Satellite Backhaul Growth Fuels African M&A

African satellite provider Gateway Communications is positioning itself to take advantage of mobile growth across the continent, acquiring data services company GS Telecom this week for $37.5 million. (See Gateway Acquires GS Telecom.)

Based in London, Gateway has operations in Belgium and South Africa and provides international voice and data connections to businesses and carriers in Africa, as well as providing interconnection among African mobile operators.

Satellite maintains an important position in the African market, as a lack of fixed-line infrastructure and limited submarine cable connectivity mean much of the continent relies on satellite for communications. Mobile operators across Africa use satellite to connect to other networks and route international calls, so the rapid rise in subscriber growth is also a boon to satellite providers.

Gateway says it has increased its satellite bandwith capacity by 84 percent in the last year and now holds around a 16 percent share of Africa's cellular backhaul market. (See Gateway Ups Satellite Capacity.)

GS Telecom, which operates in 27 African nations, counts pan-African biggies MTN Group Ltd. , Millicom International Cellular SA (Nasdaq: MICC) , and Celtel International B.V. among its customers, along with major multinational companies like Shell, ExxonMobil, and Coca-Cola. Gateway's footprint extends from 30 to 37 countries with the acquisition, consolidating its position as one of the largest service providers in sub-Saharan Africa.

GS Telecom provides design, implementation, and management along with its network services, and Gateway says the deal will give it greater access to local infrastructure and support -- particularly in the rapidly growing Nigerian market where GS has a large presence.

Nigeria was one of the top 10 mobile growth markets in the world last year and is set to overtake South Africa as the continent's largest mobile market by the end of 2007. The West African nation has already become MTN's largest subscriber base, according to its first-quarter figures.

Analyst firm Informa Telecoms & Media notes that West Africa saw a 58 percent increase in mobile subscribers last year, compared with a 39 percent increase for the continent as a whole, and expects the sub-Saharan region to maintain a higher growth rate over the next five years.

— Nicole Willing, Reporter, Light Reading

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