African Subsea Cable Pricing: Time To Stop Whining And Start Buying

•  African subsea cable leased capacity prices have bottomed around $18K to $22K MRC per 100G per month for Equiano and 2Africa. Examples include Lisbon to Lagos and Ghana to Lagos.

• Prices are not going lower. First of all, Google kept some Equiano capacity for itself and Facebook kept 4 of 2Africa's 16 pairs for itself. Moreover, 2Africa lands in over 25 countries. So average capacity per country excluding Facebook is approximately 6 Tbps. That figure would fall further if the Red Sea segment is ever completed. Finally, all consortium members for both cables are keeping some capacity for their own Internet backbones.

• Corroborating evidence that prices will remain stable is that consortium carriers are reluctant to sell wavelength or spectrum IRUs. Carriers sell IRUs for two reasons. The first is network asset portfolio rebalancing. If a carrier has plentiful capacity on cable X with relatively low pricing, it might sell an IRU to obtain capacity on cable Y that it can sell for relatively high pricing. IRU sales fundamentally reflect the forecast of plentiful capacity today and the future. Both Equiano and 2Africa consortium members are concerned about how their existing capacity will last. They are both limiting IRU sales and charging premiums for them.

• No new cables can be constructed in under 3 years. There are persistent rumors that Medusa management has decided to do so, but it is not clear to me that the West African Coast project is fully funded. When permitting is added to the overall picture, any Medusa cable is likely three years to four years from RFS.

• Grand Conclusion: Buy Now and Buy Long. Buy now because prices have more upside than downside, and buy long to minimize pricing. Focus your own resources on building terrestrial networks using dark fibre as much as possible to gain better network performance, capacity, and lower operating expenses. The idea that African pricing will collapse the way the Atlantic did is wishful thinking. The Atlantic collapse was due to spending billions and billions on Trans-Atlantic cables with seven high capacity systems competing in 2003. That is not Africa today nor tomorrow.