[Kictanet] KDN PIPS EASSY TO THE POST $115M DEAL WITH FLAG - COST OF

[Alice Wanjira]

>From Balancing act

TOP STORY: KDN PIPS EASSY TO THE POST $115M DEAL WITH FLAG - COST OF
BANDWIDTH COST? AROUND $150 PER MBPS PER MONTH
_____________________________________________________________________

The EASSy saga, which has had more twists and turns than a mountain
road, took what may be a final turn. Kenya Data Networks announced that
it has secured a separate deal with Flag Telecom to build a spur from
off the cost of Yemen to Mombasa. The deal is believed to be worth
US$115 million and the pipe will be built before EASSy was planning to
come on stream. And the cost of the bandwidth? An eye-wateringly low
figure of around US$150 per mbps per month for Mombasa to London.
Russell Southwood spoke to KDN's CEO Kai Wulff this week about how it
will work.

Flag is in the process of completing the Falcon system that runs through

the Gulf and it will be up-and-running in early 2007. The spur to
Mombasa will be completed at the latest by September 2007.

In the deal with Flag, KDN is believed to be putting up a capacity
guarantee and will in turn sell capacity to others in the region. The
cost of this capacity will be at cost plus operating, maintenance and
interest charges. Therefore this effective cost price will be around
$150 per mbps per month, a figure that is considerably lower than any of

those mentioned verbally by members of the EASSy consortium. Flag will
manage the system and be responsible for maintenance.

KDN's Kai Wulff has a very clear attitude to capacity sales:"We will
take the capacity. We will be the guarantor. We will sell to all serious

players at the cost price. We want everyone to be able to offer
value-added services and infrastructure in the (national) market. We
will not mark up capacity and we don't see why others should do so. We
will have a huge chunk of capacity and will keep competition open by
capping bandwidth at cost. When it comes to the next upgrade of the
pipe, everyone can negotiate their own deal."

"I don't want to dominate the market. If the international bandwidth is
cheap, I will be so busy with other business that selling capacity will
look like a joke. I'll leave that to the ISPs." He hopes that by 2008
that it will be possible to offer a 4 mb DSL line to users at between
US$20-22, coming well below the current cheapest continental price being

offered by Maroc Telecom.

"We already outsource as many of KDN's function's as possible. We do it
with satellite. We will do the same with fibre. There are not many
serious private fibre operators and this is why we have ended up making
the deal with Flag."

And what of the EASSy consortium? "We will continue to be active in the
EASSy consortium but we need to rethink the purpose of EASSy". He points

out that having built this first link that the balance of the cost of
the submarine link will halved:"We need to reach the other countries.
They could follow us and speak to Flag and use the same model as we are.