This week's news of Equinix's purchase of Main One tops off one of the busiest 12 months for investment in data centres. Russell Southwood looks at what this new investment means and how it will change what Africans can do.

In broad terms, there have been four waves of investment in African communications. The first wave was in mobile networks: it remains the largest and there is continuous investment by operators every year. 4G and 5G continue to power further investment.

The second wave of investment went into international, national and local fibre networks. Again investment continues and is quite similar in scale to mobile network investment. The third wave has been in African digital start-ups, particularly Fintech organizations. The amount of investment keeps rising but is smaller than for the first two waves.

The fourth wave is in data centres and the fibre networks associated with them. Over the last 12 months, the announcements of 4 sets of pan-continental deals and investment commitments have topped US$2 billion. They are: Equinix's purchase of Main One (US$320 million), WIOCC's announcement of its Open Access Data Centres investment (US$500 million over 5 years), Digital Realty's investment commitment to Africa (US$500 million), and Liquid Intelligent Technologies' investment in its Africa Data Centres arm (US$500 million). Of course, there are also many other deals that also increase the overall total of this investment.

So what's going on? In the early 2000s, it was cheaper to send calls and data from African via Paris, London and New York to reach another country on the continent. There was a lack of cross-continental fibre connections and historic inter-country connections were dominated by Government incumbents.

Both parties connecting two countries saw it as their duty to increase their income from these connections, to the detriment of landlocked countries. At a country level, it was these barriers that IXPs were designed to address: as the slogan went, keep local traffic, local

Spool forward to 2020 and you have a situation where there is a great deal more fibre both within and between countries. But at this point outside a handful of countries, there is not always an efficient 'meet point' for carriers and pan-continental enterprise customers. International CDNs like Google and Netflix have put in place local caches to accelerate access and fight international and inter-regional latency issues. Africa is a big place and the distances almost guarantee a certain level of latency.

Running up to 2020, there was a near constant babble about cloud services but few of the international 'hyperscalers' (AWS, Microsoft Azure, Google Cloud, etc) put in place a data centre infrastructure to deliver these services effectively on the continent with the exception of in South Africa.

Covid-19 has changed a great deal. The need to work from home has been a crash course in why cloud is more than just some buzzword for many organizations. Some - like start-ups - launched as 'cloud-first' organizations and took it in their stride. Others found themselves faced with a steep learning curve.

They needed to find ways of delivering effective connectivity to employee's homes and put in place effective cloud-based solutions to enable them to do their work. Cloud services were no longer a future plan but an immediate necessity. All this has been helped by falling bandwidth prices and lower latency.

The message was reinforced by greater use of home streaming services as parents sought to distract their children. Also each and every one of those online mobile services - like home delivery - needed effective local data centres for their operations.

So what does it all mean? Increasingly the 'hyperscalers' will deliver their services to Sub-Saharan Africa from a data centre on the continent. Multinational enterprises will be able to connect up their regional offices with their global headquarters with a great deal more seamlessness. Online consumer services will be closer to their users and therefore more responsive: the fintech start-up will be in the same data centre as the banks through whom their transactions are made.

At the end of November I spoke to the team at WIOCC, including CEO Chris Wood about why they were making their investment: "If you look at cloud infrastructure in Africa today, you see sparsely interconnected ecosystems. The data centres are very local and customers want them across the markets they operate in. Currently, a global players has to set up individual relationships in countries to achieve this. As a wholesale carrier we don't compete for enterprise customers so we can create a carrier neutral infrastructure for them. We have partnership-based relationships that can bring in other connectivity for them."

In terms of providing data centres, Wood told me: "We will have one in Durban (opening early next year) where 2Africa lands, also Nairobi and Mombasa, Lagos (April next year) and Mogadishu. It will be part of the move to 5G and there will be greater deployment of Edge data centres." The plan is to build 20 data centres.

Despite the scaling up of local data centres in a number of countries already, he makes the point that there are a lot of countries without effective data centres: "We do the difficult stuff like going into Somalia and landlocked countries like Burundi, Uganda and Zambia to help open up and digitize those countries."

But how can a wholesale operator claim to be carrier neutral?: " It's how you act rather than who you are. We've gone with the name Open Access Data Centres for our newly created company to make it absolutely clear. The new cables coming to Africa want to land in open access landing stations."

The investment from WIOCC has also seen it go from being a Southern and Eastern African operator to becoming more pan-continental: "West Africa has so far not been addressed by us. But we have now built up a sizeable network in Nigeria from bought capacity. It's a transformative event and we're working in a cross-border manner. This is complemented by our investments in Equiano and 2Africa."

WIOCC raised the equity capital from CAPE IV, a fund managed by leading Africa focused private equity fund manager, African Capital Alliance (ACA). WIOCC's debt facility was provided by the International Finance Corporation, Proparco and Emerging Africa Infrastructure Fund managed by Ninety One. Verdant Capital acted as financial advisor to WIOCC for the equity capital raise.

This week Equinix, which describes itself as a digital infrastructure company, landed a deal largely negotiated over Zoom, to buy Main One, the owner of one of the West African international cables, 1,200 kms of Nigerian fibre and one of the largest of the already operating data centres in Lagos plus two other smaller data centres in Ghana and Cote d'Ivoire. It sees the acquisition as "a pivotal entry point for Equinix into the continent."

According to Judith Gardner, VP of GEMS, Equinix EMEA: " We've had an ambition to come to Africa for some time. We're focused on Kenya, Ghana, Nigeria and South Africa. We looked at how Main One's data centre business has grown and it's the largest player in West Africa. Africa as a region is incredibly under-served. It has more internet users than the USA and less data centres than Switzerland. Our customers kept saying when are you going to go down there?"

"Our Pan-African strategy will be served by four sites and access to the Main One cable is a significant differentiator." To complete its strategy, it is in the market to acquire other data centre operators: "Our corporate development team is always looking at targets. We need to know whether the company wants to sell. We have identified some targets." The Main One acquisition marks "the first step in Equinix's long-term strategy to become a leading African carrier neutral digital infrastructure company."

Under the terms of the agreement, Equinix intends to acquire MainOne and its assets with an all-cash transaction at an enterprise value of US$320M, which is expected to be AFFO accretive upon close, excluding integration costs. The transaction is expected to close Q1 of 2022, subject to the satisfaction of customary closing conditions including the requisite regulatory approvals.

Globally, Equinix has 237 data centers across 65 metros and 27 countries, providing data center and interconnection services for over 10,000 of the world's leading businesses, including more than 50% of Fortune 500 companies.

In Brief

Cape Verde: CVTelecom (Cabo Verde Telecom) and Angola Cables have signed a joint cooperation agreement to identify synergies to expand connectivity and network capabilities. The strategic partnership will also streamline closer commercial cooperation in the development of customised networking products and solutions that can be brought to market in the coming months. The SACS, WACS, MONET and EllaLink subsea cables will be part of the strategic plan to offer multiple connectivity and redundancy routing options for ISPs, enterprises and content providers looking to route Internet traffic between Africa, Europe and the Americas at low latencies on these express routes.

South Africa: Vodacom customers can now enjoy out-of-bundle rates from as little as R0.49c and up to R5.00 when travelling to over 156 countries across 656 partner networks. This is a price cut of up to 88%.

Kenya: Digital banking fintech startup Kwara (www.Kwara.com) has partnered with Workpay (www.myWorkpay.com) to offer Savings and Credit Co-operative Societies (SACCOs) in Kenya with human resource management and payroll processing solutions. The partnership will enable SACCOs to automate their Human Resource (HR) processes as a complimentary service to Kwara's products i.e Core Banking, Online and Mobile Banking and Open API service. Through the partnership SACCOs will be able to carry out seamless payroll processing into SACCO accounts and enjoy access to a HR module for efficient management of their staff. This will conveniently allow them to manage their HR functionalities such as time and attendance, leave management, payroll processing, compliance and performance management for their employees.

MEST's founder, Jorn Lyseggen, will be taking over as Managing Director of MEST as current MD, Ashwin Ravichandran, goes on to pursue a fintech startup. Ashwin will continue to be a part of the MEST family, in a new capacity as Portfolio Advisor on a part-time basis while supporting our founder transition to the Managing Director role.

Ghana: MTN Cote d'Ivoire says it has conducted the country's first 5G mobile trials. A report from Journal de Brazza cites an unnamed MTN source as saying that talks are underway with authorities to define the required spectrum.

Sudan: Kuwait-based Zain Group has announced that it has received a non-binding offer from Invictus Holding Limited to acquire 100% of Zain Sudan and Kuwait Sudanese Holdings. According to a statement from Zain Group, Invictus, which is a subsidiary of Dal Group, has offered a total of USD1.3 billion. The board of directors has agreed to proceed with the due diligence process to provide the initial approval. The statement adds that further material updates will be 'disclosed in due course'.

Nigeria: The Nigerian Communications Commission (NCC) has announced that three telecoms companies have qualified as approved bidders in the upcoming 3.5GHz spectrum auction for the deployment of 5G networks, namely MTN Nigeria, Airtel Networks (Airtel Nigeria) and Mafab Communications, having met the criteria for participation including payment of an Intention to Bid Deposit (IBD). The NCC reaffirmed that the licence auction is scheduled for 13 December 2021.

Nigeria: Co-Creation Hub in partnership with the Massachusetts Institute of Technology Governance Lab (MIT GOV/LAB, Gatefield, and the Ekiti State Ministry of Health and Human Services has launched the first-ever governance innovation accelerator in Nigeria. The Governance innovation lifecycle challenge and accelerator will leverage a specially designed human-centred design framework to implement an approach to governance innovation that can address critical areas of need in healthcare service delivery, enhance government responsiveness, and encourage changes in individual and collective behaviour that can ensure better health outcomes for inhabitants of Ekiti State.

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