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Cablegate: Sudatel Should Bring a New Dynamic to Senegal's Ict

VZCZCXRO8250
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDK #0778/01 1841024
ZNR UUUUU ZZH
P 021024Z JUL 08 ZDK NUMEROUS SVCS
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 0761
INFO RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUCPDOC/USDOC WASHDC
RUEHLMC/MCC WASHDC

UNCLAS SECTION 01 OF 02 DAKAR 000778

SIPDIS

STATE FOR AF/W, AF/EPS, AND EB/CIP:KBLAKEMAN
USDOC FOR 4510/IEP/ANESA/OA/PMICHELINI

E.O. 12958: N/A
TAGS: ECPS EINV EFIN ECON PGOV SG
SUBJECT: SUDATEL SHOULD BRING A NEW DYNAMIC TO SENEGAL'S ICT
SECTOR

REF: 07 DAKAR 1925 (NOTAL)

DAKAR 00000778 001.2 OF 002


1. SUMMARY: According to sources from the Ministry of
Infrastructure and Telecommunications, Sudanese telecommunications
company Sudatel should begin its business operations and ICT
infrastructure investment in Senegal in October 2008. Though
Sudatel claims to be an independent, private firm, job applications
are being processed at the Sudanese embassy in Dakar. Sudatel
asserts it will invest USD 500 million over the next five to fifteen
years in establishing its own network, in addition to the estimated
USD 200 million license fee it has already paid (Reftel). Sudatel
is entering a dynamic mobile market and should bring much needed
competition to the ISP sector. Mobile customers are concerned that
recent legislation that collects customer data is intended to
facilitate government eavesdropping. END SUMMARY.

SUDATEL'S AMBITIOUS PROGRAM
---------------------------
2. Sudatel has an ambitious program to penetrate the growing
telecom market in Senegal. The company has announced plans to
invest at least CFA 210 billion (USD 500 million) in equipment and
ICT infrastructure in the next two years, and create more than one
thousand jobs. The company's recruitment process has already
started and job applications are being processed at the Sudanese
embassy in Dakar. Sudatel expects to increase the number of
fixed-line telephones in Senegal from 283,000 to 300,000 and to
increase mobile users from 3.5 million to 4.5 million in the next
two years.

3. As reported in Reftel, in September 2007, Sudatel won a
comprehensive telecommunications license, paying as estimated USD
200 million to become Senegal's third mobile operator and enter into
competition with the two existing mobile operators, Orange (part of
the France Telecom-controlled Sonatel subsidiary) and Tigo (a unit
of Luxembourg-based Millicom). In addition, Sudatel has the right
to provide fixed line and internet services, using its own bandwidth
to go head-to-head with Sonatel, the current monopoly provider.
According to sources from the Ministry of Infrastructure and
Telecommunications, after a number of delays, Sudatel plans to start
its activities in Senegal in October 2008.

4. According to company statements in the Dakar press, this is
Sudatel's first venture in West Africa, though it has a large
presence in East and Central Africa. Sudatel reportedly represents
60 percent of transactions in the Khartoum stock market and has been
listed on the Bahrain and Abu Dhabi exchanges since 2002 and 2003,
respectively.

SIGNS OF GROWTH IN THE TELECOM SECTOR
-------------------------------------
5. Over the years, the Senegalese mobile market has recorded sharp
increases in subscribers. According to a March report published by
Senegal's telecommunications market regulator ARTP, January 2008
mobile usage reached approximately 39 percent of Senegal's 11
million inhabitants with 99.17 percent of mobile customers using
pre-paid accounts. Sonatel/Orange is the market leader with 3.044
million customers, while Tigo has an estimated 1.118 million. As of
September 2007, Senegal has approximately 650,000 registered
internet accounts, and 96 percent of these are Sonatel ADSL
subscribers. Smaller providers and some privately leased lines are
operating through special contracts, with Sonatel as the bandwidth
provider. Fixed line usage is only approximately three percent of
the population or 315,000 lines, but this number has been falling
for the past few past years.

6. Senegal has generally effective ICT policies, effective
regulators, and fairly good telecommunications infrastructure. The
GOS has recently established an inter-ministerial intranet service,
which is part of a broader pledge by the Wade administration to
improve service and accountability to the population. However, this
network is not yet widely utilized. With the incorporation of new
technology such as 3G services, mobile operators Orange and Tigo are
providing customers with increasing access to mobile internet,
online banking, and other services. Tigo has recently introduced
Blackberry service. The upcoming arrival of the third operator
(Sudatel) should further modernize Senegal's telecommunications
sector, which could be one of the country's most attractive features
for potential new investment.

NEW PRIVACY CONCERNS
--------------------
7. Shortly after the February 2007 presidential elections, new
legislation was enacted requiring mobile operators to collect,
register, and report to ARTP additional customer data, including
national i.d. numbers, date of birth, and address. Previously, it
was possible to get a cellphone chip without providing even proof of
identity. This new requirement has created some suspicion among

DAKAR 00000778 002.4 OF 002


customers, many of whom feel that the new legislation does not
adequately protect personal information, and is likely to be used
for government eavesdropping. Consequently, new mobile phone
subscriptions have slowed significantly, with Orange Senegal, in
which the government controls 28 percent of the shares, seeing a
more dramatic slowdown compared to the 100 percent privately owned
Tigo, according to industry sources. A member of Senegalese
National Assembly told Econ, "I am with Tigo because I don't want my
cell phone tapped."

COMMENT
-------
8. It is still unclear when Sudatel will begin rolling-out its
services, but Senegal is ripe for enhanced competition, both on
services and network quality. In particular, land-line quality is
poor -- though we are not convinced that Sudatel will make large
investments in this sector, apart from tapping into the country's
underutilized broadband internet potential. If Sudatel follows
through on its announced plans for investment and employment, the
company would quickly become one of Senegal's major economic drivers
for the coming years. As reported in Reftel, Sudatel is assumed to
have won its license over rival bidders because its cash offer was
significantly higher. Unfortunately, we believe the GOS spent that
entire USD 200 million to support last March's Dakar summit of the
Organization of Islamic States (OIC), rather than investing in the
country's ICT infrastructure or improving its regulatory
effectiveness. Though Sudatel purports to be an independent,
private company, it will be interesting to see if GOS regulators are
influenced by Senegal's relations with Sudan. President Wade speaks
of a "special relationship" between the two countries, especially
after brokering a "peace agreement" between the Presidents of Sudan
and Chad at the OIC summit.

SMITH

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