Second wave investment in broadband kicks off with Wananchi putting US$100 million into HFC networks for Triple Play delivery in Kenya and Tanzania
Africa’s second wave of investment after mobile telephony has kicked off with a commitment from Kenya’s Wananchi to invest over US$100 million in an HFC network in Nairobi and Mombasa to deliver a Triple Play service with plans to also launch in Tanzania. Once the TEAMS and SEACOM cables have arrived in Mombassa in Q2, 2009 it will be offering 3, 6 and 10 meg services with VoIP voice calling. Russell Southwood interviewed the Group’s new CEO Euan Fanell.
Fanell is a veteran of the cable industry and has worked for over 20 years with the Group’s Chairman Mark Schneider and his father Gene. He joined Wananchi from Liberty, a leading cable company in Denver and had previously run a cable company in Baltimore. But his experience is not just limited to the States as he has also run operations in the Philippines and Saudi Arabia.
Q: What do you think the potential subscriber market in Kenya is for Triple Play delivered over your planned HFC network?
In Kenya we’re building out the HFC network in Nairobi and Mombassa. It will cover half a million homes in Nairobi and somewhere between 150,000-200,000 households in Mombassa. That’s the target market for our Triple Play services. But it takes time to construct and HFC network and it will take us 3-4 years to complete the build-out.
Currently we have less than 15,000 cable subscribers but the number is a function of the size of the network. Currently it’s only capable of serving 38,000 households. On the Internet side, we have less than 10,000 subscribers.
Q: I know you’re also rolling out WiMAX but that this will not have the capacity to deliver your television services. How will that work for the customer?
The rationale for WiMAX is its quicker deployment. It’s much faster to roll-out than HFC. We can also deploy it in areas that are not economical for the wired HFC platform. It can then be used for two types of service: wireless broadband and VoIP. The HFC platform will deliver voice, video and data and we already have the existing cable network.
Some of the households in the two main cities may start out with a WiMAX service that offer broadband Internet and voice. When the HFC network reaches them, it will be able to provide a faster Internet service and the television services.
In terms of the bundles we offer, we’re looking at things in two stages. We don’t yet have an international submarine network serving Kenya. Currently all our Internet services are supported by satellite and this both limits the speed and price at which they can be offered.
The African Telecoms, Media and Technology Fund has a 10% investment in the TEAMS cable (which is due to land in Q2, 2009). Once it has landed, we will be offering a 3 meg, 6 meg and 10 meg service but until then we have to limit it to a 512k download speed for residential customers and 1 meg for SME businesses.
The WiMAX service will be able to deliver 1 meg or more but not the 10 meg service a business might need.
Q: How will the VoIP voice calling service work?
It’s not yet been launched but we expect to have it in place by the end of the year or latest January 2009. It will be a traditional long distance voice service. We’re working on an interconnection agreement with the local carriers and making good progress.
Q: You’ve not experienced any delays in these negotiations?
No. (Regulator) CCK has established guidelines for operators to work within.
Q: So what TV bouquets will you be offering?
We’re currently offering several service packages:
There is the basic English language service which includes international news like BBC and Sky as well as sport, documentaries and music. There are 38 channels and it retails at KS1,000 per month. (US$14.50)
We then offer an extra level of content, a premier bouquet from GTV which includes high-quality blockbuster movies, Premier League football and the PGA touring events. This costs KS2200.75 (US$31.89) per month for an additional eight channels.
There are then two other packages. One offers approximately 80 channels which is the basic 38 channels plus the very best of Asian (which means Indian) programmes including Star TV and ZTV, Bollywood films and a selection of the best regional FTA channels in India. This costs KS1,500 (US$21.74) a month. You can also add the GTV package on top of that.
Finally there is a basic Hindi language bouquet offering 40 channels at KS800 (US$11.59).
Using HFC we can support 200 channels and consumers can choose what they want. You can get a GTV package for the same price as they offer it elsewhere.
Q: Will you be doing Video downloads, sometimes described as Video on Demand?
After we’ve begun the process of expanding the HFC network, in a year’s time , we’ll begin offering Pay Per View and Video on Demand.
Q: Are you going to be a producer of programmes or just a distributor?
We’re looking beyond being a distributor. At the Fund level, we want to make strategic investments and partner with other companies like GTV to help benefit from economies of scale. But there will be no local product or content unless we enter into a relationship with a local FTA channel.
Q: How much is the Africa Telecoms, Media and Technology Fund going to invest in the HFC and WiMAX networks?
The Fund currently has funding of up to US$50 million and commitments for a further US$25 million. We’re very much in fundraising mode and want to find another US$25-50 million on top of these sums. This will enable us to complete the build-out in the two cities and the WiMAX network. We currently have 30 WiMAX base stations that have been supplied by Telsima and plan eventually to have 110.
Q: Are you planning to roll-out beyond Kenya?
The Fund has recently acquired a broadband and VSAT provider in Dar es Salaam (Tanzania) and is actively negotiating the acquisition of a cable TV provider. We plan to replicate the plan we have for Kenya.
Q: There are lots of people talking about launching Triple Play in Kenya, who’s going to be serious competition?
In the wireless space, you have Access Kenya who are also using WiMAX and Africa Online plus the cellcos like Zain and Safaricom. The wireless space is really very competitive. In the fibre space, Orange (the owner of Telkom Kenya) is going to be a formidable competitor, looking at applications services up to 10 mbps to the building or business facility. We will be able to do fibre to the premises. There are smaller operators but they’re planning a much smaller roll-out. We’re going after both residential and business clients.