Wednesday, May 07, 2008

(Adds BT comments, analysis and background details.)

 
  
   By Tahani Karrar  
   Of ZAWYA DOW JONES  
 

DUBAI (Zawya Dow Jones)--Telecom EgyptTelecom Egypt said Wednesday it signed a $700 million contract with 15 companies including BT Group PLC (BT), AT&T Inc. (T), Cable & Wireless, MTN GroupMTN Group Ltd. (MTNOY) and Verizon Communications Inc. (VZ) to build a submarine cable between the U.K. and India.

Telecom EgyptTelecom Egypt will contribute $50 million to the venture, known as the Europe India Gateway, or EIG, cable system, the company said in a statement on its Web site.

Other companies involved in the project include Oman Telecommunications Co.Oman Telecommunications Co. (OTEL.ON), Saudi Telecommunications Co.Saudi Telecommunications Co. (7010.SA), Bharti Airtel and Emirates Integrated Telecommunications Co., or DuEmirates Integrated Telecommunications Co., or Du (DU.AI), Telecom EgyptTelecom Egypt said.

The 15,000 kilometer-long cable will connect 13 countries and three continents, with landings planned in the U.K., Portugal, Gibraltar, Morocco, Monaco, France, Libya, Egypt, Saudi Arabia, Djibouti, Oman, United Arab Emirates, and India.

The EIG system is targeted to be operational in the second quarter of 2010, Telecom EgyptTelecom Egypt said.

"In addition to complementing existing high bandwidth cable systems in the region, the EIG cable system will provide much needed diversity for broadband traffic currently relying largely on traditional routes from Europe to India," the company said in the statement.

OmantelOmantel, which invested $40 million in the deal, said the new cable system would safeguard the region's telecommunications against natural disasters.

"This is very important considering the threat of earthquakes in this region," OmantelOmantel said in a statement.

In February, internet and mobile connections went down in the Middle East and south Asia after four submarine cables were cut linking telecom traffic between the Middle East, Europe and Asia.

The cuts were later confirmed to have been caused by ship anchoring in bad weather and the U.A.E. has since impounded two ships. Some analysts put the cost to Mideast business alone at $5.7 billion.

A British Telecom spokesman said the EIG cable would strengthen commercial communications between the U.K. and India.

"The importance of this cable is that it will link the U.K.'s financial center to the increasingly important IT services center of India," the London-based BT spokesman told Zawya Dow Jones.

He added it is also welcome back-up for BT's international operations.

"As a company with an increasingly global reach it's important for us to be able to support our customers globally and we need to make sure if there are accidents then there isn't a loss of service to our customers," he said.

Analysts say that as well as using the fiber-optic EIG cable system as an extra back-up against natural disasters, the extra capacity could be exploited to place the project participants in a stronger financial position.

"Companies can generate another steady stream of profits by leasing out or selling their capacities to other operators and improve their quality of data transfer by increasing their capacity," said Marise Ananian, a telco analyst at EFG-Hermes.

Telecom EgyptTelecom Egypt has already sold 25% of its TE North cable capacity, a submarine cable linking Egypt to France, for $125 million.

Gigi Varghese, an analyst at Vision Securities in Muscat, said internet penetration in Africa and Asia will increase in the next two years, so there will be more demand for higher bandwidth.

"Having extra bandwidth now will put companies like OmantelOmantel and Du in a stronger position to capitalize on the growing internet market in coming years," he said.

Other companies in the deal include Djibouti Telecom, Gibtelecom, Maroc TelecomMaroc Telecom (IAM.CL), Libyan Post, Telecom and Information Technology Co., PT Comunicacoes and Telkom South Africa.

-By Tahani Karrar, Dow Jones Newswires; +9714 364 4965; Tahani.Karrar@dowjones.com

Copyright (c) 2007 Dow Jones & Company, Inc.

(END) Dow Jones Newswires

07-05-08 1448GMT