Identifier
Created
Classification
Origin
09ADDISABABA2741
2009-11-20 07:46:00
CONFIDENTIAL
Embassy Addis Ababa
Cable title:  

ETHIOPIA: SEACOM DEAL STILL AWAITING GOE APPROVAL

Tags:  EINV EINT ECON ET 
pdf how-to read a cable
VZCZCXRO3528
RR RUEHROV
DE RUEHDS #2741/01 3240746
ZNY CCCCC ZZH
R 200746Z NOV 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 6877
INFO RUCNIAD/IGAD COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUZEFAA/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RHEHAAA/NSC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 ADDIS ABABA 002741 

SIPDIS

DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA -
DWINSTEAD
USAID FOR AFR/EA HELLYER AND DALTON
DEPT PASS TO USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND
BARBARA
GRYNIEWWICZ
DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO
DEPT OF TREASURY WASHDC FOR REBECCA KLEIN

E.O. 12958: DECL: 11/19/2019
TAGS: EINV EINT ECON ET
SUBJECT: ETHIOPIA: SEACOM DEAL STILL AWAITING GOE APPROVAL

ADDIS ABAB 00002741 001.2 OF 002


Classified By: Charge d'Affaires Ambassador Roger A. Meece for Reasons
1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 ADDIS ABABA 002741

SIPDIS

DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA -
DWINSTEAD
USAID FOR AFR/EA HELLYER AND DALTON
DEPT PASS TO USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND
BARBARA
GRYNIEWWICZ
DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO
DEPT OF TREASURY WASHDC FOR REBECCA KLEIN

E.O. 12958: DECL: 11/19/2019
TAGS: EINV EINT ECON ET
SUBJECT: ETHIOPIA: SEACOM DEAL STILL AWAITING GOE APPROVAL

ADDIS ABAB 00002741 001.2 OF 002


Classified By: Charge d'Affaires Ambassador Roger A. Meece for Reasons
1.4 (b) and (d).


1. (SBU) Summary. U.S. company Seacom arrived in Ethiopia in
early October in hopes of finalizing a contract with the
Ethiopian Telecommunications Corporation (ETC) and returned
again in mid-November, but has yet to conclude a deal. The
contract would allow for Ethiopia to connect to Seacom's
existing undersea fiberoptic cable via Djibouti and provide a
significant boost to broadband capacity in the country. Two
years of negotiations have not produced ETC Board approval of
the contract. The Seacom cable is already providing enhanced
internet access to countries down the East African coastline,
from Kenya to South Africa. The most recent Seacom-ETC
negotiations coincide with new ETC storylines that hint at
liberalization. ETC recently issued a tender seeking to
revamp its management operations and unconfirmed press
reports indicated ETC is interested in pursuing
revenue-sharing agreements with other providers.
Additionally, Minister of Transport and Communications Diriba
Kuma stated publicly that a new telecom bill is aimed at
strengthening the telecom regulatory agency. End Summary.
STILL NO DEAL
--------------


2. (C) Seacom representatives visited Ethiopia in early
October to attempt to finalize a contract with ETC and met
with Econoffs to provide post with a status update. Seacom
thought the contract terms were nearly finalized after two
years of negotiations; however, ETC's procurement team raised
the new issue of a 10 percent withholding tax during this
visit that would have to be factored into the contract terms.
Seacom maintained it has already offered extremely favorable
cable lease terms to ETC, but was being asked to endure
another cut into its profits. Negotiations continued into
mid-October and Seacom submitted a draft agreement to the ETC

Board at that time. Seacom was hopeful for a positive
response in October, but instead was compelled to return to
Ethiopia in mid-November to continue negotiations. It
appears ETC keeps identifying different contract issues and
continues to pose new questions to Seacom. On November 17,
ETC provided Seacom a new proposal to bridge the differences
and Seacom finds the proposal promising.


3. (C) If Seacom does not have a final contract soon, its
representatives told Econoffs they plan to request a meeting
with Prime Minister (PM) Meles Zenawi. Seacom met with PM
Meles about 10 months ago and the company believes he may be
the only one that can move this contract forward. Seacom
stated Ethiopia has a lot to gain financially from this cable
connection, not only increased domestic revenues, but
backhaul fees if it is extended into Sudan and other
neighboring countries. Ethiopia will probably lose more
control of internet traffic if this cable goes online, and
Seacom speculated this could be a major concern for the GoE.
When asked, Seacom representatives told Econoffs they did not
think Chinese-owned ZTE interference has played any part in
the slow negotiations (ZTE is working inside ETC to expand
its infrastructure). In addition, Seacom reported it had not
been approached for any kickbacks or bribes by GoE or ETC
officials.

DEAL HAS BEEN SEALED IN OTHER AFRICAN COUNTRIES
-------------- --


4. (SBU) Seacom's cable is now operational from South Africa
up the coast to Mozambique, Tanzania, Kenya, Uganda, Rwanda
and on to India. The company is looking to finalize
agreements to lay the cable in the Red Sea and complete a
connection to Europe. Besides Madagascar (due to political
unrest),Ethiopia and Djibouti are the only two countries in
the current Africa plan that are not hooked up to the Seacom
cable. Seacom believes Ethiopia could have been hooked up
(via Djibouti) by December 2009 if a deal had been finalized

ADDIS ABAB 00002741 002.2 OF 002


in October. Seacom reports Djibouti's cable operations are
dependent on ETC signing a companion contract because Seacom
would not find a Djibouti connection sufficiently profitable
without Ethiopia. Seacom was told by ETC the connection
lines were complete on the Ethiopian side all the way to the
Djibouti border. Seacom also reports Djibouti has completed
the lines from the coast to the Ethiopian border. Therefore,
it appears the lines just need to be connected across the
border for the cable to be functional in both countries. See
www.seacom.mu for background on Seacom's undersea cable
project and company background.

POTENTIAL TELECOM SECTOR CHANGES
--------------


5. (SBU) These negotiations come at a time where there has
been talk of changes within the telecom sector. In early
November, the GoE officially announced a tender seeking an
international firm to overhaul ETC's management operations.
The chosen company will introduce new schemes to reform ETC's
core operations and increase revenues. The new company is
not expected to begin its reforms until ZTE's expansion
project is winding down in February or March 2010. Finance
Minister Sufian Ahmed informed visiting DAS Karl Wycoff
during a November 19 lunch that European, South Korean, and
Indian companies have expressed interest in this tender. In
October, local press reported ETC would be open to
revenue-sharing agreements with private companies (including
foreign). These reports, however, have not been confirmed by
GoE officials. Another topic of telecom discussion is the
draft telecoms bill expected to reach parliament in early

2010. Minister of Transport and Communications Diriba Kuma
stated publicly the bill's purpose is to improve the telecom
regulator (Ethiopian Telecommunications Agency) by equipping
it with more authority and technology. Kuma denied reports
stating the bill would lead to telecom liberalization.

COMMENT
--------------


6. (SBU) These contract negotiations have been dragging on
for two years and Seacom is understandably anxious to close
this deal. There are potentially two other cables that could
serve as competition (East African Submarine Cable System
(EASSy) being one of them) to the Seacom cable in the future.
The GoE may simply be holding out for the best deal;
however, Seacom may lose its patience and Ethiopia may miss
out altogether on improving its broadband capacity in the
near term. Post has offered to support Seacom's efforts
where appropriate, but Seacom has asked post to not/not take
any action to date. End Comment.
MEECE