Uunet's pan-African network takes shape - Company Business and Marketing

CommunicationsWeek International, August 13, 2001 by Lance Harris

Uunet Africa has taken the first concrete step towards fulfilling its pan-African strategy by establishing a formal presence in Kenya.

The move is the latest part of a wider strategy that will place the Internet service provider (ISP)--a joint venture between Uunet South Africa Pty Ltd. and leading provider Africa Online Holdings Ltd.--at the forefront of business Internet service provision on the continent. Uunet will initially provide leased line and corporate dialup Internet access products to more than 250 business customers in Kenya, with plans to roll out other services such as hosting and security at a later date.

In a bid to reach business users across the continent, Uunet Africa is also well advanced in its plan to roll out a hubless satellite network to address the lack of interconnect points between the operators in the countries in which it is active.

"Once we have completed the rollout of this Internet protocol-based satellite network, we will have access to two new markets: we will be able to offer telcos interconnect bandwidth and also offer VSAT services in countries where we have a license," said Guy Clarke, sales director for Africa at Uunet SA.

Uunet plans to have a presence in 18 countries across Africa by the end of 2002, said Clarke. The joint venture, which has around $20 million of capital to draw on, expects to be profitable in its second year of trading.

Uunet Africa, created last year, is a 50:50 joint venture between Uunet SA, the South African ISP owned by WorldCom Inc., of Clinton, Mississippi, and Africa Online, the Pan-African ISP owned by investment group African Lakes Corporation plc, based in London.

Under the terms of the original deal, Africa Online transferred 650 corporate access customers and 65 employees involved in servicing enterprise customers to the joint venture. In addition, it signed a 10-year agreement to use Uunet's infrastructure to operate its consumer dial-up business, which currently has more than 33,000 subscribers.

Uunet Africa will initially roll out its services in the countries where Africa Online already has a presence: Kenya, Egypt, Uganda, Tanzania, Swaziland, Zimbabwe, Zambia, Ghana and the Ivory Coast. It also plans to set up shop in Mozambique, Nigeria, Angola, Mauritius and Senegal.

Set to be dominant ISP

Mike Jensen, an independent consultant covering the African Internet market, believes the deal with Uunet puts Africa Online in good shape to carve out a position as the dominant pan-African ISP.

Jensen said the pan-African presence of Uunet SA and Africa Online is now rivaled only by M-Web Holdings Ltd., of Cape Town, which has established operations in Namibia, Zimbabwe and Uganda. Loss-making M-Web has scaled back on plans to invest in the rest of Africa because of increasing pressures from shareholders to see profits, as well as the threat to its dominance in its home territory by a free Internet access service from South African financial services giant, ABSA.

Uunet's Clarke said the deal with Africa Online has allowed Uunet to move aggressively into the African market without needing to start from scratch. "So far, we have found that we underestimated the potential of the African market. We can't keep up with the calls from multinational companies seeking similar service levels to the ones we provide in South Africa," he said.

South Africa, with around 2 million subscribers, still dwarfs the Internet population in the rest of Africa. And, unlike the rest of Africa, where the markets are fragmented and shared by nearly 600 ISPs, 90% of the South African dial-up market has been consolidated into the hands of four major players.

According to Jensen it is difficult to measure the total Internet population in Africa, but he estimates there are over 1.3 million dial-up subscribers on the continent. Of these, North Africa claims around 250,000 subscribers and South Africa 750,000, leaving about 300,000 for the remaining 50 African countries, he said.

Each computer with an Internet or e-mail connection typically has between three to five users, and most users access Internet services through an Internet cafe or Kiosk.