisition of a stake in TEAMS compliments KDN’s strategy of being a cross-border, pan-African network operator.
“Shareholders in TEAMS will be allocated cable capacity proportionate to shareholding. KDN’s stake will thus grant us access to additional bandwidth, provision for redundancy of broadband connectivity and significantly increase KDN’s service quality, all the while unlocking a wide range of additional services for the group as a whole,” says Venter.
KDN, a Kenyan company 60,8% held by Altech, is a ‘carrier-of-carriers’ telecommunications operator and internet service provider, with dominant fibre and radio infrastructure throughout East Africa. It is currently the largest data network infrastructure player in the region, with an eye firmly set on broadening its reach throughout Africa. With terrestrial fibre laid in Kenya, Uganda and soon Rwanda, the acquisition of a stake in TEAMS is a perfect fit for KDN’s plans.
In August 2008, KDN became the first ICT company to construct a termination point at the Kenyan coast in anticipation of the landing of East Africa’s three international undersea cables. KDN’s fibre optic cable will connect the undersea cables that land in Mombasa to the rest of East Africa, creating a five-country, fibre optic based terrestrial network linking Kenya, Tanzania, Uganda, Rwanda and the DRC.
TEAMS, the $130-million, 5 000km undersea fibre optic cable project spearheaded by the Kenyan government, stretching from the coastal towns of Mombasa (Kenya) to Fujairah (United Arab Emirates) will facilitate East African connectivity to international communication networks, providing bandwidth at lower prices and creating an East African broadband network, where currently costly satellite technology is used.
Currently, the price for satellite connectivity is $1 900.00 per Mbps per month, whereas the expected price for submarine cable connectivity drops dramatically to $90.00 per Mbps per month. This cost is expected to decline even further to $27.00 per Mbps per month by 2020, a significant future cost saving.
The east African coastline is the most extensive in the world lacking access to a fibre optic connection linking it to the rest of the globe. The landing of TEAMS and other undersea cables is a crucial turning point in empowering the entire African region as readily accessible bandwidth, lower telecommunications costs and faster global connectivity will stimulate economic growth.
“Altech currently plays across the entire digital delivery chain, which represents the interlinked series of technologies and services that enable the sending and receiving of digital data across multiple networks," says Venter.
"We seek to continuously develop and uncover technologies that defend, expand and strengthen our links in the chain, with an emphasis on open systems and intellectual property. KDN’s exposure to the opportunities TEAMS presents complements Altech’s extensive data network and ISP operations in East Africa, and is a reflection of our expectation that there will be explosive growth in the demand for data services throughout the continent."
Africa currently has less than 1% Internet penetration, compared to the US’s 60% penetration. The demand for broadband in the region is expected to increase at least 10-fold over the next three years, bridging this digital divide between Africa and the world. Telecommunications and data demand from Kenya alone for international connectivity currently amounts to 1Gbps, with a 10-fold growth foreseen in the next five years, should prices reduce.
“This investment in TEAMS will improve the value of our overall business by allowing Altech to broaden its scope of operation," says Venter. "We have a two pronged approach, the first being ample bandwidth-access via the undersea cable, the second, being our extensive terrestrial network throughout East Africa. Consequently the acquisition will be beneficial to achieving our aim of molding KDN into the primary internet solutions provider throughout the continent.”