The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable Angola case study 1 Russell Southwood ASSOCIATION FOR PROGRESSIVE COMMUNICATIONS (APC) APC-200805-CIPP-R-EN-PDF-0047 ISBN 92-95049-49-7 COMMISSIONED BY THE ASSOCIATION FOR PROGRESSIVE COMMUNICATIONS (APC) CREATIVE COMMONS ATTRIBUTION-NONCOMMERCIAL-SHAREALIKE 3.0 LICENCE GRAPHICS: COURTESY OF AUTHOR 1 Russell Southwood is a leading analyst of the African ICT market. He is a specialist of Internet, telecommunications, and media developments on the continent. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study i Table of Contents 1 Overview of report..............................................................................................3 2 Background..........................................................................................................3 2.1 Brief country profile.....................................................................................3 2.2 Overview of Angola’s telecommunications industry.............................5 2.2.1 Angola Telecom and its plans.............................................................6 2.2.2 Other telecoms players.........................................................................8 2.2.3 Internet services.....................................................................................9 2.3 History of the SAT-3/WASC cable in Angola.......................................10 2.4 The impact of SAT-3/WASC in Angola.................................................11 3 Performance indicators – successes and failures..........................................12 3.1 Subscription, usage and capacity utilisation..........................................12 3.2 Cost and tariffs...........................................................................................15 3.3 Traffic...........................................................................................................19 4 Analysis of access to SAT-3/WASC...............................................................20 4.1 Legislation and regulation........................................................................20 4.2 Dispute resolution mechanisms and decisions......................................22 4.3 Investment and business environment in Angola................................23 4.4 Politicization of the sector.........................................................................24 4.5 Human resource capacity.........................................................................24 5 Conclusion..........................................................................................................25 6 Glossary..............................................................................................................26 7 Bibliography.......................................................................................................27 List of Tables Table 1: Share of capacity in SAT-3/WASC........................................................10 Table 2: Breakdown of Internet subscribers by provider - 2004.......................13 Table 3: Existing and projected growth in voice traffic in minutes (2002-2010)19 List of Figures Figure 1: Angola........................................................................................................4 Figure 2: Planned network in Angola....................................................................7 Figure 3: Growth of fixed and mobile subscribers (1975-2005)........................12 APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study ii 1 Overview of report This report examines the impact the submarine fibre optic cable known as South Atlantic 3/West Africa Submarine Cable (SAT-3/WASC) has had on the telecommunications market in Angola. It is one of four similar reports commissioned by the Association for Progressive Communications (APC) in November 2006 – the three other countries researched being Cameroon, Ghana and Senegal. A primer that synthesizes the results of the four studies is available for download from APC’s website (www.apc.org). This report focuses solely on the ‘Africa section’ of the submarine cable - i.e. South Atlantic 3/West Africa Submarine Cable - which also includes a South African-Far East connection (SAFE). (In its entirety, the rather cumbersome acronym for the cable is SAT- 3/WASC/SAFE). The report presents data gathered through in-country interviews with various market players and stakeholders, including performance indicators such as subscriber numbers for different types of services, usage figures, and pricing at the retail and the wholesale level. Detailed comparisons are made to satellite as an alternative means of access to international bandwidth, and the report identifies how the two mediums have influenced each other in terms of pricing and subscription levels. The report also looks at the environment for access to the SAT-3/WASC cable in terms of regulation and licensing, as well as the general business environment in Angola’s telecoms sector. 2 Background 2.1 Brief country profile Angola is the largest country in southern Africa outside South Africa, with an area of 1.2- million sq km. It is bordered by Namibia in the south, Zambia in the east, and the Democratic Repubic of the Congo (DRC) in the north. It is divided into 18 provinces, six of which are situated along the coastline, which is the part of the country with the highest population density. It has a population of 15.94-million, of which around 10-million live in its main towns and cities, with around four million in the capital Luanda. In 2004 Angola had an adult literacy rate of 67%. The country is a former Portuguese colony and has inherited its legal framework from its past colonial power. At independence in 1975, a civil war started between three competing guerrilla movements: the FNLA, the MPLA and UNITA. This war ended in 2002 with the killing of UNITA’s leader Jonas Savimbi. After this, a unity government, led by the MPLA, was formed. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 3 The war wrecked a great deal of Angola’s physical infrastructure, including its telephone and railway networks, and distrupted the country’s social infrastructure. Only a small part of the country has access to electricity. The civil war also accelerated urbanisation: only 20% of the population were in towns and cities in 1975, compared to 50% in 2005. Angola potentially has one of the most prosperous economies in Africa. After Nigeria, it is the most significant oil producer in sub-Saharan Africa, producing between 900,000 to one million barrels a day. Most of the oil extracted is of a very high quality and sells well to a wide range of buyers. Oil extraction from offshore and coastal fields between Luanda and Cabinda accounts for more than 90% of its foreign earnings, and escalating oil prices have improved the underlying financial position of the country. The Chinese have formed a close relationship with the Angolan government on the basis of its need for oil. In 2005 the Chinese government gave Angola a US$2-billion line of credit to rebuild its public infrastructure. There are also plans to build a refinery in Lobito to process oil from across Africa. Besides oil, Angola has mineral resources including diamonds, fertile agricultural land, hydro-electricity potential and marine fish resources. Figur e 1: Angola In the run-up to forthcoming elections in 2009, the government has been investing heavily in restoring the country’s infrastructure. This spending has led to annual economic growth of 15%. One example of infrastructural spending is the improvements made to the road connecting Angola to its neighbour in the south, Namibia. The combination of this spending and the effects of oil development on the economy have made Angola one of the most high-cost economies on the continent. Despite the opening of new shops in the capital, the local market for anything but basic goods remains small. One estimate made in 2004 put the total number of households able to afford anything more than basic food and clothes at only 150,000. While that number APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 4 has undoubtedly grown over the last three years, it still remains a relatively small market in terms of available disposable income for consumer goods. That said, a much wider range of people now have access to mobile phones, televisions and cars in the capital Luanda.2 2.2 Overview of Angola’s telecommunications industry At independence in 1975, two entities were responsible for telecommunications: the Post, Telegraph, and Telephone (PTT) agency was responsible for local and national traffic and also dealt with post, and the other (CPRM Marconi) handled all international traffic. The latter was nationalized in 1977 and renamed Empresa Publica Telecommunicacoes (EPTEL). In 1980, EPTEL was separated into two entities, one responsible for telecommunications (Empresa Nacional de Telecomunicações (ENATEL)) and the other for postal activities (Empresa Nacional de Correios e Telégrafos (ENCT)). The latter operated only domestic telecommunications. Legislation passed in 1992 led to the formation of Angola Telecom, after a merger of EPTEL and ENATEL. Angola Telecom, which has a presence in all 18 provinces in the country, had a monopoly in the telecommunications market (fixed and mobile) up to April 2001, when the leading privately owned GSM operator, Unitel, started its operation. This was the beginning of the liberalisation of the sector in Angola. Four fixed-line licences were issued, to Mercury Telecommunications Services (now MS Telecom), Mundo Startel, Nexus (now part of MS Telecom), and Wezacom in 2001, with the objective of expanding the base of operators in rural and suburban areas. Six years later, Mundo Startel planned to start operations in Autumn 2007, having been delayed through a combination of changing business plans and a degree of obstructiveness from Angola Telecom. Wezacom is effectively defunct, having failed to raise the required investment finance. Up until 1999, all policy and regulatory issues in the sector were dealt with by the Ministry of Transport and Communications. Bill 12/99 (June 25, 1999) established the Angolan National Institute of Communications (INACOM) that has both financial and administrative autonomy from the ministry. 2 Unfortunately there is no reliable, up-to-date data to demonstrate this, but from a wide range of personal observations (for example, the number of satellite TV dishes) and different interviews, this would appear to be true. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 5 2.2.1 Angola Telecom and its plans In the early 1980s Angola Telecom set up a network linking all of the 18 provincial capitals, but most of it was destroyed with the renewed outbreak of war in the mid-1990s. In June 2006 Angola Telecom was operating around 100,000 fixed lines (compared to 65,000 in 1999), with a fixed-line teledensity of just 0.68%, well below the African average. Two thirds of these lines are in Luanda, with few subscribers in the provinces: for example, Huambo had only 3,583 subscribers in 2005. Angola Telecom also has both a mobile subsidiary (Movicel) and one offering cable TV services (TV Cabo). Given the size of Angola and the destruction wrought by war, satellite is the most immediate means available for creating a national backbone. Angola Telecom’s subsidiary, Angosat, which uses space rented from Intelsat, provides this backbone using earth stations in each of the country’s 18 provinces. About 90% of the Angosat traffic is either to or from the capital Luanda. The rest of the traffic is inter-provincial and currently requires a double hop via Luanda. Where towns and cities are close together, these are joined by microwave link. Examples of this include: Luanda-Ndale-Malange; Luanda-Caxito; and Luanda-Conda-Muambo-Kuito. The company has a network development plan that runs from 2001-2015. In the initial phases of reconstructing the network, Angola Telecom received donor money from a wide range of sources including France, Italy, Norway and Japan. However, these individual donor contributions do not seem to have been well knitted into an overall plan, despite the existence of an umbrella infrastructure plan. In June 2007 the Government Gazette announced the signature of a US$167-million contract to complete the entire fibre network shown in Figure 2 below. As the incumbent, Angola Telecom retains a monopoly on the international gateway. Although it has ambitious plans to build a national fibre backbone, these have only slowly been implemented. Angola Telecom has five major projects that it has allocated US$200-million to over the next five years (from 2007) and is working with Siemens on the fibre optic routes. It is planning local loop delivery projects using WiMax which it aimed to introduce in 2008. It also planned to introduce public Wi-Fi hotspots in autumn 2007. The overall aim is to create a fibre network that connects all 18 provincial capitals, using a series of intersecting circles that allows for redundancy. A key route (ADONES) would be along the coast of the country with eight landing points planned for a domestic submarine cable. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 6 Figure 2: Planned network in Angola Alcatel Shanghai Bell has been responsible for laying the first piece of fibre in the national plan. This fibre goes from the southern coastal town of Namibe, due east to Lubango, before turning south to Ondive, a short distance from Oshikango on the Angolan- Namibian border. The intention is to link up to the Telecom Namibia’s fibre backbone, and in this way linking the two countries. This would give Telecom Namibia an outlet to another SAT-3/WASC international landing station (the other being in South Africa). In addition, Angola Telecom has announced that it will help supply 10,740 fixed lines in Namibe province and 6,000 in Huila province in the next three years. There have been two major investment announcements (US$300-million with Chinese vendor ZTE in 2005, and US$82-million with Siemens in 2006). However, Angola Telecom has also installed a soft-switch (through an agreement with Huawei) as part of a plan to upgrade to an IP-based Next Generation Network (NGN). Initially this will become available in Caixito and Lubango, but will later be rolled out to Benguela, Bie, Huambo, Kwanze Norte, Malanje and Uige, offering both fixed lines and Asymmetric Digital Subscriber Line (ADSL). There is also a plan to install a similar NGN network in Cabinda as part of the ZTE agreement. Angola Telecom foresees the potential for using the network to offer multimedia services at some point. There are plans dating back to 1999 to privatise Angola Telecom in three stages: • Transform it into a commercial entity, but still wholly owned by the government; APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 7 • Sell a 30-40% stake to a strategic equity partner; • Sell the remaining stake to a combination of the strategic partner and Angola Telecom employees. The company has been undergoing a change process with the assistance of external consultants, but the privatisation plans seem to be on hold. 2.2.2 Other telecoms players Mercury Telecommunications Services (MS Telecom) was started in 1997 to develop the communications capacity for the state-owned oil company Sonangol. Having established its own network, it widened its scope in 1999 to offer services to the public sector and then, in 2003, became a fixed-line operator and Internet Service Provider (ISP). It uses its Voice over Internet Protocol (VoIP) network to carry international calls and has two suppliers of IP-voice minutes: Norwegian satellite company Taide and Hong Kong-based New World. It also has a 25% share in Unitel. Angola is therefore in the slightly unusual position of having two state-financed telecoms entities that have shareholdings in all of the major operators. Mundo Startel and Wezacom have yet to launch their fixed-line ISP operations. Mundo Startel and ZTE signed a framework agreement for the purchase, implementation, operations and maintenance of a NGN during 2005. It is envisaged that the first services will be provided by Mundo Startel’s network in the third quarter of 2007. It is building an IP network and will use WiMax to deliver to its subscribers. It aims to get 5,000 fixed- wireless subscribers in the first year, increasing these to 50,000 over five years. It also plans a metropolitan fibre network if Angola Telecom does not open up its network and charge what it considers more reasonable prices. Its plan was to roll out its network initially in Luanda and Benguela, and then to move on to Huambo, Namibe, Huila, Kwanza Sul and Cabinda. Telecom Namibia has a 44% stake in the company, with the rest being owned by local Angolan shareholders. Portugal Telecom has a minority (25%) stake in Unitel, which operates a GSM network, launched in 2001. Movicel, the second mobile operator in the country, is the mobile subsidiary of incumbent Angola Telecom and operates a Code Division Multiple Access (CDMA) 2000 1X wireless network.3 Unitel is the market leader and claims to have 2.5- 3 GSM is the dominant global mobile operating standard and CDMA is the standard that was adopted by the US and the rest of the world. The issue for Movicel has been the availability of CDMA handsets at a competitive price. Otherwise there are no outstanding interconnection issues. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 8 million subscribers, while Movicel claims around 1.25-million subscribers. Unitel’s shareholders include MS Telecom and the President’s daughter. Portugal Telecom has expressed interest in buying a further 25% shareholding in Unitel. However, this was rejected by the government, who said that it wanted Portugal Telecom to sell its current 25% shareholding back to it. It is believed that the government wants to launch a stock market flotation of the company. In what may be a response to this position, Portugal Telecom announced in March 2007 that it wanted to set up a pan- African MVNO.4 Its CEO Henrique Granadeiro told the Portugese newspaper Visao: ”It doesn’t mean that we would make Unitel the centre of the operator, but Angola is a good platform for the launch of a pan-African operator.” Part of the original shareholder agreement of Unitel envisaged the company expanding into the rest of Africa. There have been discussions about introducing a third mobile operator in order to create more competition that will address both price and service issues. Both Celtel and Vodacom have expressed interest in entering the market. 2.2.3 Internet services Internet services began in Angola in 1996 when Pacomm was licensed to install the Ebonet network (Ebonet was the first ISP in the country). There are now several ISPs, including Angola Telecom, MS Telecom, SNet, Maxnet, ACS and TV Cabo. Of these, four companies (Angola Telecom, MS Telecom, Snet and Multitel) are members of the Angolan Internet Exchange Point launched in 2006. In addition to these ISPs, Movicel offers data services. MS Telecom’s Internet operations are the result of a consolidation in the market. Nexus Telecommunications and Services was the result of a merger between Ebonet, NetAngola (another ISP) and the telecoms operator Telesel in 2003, before it was itself acquired by MS Telecom. The latter has also acquired ACS, one of the largest corporate providers. TV Cabo is a joint venture between Angola Telecom and the Portuguese company Visabeira de Portugal.5 It was started in March 2006, and at its launch it was announced that the company would invest US$88.7-million in the country. It wants to use this money to expand nationally, but says these plans are dependent on the speed of the roll-out of 4 A Mobile Virtual Network Operator (MVNO) is a mobile company that has its own brand, marketing, retail outlets, and phone offerings, but uses another operator’s infrastructure (towers and network) instead of building and operating its own. 5 Visabeira de Portugal is a holding company (whose activities include telecommunications, construction, tourism, industry and services) which also has a cable joint venture in Mozambique. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 9 Angola Telecom’s national fibre network. Currently it is delivering pay-for cable TV and Internet, but only within the capital Luanda. 2.3 History of the SAT-3/WASC cable in Angola According to the Construction and Maintenance Agreement for SAT-3/WASC (June 17 June, 1999), Angola Telecom invested US$24-million in the project, giving it 4% of the shareholding. This is the same level of investment made by Ghana Telecom and Mauritius Telecom, but more than Cameroon’s fixed-line incumbent Camtel, which only invested US$20-million. For this investment, it was allocated 805 270 Minimum Investment Unit kilometers (MIU km) (3.69% of the total allocated capacity), of which 62 575 MIU km were assigned immediately and a further 300 000 MIU km were kept as reserve capacity. 442 695 MIU km were put into ‘pool’ capacity that might be taken up at a later stage. This accounted for 4% of the overall pool capacity. Table 1 shows a breakdown of the assigned capacity, giving some indication of the routes considered most needed by Angola Telecom at the point at which the investment was made. Capacity in MIU Carrier Destination Connecting point km 1.USA 7250 (11.6%) AT&T USA Portugal 3625 MCI USA Portugal 3625 2. Europe 45,800 (73.2%) Portugal Telecom Portugal Portugal 36,250 BT UK Portugal 3625 France Telecom France Portugal 3625 Telefonica Spain Spain 2200 3.Africa 9625 (15.4%) Telkom SA South Africa South Africa 2850 Sonatel Senegal Senegal 2200 CI Telecom Cote d’Ivoire Cote d’Ivoire 1300 Ghana Telecom Ghana Ghana 1125 Nitel Nigeria Nigeria 1075 OPT Benin Benin 1075 Table 1: Share of capacity in SAT-3/WASC As with most of the African SAT-3/WASC shareholders, Angola Telecom has a single landing station, located just north of Luanda at Cacuaco, which became operational in October 2002. APC Publications The Case for “Open Access” Communications Infrastructure in Africa: The SAT-3/WASC cable– Angola Case Study 10