Wananchi Group, Cisco in US $ 31.25 M infrastructure deal

Kenya’s Wananchi Group, a provider of integrated communications services, has signed a multi-year agreement with Cisco Systems for provision of network technology solutions and services to enhance its expansion in the Eastern African region.
The deal, worth approximately US $ 31.25 million (Kshs 2.5 billion), will enable Wananchi, a provider of ‘triple play’ communications services – that is broadband, multi-channel television, and voice telephony as well as broadband data and internet services – to rollout its services in nine countries in the eastern African region – Kenya, Uganda, Tanzania, Rwanda, Burundi, Malawi, Ethiopia, Sudan and Zambia.
The contract is to enable Wananchi, founded 12 years ago as an internet service provider (ISP), to provide managed and hosted communications services for residential, corporate and government sectors, and further enhance the firm’s roll out of its cable and WiMax network to complement the existing VSAT infrastructure in Africa.

The deal is a vendor financed contract supported by Cisco Capital, a Cisco Systems subsidiary which provides financing solutions. The agreement will enable Wananchi to deploy Cisco’s integrated end-to-end network technology solutions, which include the firm’s networking solutions, collaboration, data centre services as well as multimedia ‘Set Top Boxes.’

Vendor financing, which involves the seller arranging flexible financing for the solutions and services purchased, is becoming common in the global ICT space due to risk levels and inability of buyers from emerging markets to access chaep and easy capital.

Suhayl Esmailjee, Wananchi Group’s chief operations officer, said that the contract would enable the firm to hook up to a million homes in Kenya in the first three years, through the company’s Zuku brand, the “triple-play” network which offers subscribers over 100 TV Channels, video on demand, pay per view as well as 10Mb of internet bandwidth and free VoIP phone calls..

“We will utilise the infrastructure to support not only Kenya but our operations in the region. We are set to use the infrastructure deployed locally to deliver services across the region,” said Esmailjee.

“This latest infusion of capital will allow us to create two new business divisions: Programming to create 10 brand new channels and Direct-To-Home Satellite TV to accelerate the pace to more rural areas where it will take time for our cable and WiMax offering to reach,” said Mark Schneider, Wananchi Group chairman.

Industry statistics indicate that Africa is still an untapped market in PayTV as seen from the fact that even though global Pay TV penetrations range between 20 to 80 per cent, Africa’s PayTV penetration is still less than 0.1 per cent, thereby presenting providers with an opportunity.

“The Wananchi Group’s key objective is to expand our portfolio, enhance our commercial proposition, revenues and reputation. Cisco will help us to continuously deliver the necessary technology enhancements to our infrastructure to service our ever growing customer needs and remain at the forefront of delivering new and innovative services to our customers,” said Schneider.

Wananchi, one of the main providers of residential of cable and internet service in Kenya and business communications services in Tanzania, has deployed a 187-km cable network which passes through approximately 37,000 homes in Kenya.

The Wananchi/Cisco deal follows the recent announcement by East Africa Capital Partners (EACP) to invest US $ 19.25 million (Kshs.1.54 Billion) from the Export Development Canada (EDC) into the Africa Technology Media and Telecommunications (ATMT) fund to finance the expansion of Wananchi Group.

EACP manages the ATMT Fund, which holds 51 per cent of Wananchi Group shares while
EDC is Canada’s export credit agency offering financing, insurance and risk management solutions to Canadian exporters and investors. The other shareholder in the firm is Emerging Capital Partners (ECP), A US-based equity fund manager which holds a 49 per cent stake in Wananchi Group.

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