How undersea cable operator has transformed into a telco

Workers from fiber optic providers on work at Othaya in Nyeri on October 4, 2017. [Kibata Kihu, Standard]

Ten years ago, the Kenyan Coast experienced a flurry of activities that were of interest to many, especially those in the technology sector.

This saw the country witness the landing of different fibre optic cables that would usher in an era of fast internet. Till then, the country had relied on the costly and slow satellite connectivity that could be affected by certain weather conditions - resulting in major downtimes.

The fibre optic cables were, however, premised on something different. Other than the reliability, they have increased the speed of internet access several times over.

And the companies behind the fibre optic cable network were mostly either State-owned or owned by a consortium of telecommunications service providers.

The telcos had come together to enhance their service offering through increased internet speeds and reliability. They were largely successful with a key measure seen in consumers’ addiction to the Internet.

Among these were the East African Marine System (TEAMS) owned by the Government and local telecommunication firms, The Eastern Africa Submarine Cable System (EASSy) that was owned by operators and governments in the region, the Lower Indian Ocean Network (LION) owned by Orange of France and Telkom Kenya and Seacom.

Seacom, however, went it alone, being privately owned.

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Thus while competing with other cable operators that did not care much about profits, it had to return a dividend at the end of every year while finding ways of growing that return in subsequent years.

Out of this need, the firm started to compete directly with its customers by selling internet connectivity to corporates through its enterprise division.

When the cable landed in 2009, it would sell international bandwidth to telecommunication firms which would then sell this to corporates and retail customers. Seacom also embarked on an acquisition spree of firms that owned terrestrial cable or offered cloud solutions as well as other service providers.

This saw it shed its past image as an undersea cable operator to a pan-African telecommunications firm.

“Our core business has been to serve the service provider segment until four years ago when we diversified to selling directly to corporates. We started selling directly to businesses in South Africa in 2015. In Kenya, we launched this service in 2016,” said Seacom East Africa Managing Director Tonny Tugee.

“One of the drivers was that capacity utilisation has been slower than expected whereas there is huge capacity, utilisation was still under 50 per cent, so we felt the need to drive capacity utilisation even more.”

The benefit of fibre investment, noted Tugee, was not trickling down to the end-user and we wanted to up the quality of service to customers at the wholesale level.

“We have targeted large corporates and deliver the right level of scale and quality to them. Our desire is to drive dedicated capacity because large enterprises require quality of service to continue operating more efficiently,” he said.

“For the last three years, We have seen the corporates undergo a complete shift from an experience and utilisation point of view, some have doubled or tripled the capacity they had been using. If you open the road, the guy will drive without bottlenecks but if there are bumps they will go more slowly.  This allows businesses that depend on the internet for growth to tap into the quality of service that we are delivering.”

The firm is currently offering the service to businesses in Nairobi and Mombasa with plans to extend its offering to other major towns. The firm has continued to extend its fibre infrastructure network inland with a metro in Nairobi. The metro network has 12 pops and has built a protected network to serve clients directly, “We have a presence in Mombasa and we are organically growing in other major towns in Kenya Thika, Kisumu, Eldoret, Nakuru. Beyond Kenya, we have direct offering to corporate service in Kampala. Tanzania, Mozambique, Rwanda, Ethiopia are within sight as potential markets to expand into,” said Tugee.

The firm, he noted, has in some instances built cable networks but is looking at more of infrastructure sharing where necessary.

In other instances, it will acquire infrastructure companies.

The firm expanded through acquisitions in South Africa, with its most recent being last year buy out of FibreCo, an infrastructure firm.

Tugee said that there are negotiations going on in Kenya.

“It is not about building your own road. It is about selecting a road that is there but you manage it yourself. So we have taken dark fibre and we light it and manage it ourselves, which is like having your own road. It is the sort of model that we have adopted. You cannot have 10 fibre cables running from Mombasa to Nairobi, it is expensive and you do not need it,” he said.

“We will continue to invest but we are not looking at building own (terrestrial) fibre. One of the ways we will go about expansion is through acquisitions. As pressure and competition increases, you will find consolidation happening and players that find it hard to continue operations may decide to lurch on the bigger player.”

He added that they are on the lookout for the right customers.

“Different conversations are happening at different levels, subject to non-disclosure agreement so we cannot talk until the conclusion.”

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East African Marine SystemEastern Africa Submarine Cable System