Mauritius’ IOX wants to build an international cable to link India to Africa – “We are not operators, we are facilitators for the operators.”

26 January 2017

Top Story

An ambitious new cable project is seeking to link Mauritius to Africa and India. Formerly with Seacom, IOX’s Arun Kandasamy wants to make Mauritius a hub for enterprise business and a stepping stone for Indian businesses to enter African markets. Russell Southwood spoke to IOX Founder and CEO Arun Kandasamy this week.

Kandasamy says that the idea for the IOX cable came about from seeing how Mauritius might develop economically. It can become “a business platform for Indian businesses in Africa” and “it’s an ideal location for holding data for Africa.” It’s a place where there’s good corporate governance and an environment that has low political risk:”There will be no business case unless we look at it differently.”

The total capital project is US$150 million for a route that goes from the island of Rodrigues (that is part of Mauritius) to the east coast of Africa and then on existing cables to Mumbai. This capital includes building backhaul fibre to connect to all landing stations in South Africa, Tanzania and Mumbai.

“Mumbai is the commercial capital for India and the majority of businesses are there. There are a number of cable systems that land in Mumbai and we can connect with most of them for on-connection to the rest of India.”

It sees itself as possibly facilitating connections to Reunion and Madagascar:”In terms of connecting to the islands, there are multiple options…and we want to generate collaboration with existing cable operators.”

It is the third cable connecting Mauritius to Africa and IOX has longer-term plans to take a cable from its landing station in Rodrigues to Chenai and Pondicherry. The Chenai/Pondicherry link would give low latency access to Asia and Latin America.

It is currently working on building a cable that will go from Rodrigues to a Seacom stub off of Dar es Salaam on a direct route:”This will expedite time to completion…Reunion and Madagascar will only be added if existing operators want to get involved.”

So are the local operators going to become customers for the cable?:”The basic model is that we would like to invite them to become customers. It’s an Open Access cable and we’ve invited them to be customers”.

There are three potential larger scale customers in Mauritius: Orange, Emtel and MMTL (which launched LTE in 2015). Of these three, Orange and Emtel would be “anchor tenant” customers. Orange is already an investment party in SAFE (the Indian Ocean extension of SAT3) and in LION (which it led). In this situation, Emtel would be the most likely “anchor tenant”.

”Everybody is interested and keen on looking at the project. We want to provide capacity in a risk-free environment. They would like to invest in local network development or international infrastructure. Our project allows them to do both. We are not operators, we are facilitators for the operators.”

Kandasamy is cagey about price and has a business model that he thinks will take him to a place where he can get higher value from the cable:”We’d like to create price differentiation and we’re inviting operators to benefit from capacity. He doesn’t want to see IOX get involved in a price war. Wholesale prices in Mauritius have gone down but largely through regulator pressure as Orange controls both of the existing cables.

His alternative route to market (which echoes Seacom’s current strategy) is to go directly to corporate customers. The pitch is essentially as follows: “You could spend a lot of money running your own links and investing in them. We can do that for you and allow you to make money from the links from day one.”

Essentially the corporate customers swap CAPEX for OPEX and share the rewards with IOX:”We provide the applications and the seamless connectivity. They are able to generate revenues from their customers and make some money and pay us.”

And the capital raising for the project?:”We are raising funds for the project and attracting Indian investors. They are exempt from capital gains tax before 31 March 2017 in India.” It’s planning to go live by either the end of 2018 or the beginning of 2019.

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