SEACOM CONSORTIUM PROPOSAL
Common Carrier Consortium (Name to be decided)
Common Carrier Consortium (Name to be decided)
REQUEST FOR INTERESTED PARTIES TO INDICATE THEIR INTENTION TO PARTICIPATE
(this is a living document and is subject to change)
Proposal (High Level): Objectives
- The formation of a consortium of private investors with the object of acquiring and distributing multiples of STM1 (150MB) subscriptions of the SeaCom cable.
- The provision of preferential international bandwidth resources (via the consortium's SeaCom capacity) to stakeholders commensurate with their stake holding (1Mb per share held - minimum of 10 shares).
Stake holding, Consortium and Benefits:
- Creation of a private company (the consortium) comprising 150 shares per STM-1 on offer in bundles of 5 shares with a minimum purchase of 10 shares. The company will create 4800 shares but only release 150 shares per STM-1 purchased.
- Each share (or 1Mb) will be sold for R12000. This sale will cover the 5% deposit required by SeaCom.
- Conclusion of a suitable STM1 subscription agreement with SeaCom, with the view of subscribing the consortium to 150MB international bandwidth for 20 years. The total price for this is approximately R30,000,000 (thirty million rand) once off, or approximately R3,000,000 (three million rand) per quarter for 12 consecutive quarters. Regardless of the start date of any further STM-1 purchases - the agreement concludes at the end of the cables life, around August 2029.
- The share purchase capital will be utilised to pay the required 5% (R1,500,000) deposit to the SeaCom provider and a further portion will fund hardware and infrastructure at the landing site in the United Kingdom (London) and in Midrand/Johannesburg. The remainder will be applied as operating capital for the consortium.
- Together with its share acquisition each stakeholder must conclude a service agreement with the consortium for the provision of bandwidth and data for shares held. The commercial terms of the service agreement will be:
- 1MB + data = R8,500 (eight thousand five hundred rand) per month; and
- Fixed term of 36-months.
- On the expiry of the 36 month period, the price will be reduced to a maximum of R2,000 (two thousand rand) per MB per month. This price will only be available to shareholders.
Financial Model is therefore:
- 10 stakeholders with 15MB's per month subscription each at R8,500 per MB payable in advance for the quarter.
- 1 x 15 x R8,500 x 3 = R382,500 per stakeholder (per 15 shares) per quarter; or
- 10 x 15 x R8,500 x 3 = R3,825,000 income to the consortium per quarter.
- After 36-months the price per MB will drop to about R2,000 (two thousand rand) per month per MB for the next 17 years (at of todays prices). Prices to be determined by the Board subject to the maximum stipulated above.
Technical services (Peering, Transit Data) will be provided by Posix Systems - who already has equipment located in TeleHouse East (THE), London. Participants may be able to pull cross-connects to THE for their own requirement (London based hosting - etc).
Unknown Problems / Costs
The South African line terminates at Neotel, Midrand.
Dark Fibre Africa (DFA) is trenching from there to JINX (158 Jan Smuts, Rosebank) and promises operational status before 1st July.
Neotel wants a monthly cross-connect of US$1450 to connect SeaCom to DFA (per STM-1).
DFA is R1,600,000 per year with a 5 year contract, plus about R70,000 startup.
Transit will be provided at about $5000 per STM-1 from London - also included.
These costs are covered by the monthly cost of R8,500 per Mb per month charge.
Our deal MUST be concluded before 1st July - SeaCom prices then increase by 25%.
Once in the door - we can increase our capacity at the same costs.
With the purchase of an STM-1, other South African significant market players should peer with the consortium on a settlement free basis, Telkom SA will peer with a shared-cost line - but may restrict connectivity with respect to their ADSL Network.
With the full cooperation of Consortium members, the consortium could purchase ATM access to the ADSL Network, providing consortium bandwidth to ADSL customers - etc.
Statement of intent to participate:
Please indicate your intention to participate in the above consortium by including the following wording on your official company letterhead and returning same to Mark Elkins:
Dear SeaCom Consortium (care of Mark Elkins, the coordinator):
EXPRESSION OF INTENT TO PARTICIPATE: SEACOM CONSORTIUM
After reviewing your proposal for the establishment of a consortium and discussing the matter amongst our senior management team, we the undersigned hereby notify you of our willingness, ability and preparedness to participate in the proposed consortium on the following basis:
- Venture: Formation of consortium to subscribe to a STM1 package of SeaCom
- Shareholding: we wish to subscribe to and acquire _____ shares.
- Share Purchase Price: we agree to pay R12,000 (twelve thousand rand) per share before the commencement date.
- Commencement Date: 1st July 2009
- Service Contract: We agree to conclude a subscription contract with the consortium subject to the following conditions:
- Agreed price for first 36 (thirty six) months: R8,500 (eight thousand five hundred rand) per MB per month, which is payable per quarter in advance.
- The subscription quantity is 1Mb per share held.
- Agreed price upon expiry of initial 36 month period until August 2029 (or life of the cable) will be determined by the consortium, but subject to a maximum of R2,000 (two thousand rand) per month per Mb.
Service contract is fixed for the first 36 months of any purchase of an STM-1, thereafter it can be terminated upon 30 days prior written notice.
Delivery of Service: JINX
We appreciate and accept that in order to proceed with the successful establishment of the consortium; the coordinator must receive expressions of intent for the acquisition of an initial 150 shares. Following receipt of the necessary expressions of intent, the coordinator will call together a meeting of all relevant stakeholders so that the contractual formalities can be finalised and concluded, and that the relevant share and subscription fees can be paid. The initial payment due will be R12,000 (Twelve thousand rand) per share. + R24,000 per share (minimum service subscription for first quarter, excl VAT).