Djibouti telecoms market

With more than 300km of coastline and being a free trade zone, Djibouti serves as a gateway to the sea for countries such as Ethiopia, Kenya, and Sudan.

Port activity and foreign direct investment (FDI) drove Djibouti’s return to economic growth in 2012, which reached 4.5%, according to the African Economic Outlook report.

Yet poverty and unemployment remain major issues. To identify leading sectors that could diversify sources of national growth and create jobs, the government is drafting a long-term development strategy called “Vision 2035”.

In addition to its considerable port activities, Djibouti boasts one of Africa’s most advanced international telecoms networks. It includes two earth stations and a landing facility serving five submarine cables, linking Africa to Asia, the Middle East and Europe: EASSy, EIG, SEACOM, SeaMeWe3, and WIOCC. Several other consortia-owned cables are looking to land in 2014, including AAE1 and SMW-5.

Djibouti’s domestic telecoms market has remained largely flat for many years, while the country’s regulatory framework has also changed little. There has been no local loop unbundling, and in June this year it was criticised by the World Bank and other development agencies for failing to liberalise.

Djibouti Telecom (DT) is the sole incumbent for fixed services (including corporate and wholesale IP/data and ADSL), mobile (2, 2.5, 3G) and internet services, although it does have an internet exchange supporting other ISPs in the region.

The Djibouti National ICT Strategy 2003 encourages strengthening the powers of the Ministry for Communication and Culture, Posts and Telecommunications (MCCPT) to encourage deregulation, with one option being a second mobile licensee.

DT has been working with neighbouring countries to expand regional connectivity. In March 2013, it also launched Djibouti Data Centre (DDC), a Tier 3 level facility. Based in Djibouti City and collocated with the DT cable landing station, DDC is a joint venture between DT and the UAE-based East Africa Data Holdings, a group of local and international investors.

“I know of no other data centre facility that is connected into a diverse fibre path, and connected to that many international submarine fibre cable systems at a distance of 50m away,” says John Melick III, Chairman, DDC.

DT reported recently that it had 20 operators from 13 countries in East Africa transiting through its IP nodes, with traffic volumes of about 10Gbps. DT has also developed its own PoP, sourced from connected IP transit providers, as well as Orange (formerly France Telecom) and Etisalat.

“Our estimates nearly tripled last year because big international players are using it as an IP hub,” says Paul Brodsky, Senior Analyst, TeleGeography. “Telecom Italia, Level 3 and BICS, for example, are serving IP traffic out of Djibouti, and they are also offering CDN services out of the DDC.”

Djibouti’s main competing hub is Egypt. “What we’ve seen in Egypt is that there is an incumbent that is not necessarily competitively positioned from a price or capability perspective,” continues DDC’s Melick III. “All the political unrest has certainly impacted on its ability to attract investment. Instances of cable cuts and sabotage do not increase operator confidence.”

But according to James Walker, VP for managed network services, Tata Communications, the problem for Djibouti is that it’s a transit point rather than a market.

“In order for it to have real value, you have to have some presence or customers in the countries that are served by it,” he says.

For Walker, the real opportunity lies in the potential of a southern transit route out of Ethiopia and down through Kenya.

“It is still unreliable because it crosses large, uninhabited stretches. So the real focus is on northbound connectivity out of Ethiopia, which is a really big market. There is also some solid connectivity into northern Somalia and into Sudan. But if this path south terrestrially into Kenya becomes more stable, it then provides an alternative path to the submarine cables off the coast of Somalia, which are prone to getting cut.”