Somalia: while daring operators turn a profit, it's the bad news that tends to reach us

Somalia - often in the news, but, sadly, this rarely seems to be for positive reasons.

Just this week, heavy fighting in Mogadishu has caused at least twenty deaths, with fierce clashes between Government forces and an Al-Qaeda-linked rebel group battling to oust the country's President. Meanwhile, Minority Rights Group International (an organisation which campaigns worldwide to protect disadvantaged minorities and indigenous peoples) has stated that Somalia remains the world's most dangerous country for minority groups.

Amidst the chaos of the civil war which has gripped the country since 1991, Somalia has sometimes gained strong praise for the surprisingly good condition of its telecommunications infrastructure. For example, Industry-watcher Paul Budde, with whom I once had the pleasure of working to create an Oceania region telecoms sector conference in Sydney, wrote in 2005 that although Somalia had "no government" and was "lawless and war-torn" with "no banking system, no national telecoms operator, no court system" and with nobody paying taxes, the country nevertheless had a thriving telecoms business.

Paul wrote about how when national operator Telecom Somalia collapsed, their employees continued to work, setting up a de facto privatised company in 1994. Paul also described his amazement at learning about how this entity and two other mobile operators later voluntarily agreed to introduce operational separation and combined to set up a separate infrastructure to be used by all three of them. He also wrote about how despite the lack of a banking and court system people pay their bills, "and even the war lords don’t interfere as they all have a vested interest in good telecoms." Paul was also surprised at broadband speeds available in the Mogadishu area and the speed with which customers could have a landline installed.

Three years later, an African Press Agency report also described telecommunications as one of the rare business successes in the strife-torn country. This report asserted that it is easier to set up a telecoms business in Somalia than in some other African countries because there is no need to get a license and there is no state-run monopoly hindering new competitors from entering the market.

As things currently stands, the mobile market is, according to the World Cellular Information Service from Informa Telecoms & Media, contested by no less than six telecoms operators, all of which have deployed GSM networks. These are (in order of estimated market share):

1. Telecom Somalia - 37.87%
2. Hormuud Telecom Somalia - 18.74%
3. Telsom - 13.71%
4. Somafone - 13.27%
5. NationLink Telecom - 9.90%
6. Golis Telecom Somalia - 6.52%
   

My understanding is that because of the way de facto control of the country is fragmented, these operators do not all cover precisely the same areas. As a nation state, Somalia exists largely in a de jure capacity. A weak but largely recognised central government authority, the Transitional Federal Government is just the latest in a series of ineffectual, externally recognized governing authorities. In reality, control of the north of the country resides in the regional authorities. Of these, Puntland, Northland State, Maakhir, Galmudug, acknowledge the authority of the TFG and maintain their declaration of autonomy within a federated Somalia, while Central, Southern Somalia and Kismayo are in the control of the Islamic Courts Union and insurgent group al-Shabab. Baidoa is currently the seat of the TFG, and Somalia's commercial centre. On the other hand, the Somaliland region in the north, with its capital in Hargeisa, has declared independence and does not recognise the TFG as governing authority. Its self-declared independence is unrecognised internationally due in part to opposition from the TFG and other countries, such as neighbouring Ethiopia, which fear ensuing secessionist movements.

This fragmentation of the country is reflected in the coverage areas of the operators, most of which offer a range of fixed-line services in addition to their mobility propositions. Golis Telecom Somalia, for example, operates in North East Somalia, offering fixed and mobile services in both Puntland and the self-declared independent state of Somaliland. Hormuud Telecom Somalia, meanwhile, describes itself as the leading telecommunication services provider in Southern Somalia.

Strikingly absent from the list of six cellcos/telcos above are any big names. No multinational telecoms group has the stomach for operating in an unregulated free-for-all and in a country whose security situation continues to be so parlous. I daresay this will not change for as long as Somalia continues to be wracked with conflict and continues to suffer from the absence of settled and fully legitimate government.

So, despite the fact that some daring, entrepreneurial operators are making a profit from providing life-improving services in this troubled country, it seems that for now, even in the context of telecoms sector news, it will largely be bad news that filters through to the outside world.

One recent example of this concerns pirate activity off the Somali coast delaying installation for SEACOM, one of three undersea cables set to deliver vast improvements to the capacity of East Africa's telecoms and Internet infrastructure. Anything which delays these improvements coming on line is highly regrettable because, as a recent Reuters report points out, while the three subsea cables and many on-land infrastructure projects are helping to boost communications, sub-Saharan Africa continues to be hampered by excessive prices for broadband and mobile services. The report features comments from Mohsen Khalil, World Bank Group Director for Global ICT who says that the typical monthly mobile bill was still USD 10-12 in Africa, while in Southeast Asia many operators run profitable operations with average bills of USD5 or less.

Another incident whose impact will be felt much less widely, but is nonetheless extremely horrible, took place in an area controlled by the insurgent group al-Shabab. According to a recent Cellular News report, a court under the control of al-Shabab has ordered four young men suspected of stealing guns and mobile phones each to have a hand and a leg amputated.

Because of the mobile handset angle, this pops up as a Somalia-related item for various telecoms sector news sources. Regrettably, it feels like stories of this kind continue to outnumber more positive items. Communications services undoubtedly improve lives in developing countries, but the good work of people in our sector will continue to be hampered anywhere where ongoing conflict prevents the establishment of the legitimate and internationally recognised rule of law.

Somalia: while daring operators turn a profit, it's the bad news that tends to reach us

South Africa, East Africa gear up for vastly improved capacity

Back in April, I wondered about the impact of the three undersea cables set to land in East Africa - SEACOM, EASSy and TEAMS. I explored the question of whether it really mattered which cable would land first. I also thought about whether the region's hitherto inadequate broadband supply means that there is room for all three. I was quite attracted to the line of argument that there is.

With a few related news items popping up this week, I thought it was high time I had another look at these questions.

SEACOM appears to be very close to completion, with the company's website currently indicating that the service will be fully operational in sixteen days' time. The company has also received warm words of support from a South African customer excited about a "shift towards a high speed, high capacity Internet connectivity environment".

Hillel Shrock, Business Solutions Director at ISP/telecoms service provider Internet Solutions, believes that "Seacom is an important milestone for the local telecommunications industry as it is the first time that South African service providers, other than Telkom, will be able to make a long term investment in the provisioning of high speed, high capacity international connectivity."

In Kenya, meanwhile, telecoms sector players are working out strategic partnerships designed to take full advantage of TEAMS becoming operational. Cedric Lumiti of East African Business Week, wrote this week about the deal struck between market-leading Kenya MNO Safaricom and Jamii Telecommunications, whereby the latter will become the cellco's preferred broadband infrastructure provider. Safaricom CEO Michael Joseph explains that his company has now formally migrated to the new technology-neutral unified licensing regime set out by the Communications Commission of Kenya and can therefore offer a broader spectrum of data services using any technology platform.

All very upbeat - in line with the positive noises I heard at April's East Africa Com conference in Nairobi. If my travels take my back to that part of the world once all the cables have landed and have brought vastly greater capacity online, I'll be interested to learn about how quickly this begins to stimulate economic activity. It will also be good to get a faster connection in my hotel. VPN access was just impossible last time - and there was a lamentable slowdown in Developing Telecoms Watch blogging activity.

South Africa, East Africa gear up for vastly improved capacity

East Africa Com musings: Does it matter which submarine cable lands first?

The socio-economic impact of undersea cables in East Africa: the SEACOM view

Blogger Clement Nthambazale Nyirenda is a lecturer, researcher and consultant in Electronics and Computer Engineering at the Malawi Polytechnic, a constituent college of the University of Malawi. He is currently studying for a PhD in Japan at the Tokyo Institute of Technology. In February Clement wrote about the broadband speeds he enjoys in Tokyo and expressed his hope that a similar service might one day be available in his home country.

Malawi, as Clement noted, while usually considered to be part of Southern Africa, also lies in the easterly part of the continent, which is "the only region in the world that has neither intra-[continental] nor direct access to worldwide international cable networks." The region, Clement observes, "instead relies on expensive satellite communication" with "data costs... among the highest in the world."

Clement discusses the progress of the Eastern Africa Submarine Cable System (EASSy), "the first initiative proposed to connect countries of eastern Africa via a high bandwidth fibre optic cable system to the rest of the world." According to the EASSy website, the level of international telephone traffic per main line in sub-Saharan Africa is the highest in any region in the world, which is proof of there being "considerable demand in East Africa due to insufficient supply for telecommunications within the region." My own single experience of visiting that part of the world - last week's trip to the East Africa Com conference in Nairobi - does lead me to concur, as does the business of simply trying to make calls to other East African countries from the UK. As I noted in my most recent post here, the only frustrating aspect of my short trip to Kenya was finding it fairly difficult to stay on top of my day job via our company VPN. At both my hotel and the conference venue, Internet access was slow and unreliable.

My understanding is that there exists the hope that providing East African countries with improved connectivity could prove to be an effective catalyst for economic development in the region through the expansion of businesses based on the Internet, the provision of call centre services and the outsourcing of other back office functions.

EASSy is set to run from South Africa to Sudan, with landing points in six countries, and will be connected to several landlocked countries. A number of telecoms operators have invested in EASSy via WIOCC (West Indian Ocean Cable Company), which had a visible presence at last week's conference. These include state-owned wireline incumbent operators such as Botswana Telecommunications Corporation, Djibouti Telecom, Telecomunicacoes de Mocambique and soon-to-be-privatised ONATEL of Burundi.

Others in the WIOCC contingent are Orascom Telecom-backed MNO U-Com (of Burundi), Telkom Kenya, Dalkom (Somalia), Zantel, Uganda Telecom, Israel's Gilat Satcom and the Lesotho Telecommunications Authority.

From South Africa, direct investors in EASSy include Neotel, MTN and a consortium of Telkom (SA) and Vodacom. Futher direct investors in the project are Telecom Malagasy, Mauritius Telecom, SUDATEL, Tanzania Telecommunications Company, Comores Telecom and Zamtel (no, that's not a repeat of Zantel). From beyond the region, other backers are BT, Saudi Telecom, Bharti Airtel, Etisalat and France Telecom.

In his February blog post, Clement Nyirenda notes that EASSYy was once expected to be ready for commercial use in Q2 2007 but that construction did not get underway until March 2008. Clement reports (confirmed by a more recent Compterworld Kenya article) that the project is now slated for completion and commercial service in the second half of 2010 - three years behind schedule. "EASSy has not been EASY", comments Clement.

In Clement's opinion, "the major problems hampering the progress of the EASSy project stem from the fact that it is a joint venture of more than 20 largely monopolistic parastatal telecommunication bureaucracies." I shall leave it to individual readers to decide which (if any) of the project's backers fit this rather critical description. "In Africa," says Clement, "the culture of working together in such a large grouping is not common."

Wrangles between partners do seem to have been a feature of the project, at least as far back as June 2006, when a meeting of ICT ministers from Eastern and Southern African countries helped resolve disagreements among project participants, according to Sammy Kirui, the chairman of EASSY's project management team.

Regarding the most recently announced delays, the Computerworld article quotes WIOCC CEO Chris Wood, who said late last month that "the delays have been caused due to optimizing the cost structures and finalizing the agreements between all participating carriers". Wood, states the article, is not worried about the delays because the most important thing is the long-term stability of the financial structure of the cable system. "Time and again", Wood said, "the telecom industry has seen private equity financed companies build cables and then go bankrupt within a few years as their business model, hit by high costs, proved unattainable."

EASSy is just one of three submarine cables set to improve the region's connectivity. Another is TEAMS (East African Marine System). Etisalat appears to be spreading its bets in the race to connect the region, having a 15% stake in TEAMS in addition to its investment in EASSy. The other 85% of the ownership of the TEAMS project is split between a diverse group of interests including the Kenyan Government, Telkom Kenya (another one which is backing two horses) and Kenya's market-leading cellco Safaricom. Also involved from Kenya are the country's largest private data carrier Kenya Data Networks and most recent mobile market entrant Essar Telecom Kenya, whose billboards I saw all over Nairobi last week. The advertising of another TEAMS backer, the cable MSO Zuku, was also very prominent as I caught a glimpse of the city during cab rides between meetings.

Kenyan players dominate the consortium, with ISP AccessKenya and Jammii Telecommunications (which provides access to the Internet Backbone to telcos, ISPs, and large enterprises) also involved.

One more Keynan TEAMS backer is Flashcom, an integrated telecommunications solutions provider offering voice, data and SMS services with a collection of network assets including a CDMA2000 WLL and ISDN services over Fibre. Flashcom's CEO Joe Kimani was on the speaker panel at last week's conference, but unfortunately I didn't get the chance to catch what he had to say. From beyond Kenya, a small stake in TEAMS is held by Africa Fibrenet of Uganda.

The other submarine cable on the East Africa scene is SEACOM, whose investors state that the project will ensure access to low cost bandwidth, thereby encouraging the growth of existing and new industries, as well as education and e-government.

Does the region need three undersea cables? If all of this is thought of as a race to land the cables and start doing business first, will whichever project finishes last find itself out of the game? A Business Times (Tanzania) article of last Friday contends that the answers to these questions are, respectively, 'yes' and 'no'.

In this article, the scene is set with an illustration of the degree to which the current paucity of connectivity impacts upon businesses in the region. The claim is made that a large corporation in Tanzania can pay about USD 3000 a month just to ensure a reliable Internet connection for its network. According to the article, this figure rises to USD 7000 to cover a megabyte of bandwidth per computer in a medium-sized office in Kenya. "A business connection in an urban center in the US," continues the article, "can cost as little as USD 25 a month".

The article compares the economics of the VSAT and undersea cable industries and adds that "fiber optic cables are low latency: they can carry information more than ten times faster than a VSAT to satellite to cable connection."

When making a comparison between the three submarine cables, the article contends that they all have "roughly the same capacity", but notes that "each connects a different combination of countries and ownership."

The article acknowledges that "there has been much hype in the media about which cables will land first" but makes the argument that "the success of one cable does not render the others useless." The view expressed is that redundancy is needed to ensure the security of broadband supply and to stimulate competition, thereby reducing prices for users. "Tanzania will be able to make room for both the EASSy and the SEACOM cables, as well as any connectivity provided by TEAMS", concludes the piece. Plenty of room for all, then, it seems.

East Africa Com musings: Does it matter which submarine cable lands first?