Via The Financial Times, an interesting article on sub-Saharan telecoms:

The growth in sub-Saharan Africa’s telecoms industry has created global stars in the likes of M-Pesa and MTN, but its continued success rests upon having the right infrastructure to back them up.

So the acquisition of Altech Group’s east African telecoms assets by Liquid Telecom is worth noting. If it gets the nod from regulators, the deal will give Liquid access to the potentially lucrative Kenyan broadband market and a base to expand into other fast-growing data markets in the region.

The deal creates what Liquid says will be Africa’s largest integrated fibre-optic data network and gives the company Altech’s 61 per cent stake in Kenya Data Network (KDN), the country’s largest wholesale private data provider, as well as internet service providers in the Democratic Republic of Congo, Rwanda and Uganda. Liquid is a Mauritius-based subsidiary of the South African company, Econet Wireless Group.

Altech Group, a Johannesburg-listed technology company, in return gets an 8.6 per cent stake in Liquid.

East Africa has been connected to the main global network offibre cables since 2009, when Seacom’s 17,000km submarine fibre optic cable along the east African coast was completed. It is soon to receive a fifth subsea cable.

Matthew Reed, an analyst at the telecoms consultancy Informa, told beyondbrics: “The missing element in African telecoms used to be international connectivity. Now this has largely been addressed through a series of new submarine cables, the next challenge is terrestrial cabling. It remains underdeveloped and the consequence is that costs of transmission are high”.

Liquid is primarily a wholesale provider, building the network’s backbone and selling bandwidth to retail internet service provides. Fibre-optic systems provide high-quality broadband, but require heavy capital expenditure and costly maintenance.

“It is expensive to build out these fixed networks anywhere, but especially in Africa because it’s so large, it has difficult terrain, and a lot of the other infrastructural elements are often missing”, says Reed.

“However there is a huge amount of data demand growth, particularly in mobile data, and the infrastructure needs to be there.”

As the map below shows, Liquid’s network now spans many under-developed telecoms markets, including the DRC and Zimbabwe. Liquid engineers claim that the Kenyan acquisition takes the total network size to 13,000km, with total investment in new-build cable of around $200m.

Access to Kenya gives the company a new foothold in a fast growing market. According to Informa data, as of Q2 2012 there were only 680,000 mobile broadband and 130,000 fixed broadband customers in Kenya – low in comparison to nearly 30m mobile telephone subscribers, but double the figure in Q2 2011. A nationwide 4G network is due to be launched in 2013, and Informa expects cheaper smartphone models to drive mobile broadband subscriptions to 30m by 2017.

Speaking to beyondbrics, Nic Rudnick, Liquid’s chief executive, expressed confidence that the Kenyan market would continue to grow rapidly, and said that Liquid would “dramatically improve” KDN’s service quality. In the region, he said, the company’s integration would provide it with advantages over other providers. “When faults or outages occur, they tend to be lengthy to resolve because of the time taken determining whose network the fault has occurred on”, he said. “We can now insure the quality of network as it crosses borders, and guarantee that quality is the same irrespective of country – that is a unique proposition for Africa”