Africa 2008: New Satellites, New Hopes

Pricing Trends Hard To Pinpoint

Abdul Bakhrani, CEO of Nairobi-based Intersat Africa Ltd., points to high transponder charges as inhibitors of economic growth in Africa. “Rascom and Nigcomsat are going to increase competition and hopefully force the prices to be lower, but the costs may not necessarily come down,” he says. These two satellite operators “have to make a deliberate effort to lower prices. Like NileSat which was launched in 1996, these two may succeed in lowering the cost of bandwidth in Nigeria and to some extent the West African region, but it may not affect the pricing in other African countries.”

Lowering the amount of money paid by African companies and governments to satellite companies abroad is a worthy cause in itself because money that remains in Africa and will develop the continent, says Bakhrani. “Right now, many entities cannot afford the capacity they require. Lower costs mean that the ministries of health in Africa can interconnect all hospitals and offer telemedicine, which will improve the quality of life for many rural communities, for example.”

Jones Killimbe, Rascom’s director general and CEO, is optimistic about the impact that the African satellites may have on the market because pricing depends on a number of factors such as length of the contracts. “The price structure of the Rascom satellite transponder capacity will be competitive on the market,” says Killimbe, who would not comment on the status of Rascom-QAF1. “The global trend will be towards lower prices. African operators will be vital in the creation of the volume of users and traffic which will play a big role in guaranteeing the critical mass. All these factors will contribute to the expectation of prices being lowered. European operators are not paying the same prices as African operators and the explanation one gives is related to the volumes.”

But Flavien Bachabi, Intelsat’s vice president, Africa, says demand in Africa is so strong that, at the end of the day, it is the amount and type of demand that determines pricing. “Our key selling feature includes access to a global system, one that has flexibility and resilience, and we can provide customers with redundancy and more complete global and regional coverage,” says Bachabi. “When you look at per megabit rate usage — the actual cost in transponder use — it actually has decreased in recent years. According to industry analysts, Africa is significantly below the global average when it comes to transponder pricing.”

So it will remain very difficult to know how aggressive African operators will be in their pricing. “It again depends on application and how competitive they feel compared to the larger operators,” says French. “Exactly how much national demand, especially in the case of Nigcomsat, may be directed to the African operators, is another unknown element. Nigeria has talked about national broadband connectivity initiatives and there are many precedents for national governments to direct capacity leasing for national programs to go to the local incumbent.”

Pricing Trends Hard To Pinpoint

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