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Assisting telecom operators with financing AAE1 and SMW5 submarine cables

Project

Financement des câbles sous-marins Djibouti
© AFD
Project start date
Status

Completed

Project end date
Project duration
5 ans
AFD financing amount
40 000 000 US$
Country and region
Djibouti
Location
Djibouti
Type of financing
Loan
Partners
Islamic Development Bank
Beneficiaries
Djibouti Télécom
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AFD is supporting Djibouti Télécom’s participation in international consortiums for submarine telecom cables. Through its financing, AFD is contributing to the development and consolidation of the national public operator’s international activity in a highly competitive environment.

Context

Building on its unique geographical location in the Horn of Africa, Djibouti Télécom has developed an international telecom activity by investing in international fiber-optic cables that pass through the Gulf of Aden and cables that connect neighboring countries. Djibouti Télécom holds stakes in eight consortiums for submarine fiber-optic cables and has thereby built a position as a regional hub for long-distance telecommunications.

Djibouti Télécom called on AFD in 2013 and 2014 to finance part of its investment in two submarine cables. The first, Asia-Africa-Europe 1 (AAE-1), which is 25,000 km long, connects France to Hong Kong. The second, South East Asia – Middle East – Western Europe 5 (SMW5), which is 20,000 km long, connects France to Singapore.

The laying and operation of the cables are implemented by two consortiums, each with about fifteen international telecom operators, co-investors and co-owners of the cables (Orange, British Telecom, Telecom Egypt, TeleYemen, China Telecom Global, etc.).

Description

AFD’s contribution aims to finance Djibouti Télécom’s investment in AAE1 ($25 million) and SMW5 ($14.5 million) via a non-sovereign loan. This financing also comprises a $500,000 technical assistance line, a component which has helped Djibouti Télécom:

  • Improve its financial and accounting management;
  • Strengthen the strategic and operational management of its international activity to make the operator a major player in the wholesale market in the subregion.

The total cost of this project for Djibouti Télécom is $61.5 million. It is cofinanced by AFD, a loan from the Banque pour le Commerce et l'Industrie Mer Rouge (BCI-MR - $5 million) and financing from the Islamic Development Bank (IsDB - $16.5 million).

Impacts

Through its investments in submarine cables, Djibouti Télécom:

  • Gains access to very high-speed equipment with state-of-the-art technology, in particular towards Asia and China;
  • Becomes a key hub in the international telecommunications market.

Building on this competitive advantage, the government wants the national telecom operator to play a key role in the development of the digital sector in Djibouti. The objective is to make it the second growth driver for the national economy after the port sector.