Benin's OPT appoints two companies to sell ADSL and VOIP

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Beninoise telco incumbent OPT has given the right to sell its broadband service to two companies, Pharaon Telecom and one other. The deal is significant for two reasons. Firstly both companies are selling bandwidth on behalf of the incumbent. This is another sign of how incumbents are seeking to “unbundle” services and infrastructure as they enter the new era of competition. Secondly, the resellers have the right to sell VoIP calling and see this as the main driver of a high level of potential broadband subscribers.

The deal has been in place for only a month but Pharoan Telecom has already got 200 users, 60% of which are business users. What does it believe the potential market is? Raouf Adedjouman, the Company Administrator told us that:”It’s enormous. Maybe 60,000.” And the reason that he feels the potential is so great is that OPT has given them permission to sell VoIP as part of their agreement. Low end prices are around USD153 for 128/256 mbps, below the prices OPT is offering on its web site.

The incumbent seems finally to be acknowledging its own limitations. As another Beninois source told us:“OPT just does not have a commercial mentality. They cannot define market prices and the management is terrible. Not one of its engineers has any international experience. OPT simply does not have the competence to sell.”

The agreement means that each company purchases bandwidth at the market price (however imprecisely defined by the incumbent) and then pays 5% on top of these charges for the right to exploit the markets in the contract.

Even after five years, OPT also does not sell its SAT3 capacity in any clear or transparent way:”They seem to sell mainly to their friends and again prices are hard to obtain. It’s a ‘great mystery’”. Despite having considerable capacity on SAT3 for over 5 years, it appears to have only sold a very small amount of this capacity.

The country’s fibre extends from the SAT3 landing station in the South to Parakou in the north. Long-term, it is planned that this fibre will be connected to its neighbours Burkina Faso and Niger.

OPT is best known for the corrupt deal that was done with Titan in 2001.

The US military and intelligence contractor Titan was fined USD28m for paying a USD2m bribe to the 2001 re-election campaign of President Mathieu Kerekou of Benin to secure the purchase of state incumbent OPT with a dowry to carry out capital projects. The bribe was to secure a higher price for the deal. There is no suggestion the president of the West African state was himself aware of any wrongdoing.

The deal was part of a disastrous foray by Titan Wireless (now defunct) into the African market at the height of the telecoms boom. It formed a joint venture with Benn's OPT. Under the terms of what was described as a Build, Co-operate and Transfer project, it was to install and operate a GSM cellular network, a rural telephony network, a fibre optic backbone and local telephone switching equipment. Most of these initiatives were delivered by Alcatel.

Titan admitted making illegal payments (through a former employee of Titan Wireless) and has agreed to pay USD28m in fines. The combined penalties are the largest imposed on a company in the history of the Foreign Corrupt Practices Act. That 1977 law bars American companies from bribing presidents, princes and potentates in the pursuit of overseas contracts.

Titan said in February 1999 that its president and chief executive officer, Gene W. Ray, had met with the president of Benin, Mathieu Kerekou, to announce plans for "a state-of-the-art communications system" for the country. Ray, 66, has been Titan's chief executive since the company was founded in 1981.

The S.E.C.'s complaint said that, from 1999 to 2001, USD3.5 million flowed from Titan "to its agent in Benin, who was known at the time to Titan to be the president of Benin's business adviser." About USD2 million went to the president's election campaign, the commission said, some of it to buy T-shirts bearing the president's picture. President Kerekou was re-elected in March 2001 with 84.1 percent of the vote in a race against his own minister of state.

OPT is supposed to be in the process of privatising and apparently the World Bank has put aside money to underwrite the process but little progress appears to have been made.