Safaricom buys yu stake in fibre firm to launch 4G grid

Safaricom has acquired the full shareholding of rival Essar in the undersea fibre optic The East Africa Marine system (TEAMs) for an undisclosed fee.

The Nairobi bourse-listed telecom confirmed it acquired the 10 per cent from Yu mobile to offer faster and more efficient Internet data services as well support the upgrade of its network to 4G.

The deal has pushed Safaricom’s ownership of undersea fibre optic network to 32.5 per cent, a share that guarantees the operator additional capacity in Teams, which is offered based on shareholding.

Other shareholders are the Kenya government (20 per cent), Telkom Kenya (20 per cent), Kenya Data Networks (10 per cent) and Jamii Telecom (6.25 per cent).

Essar, which has been looking for a strategic investor to inject cash and stave off a liquidity crisis, says it used proceeds from the deal to sustain operations.

“The stake was sold to Safaricom in September at undisclosed figure. The finances from this sale went towards yuMobile’s operations,” said Madhur Taneja, the Essar Kenya CEO.

“It was an investment made by Essar, which was not being used for operations. This bandwidth had always been idle since we acquired it five years ago.”

Teams, which began operations in 2008, offered bandwidth to telecom firms that feed their fibre optic cables that have been laid on land.

Yu, unlike Safaricom, is yet to lay down its own terrestrial fibre-optic cable, prompting the equity sale in Teams.

Safaricom said Friday it was the only shareholder in Teams that showed interest in snapping the Essar share.

“The additional shareholding in Teams entitles Safaricom to have increased capacity on the 1.28 TB/s international cable,” said Safaricom.

“It is an integral part of our data strategy to have sufficient international capacity to feed the demands of our growing customer base and to support our terrestrial fibre strategy and LTE (4G network) plans. 

The firm said earlier it was going to spend about Sh8 billion over the next four years to lay down 2,300km of inland fibre-optic cable and support a rising customer base.

Safaricom, which had 9.33 million data users in June and 20.1 million mobile phone subscribers, currently relies on other carriers that have their own fibre networks.

It controlled 80.2 per cent of Kenya’s mobile phone voice traffic with Airtel and Essar holding a 10.4 per cent and 8 per cent respectively.

Its network has been struggling with fluctuating data speeds and dropped calls, a move that has seen the Communications Commission of Kenya declare it a non-compliant operator on quality of service.

Safaricom expects a surge in demand for data services, thanks to an explosion of Internet-ready hand-held devices like tablet computers and smartphones and an increase in the number of relevant applications and content.

This is also behind Safaricom’s drive to upgrade its 2G and 3G sites to 4G. The 4G network support high-speed wireless services.

Many operators in Africa are only rolling out 3G networks, but the big multinational players are already testing 4G in several markets.

African telecom giants MTN and Vodacom are already running trials in South Africa and Safaricom has also tested the technology.

Essar has frozen plans to roll out its 3G network in Kenya following delays in closing a financing deal with strategic investors.

Teams is one of the three other undersea cables that link Kenya to the rest of the globe, but last year faced cuts from ships that prompted costly repairs.

The undersea fibre operators have helped cut Internet costs to $450 per megabyte per month compared to the $6000 that satellite providers used to charge in 2008.

Safaricom raised the outlook for Teams this year and warned that the focus of the shareholders is not profits but an avenue for cheaper Internet.

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