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DE RUEHSA #1278/01 1640543
ZNR UUUUU ZZH
R 120543Z JUN 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 4750
RUCPDC/DEPT OF COMMERCE WASHDC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE
RUEHEG/AMEMBASSY CAIRO 0403
RUEHNE/AMEMBASSY NEW DELHI 0491
RUEHFR/AMEMBASSY PARIS 1365
RUEHGV/USMISSION GENEVA 1259
RUEHMRE/AMCONSUL MARSEILLE 0004
RUEHBI/AMCONSUL MUMBAI 0056

UNCLAS SECTION 01 OF 04 PRETORIA 001278 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
STATE PASS TO USTDA 
STATE PASS TO OPIC 
STATE PASS TO EXIM BANK 
DEPT FOR EEB/BLAKEMAN 
 
E.O. 12958: N/A 
TAGS: ECPS EINV EINT ETRD EAID BEXP TINT SF
SUBJECT: SEACOM ONLY UNDERSEA FIBER-OPTIC CABLE PROJECT SLATED TO BE 
ONLINE IN ADVANCE OF 2010 FIFA WORLD CUP 
 
PRETORIA 00001278  001.2 OF 004 
 
 
This cable contains company proprietary information. 
 
¶1. (SBU) Summary. SEACOM representatives called on Ambassador Bost 
on June 4 to discuss SEACOM's undersea cable project.  SEACOM 
(developed by U.S. group Herakles Telecom) is based in Mauritius 
with 75 percent African ownership and 25 percent U.S. ownership. 
The project will provide the first true broadband connectivity for 
countries on Africa's Eastern seaboard, which are presently 
100-percent reliant on expensive satellite and fiber-optic cable 
solutions.  Although several other undersea cable projects for the 
East and West Coasts of Africa are currently under consideration, 
SEACOM is the only one expected to be ready in time to meet FIFA 
requirements for the 2010 World Cup (with a delivery date of June 
2009).  However, at the highest level of the SAG there is still a 
lack of understanding regarding SEACOM's ability to deliver adequate 
bandwidth to meet FIFA requirements.  SEACOM seeks U.S. mission 
support in increasing awareness among SAG policy makers and business 
clients.  SEACOM's sister company, Sithe Global (a Blackstone Group 
subsidiary), is also interested in the South African energy sector, 
but is frustrated by the lengthy process for project uptake.  SEACOM 
continues to face many challenges due to entrenched political 
interests and preferential treatment of state-owned or backed 
projects.  End Summary. 
 
----------------- 
Genesis of SEACOM 
----------------- 
 
¶2. (U) SEACOM President Brian Herlihy, Government Relations Vice 
President Haskell Ward, and Telecom Specialist John Mathwasa 
provided an overview of the SEACOM undersea cable project to 
Ambassador Bost on June 4.  SEACOM is part of a group of companies 
owned by New York City-based, private-equity group Blackstone. 
Sithe Global, an independent power company, is the largest company 
owned by Blackstone.  The group has been pursuing an undersea cable 
project to increase bandwidth capacity in Africa for several years. 
SEACOM President Brian Herlihy noted that the group initially 
pursued the project through Sithe Global, one of its sister 
companies.  USTDA supported the project through an Orientation Visit 
in 2006 for East African Telecommunications Ministers where they met 
with Sithe Global and interest in an East African cable project was 
generated.  However, due to the political environment in South 
Africa and the calls for majority local ownership, Blackstone 
decided to create an African-based infrastructure company (SEACOM) 
for the project instead. 
 
¶3. (U) SEACOM is based in Mauritius with 75 percent African 
ownership and 25 percent U.S. ownership.  Herakles Telecom, a New 
York City-based international development group, owns this 25 
percent stake.  (Note: The group initially had European partnership 
agreements for an additional 25 percent, which were dropped when the 
South African Minister of Communications publicly demanded 51 
percent local ownership.)  The African ownership is now split 
between East and Southern African investors: South Africa private 
equity Venfin, 25 percent; South Africa private equity Shanduka 
(Cyril Ramaphosa), 12.5 percent; South Africa private equity 
Q(Cyril Ramaphosa), 12.5 percent; South Africa private equity 
Convergence Partners (Andile Ngcaba), 12.5 percent; and East Africa 
group IPS (owned by Aga Khan), 25 percent). 
 
 
--------------------------------------------- ---------- 
SEACOM to Provide Much Needed Bandwidth and Competition 
--------------------------------------------- ---------- 
 
¶4. (U) The project will provide the first access to true broadband 
connectivity for countries on Africa's Eastern seaboard, which are 
presently 100 percent reliant on expensive satellite and fiber-optic 
cable solutions.  Once functional, SEACOM will provide 
high-capacity, fiber-optic bandwidth along the East Coast of Africa 
through South Africa, Mozambique, Madagascar, Tanzania, Kenya, 
Djibouti, and Egypt and onwards to the rest of the world via landing 
points in Marseille, France and Mumbai, India.  According to SEACOM, 
the aim is to create a high-demand, low-cost model for bandwidth. 
Africa is currently the least covered continent in terms of internet 
content, and SEACOM representatives believe that increased bandwidth 
capacity offered by their product will spur increased demand for 
content. 
 
PRETORIA 00001278  002.2 OF 004 
 
 
 
 
¶5. (U) SEACOM will land in South Africa and connect with the 
India-based, second-national-operator Neotel's land operations 
providing much-needed competition to dominant, partially state-owned 
Telkom.  In South Africa, Telkom has tightly controlled supply on 
the existing fiber-optic system along Africa's west coast.  SEACOM 
is gambling that demand for bandwidth will increase once prices 
decrease drastically.  SEACOM's relationship with Neotel (and all 
landing parties in Africa) is based on "open access", market-based 
co-location, meaning that any customer can co-locate at no cost.  In 
contrast, existing systems operate on a "club approach", meaning 
access is granted at cost only to participating governments in the 
countries that have a landing station and to a select group of 
companies.  Other African projects have been struggling for years to 
develop an "open access" model like the one SEACOM is pursuing.  The 
SEACOM price structure will be significantly lower (about one-tenth 
of current costs) than current satellite or fiber-optic pricing in 
Africa. 
 
¶6. (U) SEACOM will have the capacity to enable high-definition 
television, internet protocol television, peer-to-peer networks, and 
surging Internet demand.  SEACOM has already released its pricing 
structure, and South African mobile-operators MTN and Vodacom have 
indicated a desire to purchase bandwidth from SEACOM because of its 
early availability, even though they would prefer to have their own 
fiber-optic cables. 
 
--------------------------------------- 
SEACOM First to be Online for World Cup 
--------------------------------------- 
 
¶7. (U) Several other undersea cable projects for the East and West 
Coasts of Africa are currently under consideration, but SEACOM is 
the only one to have started construction.  Additionally, the other 
African projects would need to get in line to secure construction 
partners/contracts as demand is on the rise around the world for new 
undersea cable projects.  According to Herlihy, SEACOM is already 
first-in-line for construction with Tyco Telecommunications and 
predicted that it would be first-to-market by at least a year. 
(Note: U.S.-based Tyco Telecommunications manufactures all of the 
major sub-systems required for undersea system construction from 
cable and repeaters to dry plant, power feed equipment and network 
management and marine installation.) 
 
¶8. (U) SEACOM is expected to be fully operational by June 17, 2009, 
well in advance of the FIFA 2010 World Cup.  Herlihy added that it 
most likely will be the only new undersea cable project to be 
operational in time to meet the FIFA high-definition broadcasting 
requirements. 
 
------------------------------------ 
South African Government Misinformed 
------------------------------------ 
 
¶9. (U) Herlihy expressed concern that at the highest level of the 
SAG there is still a lack of understanding regarding the 
availability of adequate bandwidth to meet FIFA requirements. 
State-owned infrastructure company Infraco has been stating that 
there will be no broadband solution available in time for the 2010 
World Cup.  Herlihy noted that there has been a lot of 
QWorld Cup.  Herlihy noted that there has been a lot of 
misinformation in the media on which projects will be available in 
time for 2010.  He added that SAG officials do not recognize that 
other undersea cable projects currently on the drawing board will 
not be ready in time unless they are approved in the next few days 
and construction begins shortly thereafter.  This is because there 
is only limited global capacity to lay fiber-optic cable.  Failure 
to secure cable-laying contracts in the next week means the signing 
of such contracts will not be available in the foreseeable future. 
 
 
¶10. (U) Minister of Communications Ivy Matsepe-Casaburri said, in 
her budget speech on June 3, that the SAG has approved the building 
of the African West Coast Cable undersea cable project (which is led 
by state-owned broadband company Infraco) and gave support to 
NEPAD's East Coast Uhuru Net project (which is led by Baharicom and 
would install undersea cable around the entire African continent to 
 
PRETORIA 00001278  003.2 OF 004 
 
 
connect it to Brazil, Europe, the Middle East and India).  She 
announced that both undersea cables should be ready by May 2010. 
(Note: The FIFA World Cup begins on June 2010.)  This date is in 
question as the industry for cable supply is very tight. 
 
¶11. (U) Matsepe-Casaburri noted in her speech that infrastructure 
provision for 2010 will involve an upgrade to Telkom's core network 
to meet FIFA requirements and Telkom will implement the access 
network from its exchanges into the stadiums.  Herlihy stated that 
Telkom is hinting at partnership with SEACOM to provide the upgrade 
solutions to meet the FIFA requirements.  Telkom wants its brand to 
be a part of the 2010 solution and is recognizing the need to 
partner with SEACOM.  SEACOM representatives noted that there is not 
much additional capacity left on Telkom's Sat-3 system.  SEACOM will 
connect with Neotel's land operations, but Neotel will not have 
monopoly access to SEACOM's bandwidth, and opportunities exist for 
Telkom and others to purchase directly from SEACOM. 
 
--------------------------------- 
Marketing and Advocacy Assistance 
--------------------------------- 
 
¶12. (U) SEACOM representatives sought U.S. Embassy assistance in 
dispelling misinformation regarding undersea cable project timelines 
and capacities.  Herlihy stated that SEACOM has focused thus far on 
project management and finance and conceded that the company's 
marketing needed to improve.  For example, SEACOM will provide 10 
gigabits of bandwidth to South African universities at a minimal 
administrative fee (at two percent of Telkom's current charges). 
Currently, all of South Africa has a total bandwidth capacity of 17 
gigabits.  However, this initiative has not received much press 
attention outside of technical journals.  Ambassador Bost suggested 
targeting radio audiences to educate consumers and noted that South 
Africa was a good starting point to reach audiences throughout 
southern Africa. 
 
¶13. (U) SEACOM representatives said they could benefit from Embassy 
efforts to better inform South African policy-makers about the 
availability of bandwidth for 2010.  For example, they would like to 
promote the SEACOM university bandwidth initiative with the 
Department of Education.  The U.S. Embassy offered to organize a 
media/business lunch in Johannesburg with the press and potential 
customers and a dinner in Pretoria with government decision-makers 
during Herlihy's next visit to South Africa during the month of 
July. 
 
¶14. (U) Ward added that while SEACOM is focused on just the undersea 
cable infrastructure, there is a huge potential for U.S. content 
providers to become involved once the cable lands in South Africa. 
SEACOM representatives also noted that USTDA-supported feasibility 
studies could benefit both U.S. businesses and the African 
continent.  They advocated for studies exploring opportunities for 
U.S. companies to assist with the installation and maintenance of 
the land-based cable infrastructure into the interiors of the 
African nations participating in SEACOM.  SEACOM would like the U.S. 
Embassy to promote these types of partnership opportunities.  SEACOM 
QEmbassy to promote these types of partnership opportunities.  SEACOM 
also offered to provide low-cost bandwidth solutions for 
USAID-supported projects. 
 
-------------------------------------- 
Group Also Interested in Energy Sector 
-------------------------------------- 
 
¶15. (SBU) Herlihy stated that Blackstone is also interested in 
investing in energy projects via its energy arm Sithe Global, but it 
is frustrated by the long wait time involved with getting projects 
up and running in South Africa.  He noted that the Blackstone Group 
is uniquely positioned to provide quick delivery of solutions to 
address the current power shortage, but it seemed that state-owned 
utility provider Eskom was "frozen" in its decision-making ability. 
Herlihy also underscored the exchange-rate risk of the Rand-based 
purchase agreements that the SAG would like to pursue. 
 
¶16. (SBU) Ambassador Bost commented that the government was not as 
desperate as it needed to be to address the power shortage.  The 
SAG's inability to make decisions regarding energy projects 
frustrates potential investors, especially given the high global 
 
PRETORIA 00001278  004.2 OF 004 
 
 
demand for energy projects.  Herlihy agreed that the SAG mindset is 
that it has a budget surplus, so it can build whatever it wants 
without taking into account global market conditions and the 
scarcity of suppliers. 
 
¶17. (U) Comment.  SEACOM's potential impact on South African 
economic development and university education is great.  The SEACOM 
undersea fiber-optic cable project will revolutionize the ICT sector 
in the participating African nations.  The increased bandwidth 
provided by the project will not only reduce ICT costs drastically, 
but should improve access and drive innovations in content quality. 
The project will also introduce U.S. ICT standards in Africa. 
Finally, SEACOM's offer to provide subsidized access for 
universities and USAID-funded projects should positively impact the 
development issues the SAG is grappling with, such as skills 
development.  End Comment. 
 
BOST