Liquid Telecom Group (LTG) announced the signing of a partnership agreement with Tanzania Telecommunications Company Limited (TTCL), according to a statement on September 18 2013. The deal allows LTG to interconnect with TTCL's network in Tanzania, creating a single fibre network that connects the East African capitals of Nairobi, Dar es Salaam, Kampala and Kigali. BMI expects this move to attract further investments and drive growth in the sub-region's broadband market.
|East Africa Broadband Penetration Rates (%)|
LTG operates Africa's largest single fibre network which runs from northern Uganda to Cape Town in South Africa. The network spans more than 15,000km, connecting Kenya, Uganda, Rwanda, DRC, Botswana, Lesotho, Zimbabwe and South Africa. The agreement with TTCL will now enable LTG to route traffic into and out of Tanzania for improved connectivity with clients across East and Southern Africa. TTCL operates Tanzania's National Information Communication and Technology Broadband Backbone (NICTBB), a 7,560km backbone connected to the SEACOM, TEAMs and EASSy submarine cables as well as multiple points of presence (POP) across the country and its borders with other countries.
The broadband growth potential that could be unlocked by this agreement is significant. We expect LTG's network to boost trade between the major economies in East and Southern Africa. Meanwhile, with the exception of South Africa, broadband penetration rates across the two sub-regions are generally low. The first major hindrance - high international bandwidth costs - has been solved by the arrival of submarine cable systems on the East coast of Africa. The deployment of terrestrial fibre optic networks is expected to solve the problem of lack of backbone infrastructure and ultimately boost investment in last mile infrastructure and retail broadband services.
Although we are not adjusting our broadband forecasts yet for the countries connected by LTG's fibre network, we highlight the upside potential from this deal and other developments in recent months. We expect wholesale access costs and, consequently, retail subscription costs to continue to trend downwards owing to improved connectivity. The main downside risk to our positive outlook remains the relatively high cost of PCs and computers, which we expect to hold back broadband uptake. However, we expect this to be counterbalanced by the increasing availability of low-cost data-enabled smartphones and tablets. We therefore expect the region's 3G and 4G network service providers to benefit the most from developments in the wholesale broadband market.