MTN and Neotel partner to boost network capacity in South Africa
Mobile giant MTN and SA's second national operator Neotel this morning signed a partnership agreement to co-operatively build a national long-distance fibre-optic network that could cost between R1.7 billion and R2 billion.
The telecoms companies have agreed to share the costs of trenching and project-managing the 5 000km network; however, they will each provide their own fibre and transmission equipment.
Almost all of the country's major telecoms companies have, individually, been frantically laying fibre cable in the metropolitan areas. This national network co-operation will be the first time the network operators work together to lay fibre.
“We think it was a mistake for both operators [rivals MTN and Vodacom] to put up mobile network masts separately; we should have done it together. This deal will reduce the inconvenience to traffic, many of whom are our customers and it will be more cost-effective for us,” explained MTN MD Tim Lowry, speaking at the official signing in Sandton last week.
Neotel's business support services will project-manage the project and Transtel will provide support.
At last week's signing, the telcos revealed they expect the entire 5 000km network to be completed over the next two years, which Lowry admits is an ambitious target. “However, several phases will be built together and we will have two or three vendors working on the project. I also like to give my engineers ambitious targets so they can say they earned their bonuses,” he added.
The first phase of the project, which MTN and Neotel plan to begin in March, will be the national route from Johannesburg to Durban (including Pietermaritzburg), a total of 592km. This portion of the network will then be linked to Richards Bay, the landing point of many of the undersea cables. This segment is expected to take around seven months and will cost around R200 million.
This will give MTN access to Neotel's landing point for Seacom, expected to land in SA by June, and later to Eassy – expected by 2010. While the companies have not stipulated the timelines for the rest of the phases, it hopes to begin a Johannesburg-Cape Town leg after that, which would reach 1,676km.
MTN also gets to fulfil its long-term strategy of self-provision, which Lowry explains is the primary reason for the network. “We are paying almost R1 billion per year to Telkom for our transmission. We will reduce that bill by R200 million by 2010 and up to R300 million by 2012.” He added that had the company been able to self-provide, the transmission expenses paid to Telkom would have become prohibitively high.
The project will give Neotel a redundancy network that will act alongside its Infraco national network. Neotel CEO and MD Ajay Pandey noted: “We will still continue to have the relationship we do with Infraco; however, we will review it as we go along.”
He said the country will need a large amount of local capacity that would warrant holding onto Infraco, as well as laying its own fibre alongside MTN. Engineers from both companies explained that the national network will hold unlimited capacity, curbed only by the end point equipment that each company will provide for themselves.
However, they do expect the local capacity to reach into the Terabyte range to begin with. Lowry explained that the network's capacity can increase by 30% to 40% without feeling any impact.
MTN will use company cash on hand to fund its side of the venture, while Neotel recently received R7.5 billion in financing from several investment banks to complete projects, part of which will be used for this network.
The companies said the funding is expected to peak towards the middle of next year. Vodacom was earlier this year rumoured to have been part of the discussions to build this network; however, it was not part of this morning's proceedings.