MTN, Neotel in R2bn fibre roll-out

Johannesburg - SA's second-biggest cellphone operator MTN and converged network operator Neotel have announced what they believe to be the country's biggest collaboration in the telecommunications space.

The two will roll out a 5 000km national long-distance fibre optic cable network costing between R1.7bn and R2bn, aimed for completion within two years.

The first leg, from Durban to Johannesburg, would be ready in time for 2010 and link the companies up to the upcoming west coast undersea cables - Seacom from mid-2009, and Eassy from the 2010 Fifa World Cup. The undersea cables will provide lower cost and more international capacity.

MTN South Africa MD Tim Lowry said the long-distance project would mean greater capacity for consumers and possible price reductions.

For MTN, Lowry said it would mean a saving of about R200m a year in connectivity costs from 2010 onwards and reduce its reliance on Telkom, which had struggled to meet the capacity requirements of the industry in the last few years.

In addition to linking to the undersea cables, Neotel will use the new long distance network as redundancy on Infraco, the long-distance network that it uses at present.

The network was originally built for the second national operator (which subsequently became Neotel), but was instead sold to a new government-owned infrastructure company called Infraco, which leases this capacity.

Neotel MD Ajay Pandey said the new network did not necessarily mean the end of its relationship with Infraco. He said the country was in need of as many networks as possible. The Infraco relationship would continue and be reviewed "as we go along".

MTN and Neotel will share the cost of the fibre roll-out, which includes surveying and digging, but will each lay their own fibre-optic network into the trenches. The cost of actual cable-laying is considered the most expensive part of any new infrastructure build.

Lowry said by working together on the network, each party would save between R400m and R500m.

The parties will use the erstwhile Transtel, now called Neotel Support Services after Neotel completed its purchase of the company in March 2008, to project-manage the network roll-out.

Pandey said there were a lot of skills within that division and it made sense for it and MTN to collaborate and pool their knowledge and expertise.

Lowry described the collaboration as a "cooperation" between the two companies, not the formation of a joint venture company. He said where future collaboration made sense, in areas such as maintenance, the two firms would consider it.

The capacity on the cable was "unlimited", the parties said, and dependent on the equipment that each installed at the end of the network.

MTN would fund its portion from its own cash resources, Lowry said. Neotel already had long-term project funding in place, which would be used to finance its portion of the network, Pandey said.

- Fin24.com