It's been a tough few months for telecommunications companies, but the landing of an undersea cable has given them something to smile about.
The US$280m East Africa Submarine Cable System (Eassy) arrived at Mtunzini, on the KwaZulu Natal north coast, this week.
Operators claim it will cut prices, which will be good for their recession-battered results. Telecom shares were assumed to be defensive in a slowing economy but the speed and scale of the slowdown put pressure on even this robust sector.
Undersea cables will not spare telecom operators the downside but will certainly boost their long-term prospects, by increasing the amount of bandwidth they can sell in Africa.
Eassy, which runs along Africa's east coast, is the latest undersea cable to connect the continent to the rest of the world. It follows the landing of rival Seacom, which is already providing commercial services.
These are not the only cables that will connect the continent. The West Africa Cable System (Wacs) on the west coast is expected to come into operation next year and The East African Marine System (Teams), which connects countries on the east coast with the Middle East, landed last year.
Before the landing of these cables Africa was served only by the South Atlantic 3/South Africa Far East (Sat-3/ Safe), which starts in Portugal and ends in Malaysia. Telkom's monopolistic control over this cable has led to accusations of predatory pricing - which it denies.
The arrival of Eassy and Seacom in SA changes this. Already Telkom admits that competition has driven it to come out with new, cheaper products.
The landing of these cables means the company is losing its grip on the local telecom s market. But it's not all bad for the operator. For one thing, Telkom can offer backup services if one of the cables goes down. The group has even bought backup capacity from Seacom, says its wholesale sales & marketing operations group executive, Alphonzo Samuels.
Besides investing in Sat-3/Safe and Eassy, Telkom is also a shareholder in Wacs and the Columbus III cable, which connects Europe with the US.
Samuels says the group's investment in undersea cables is central to its efforts to access cheaper international bandwidth.
There is significant advantage to ownership in an undersea cable because shareholders are charged at a "shareholder rate", which is even lower than the wholesale rate, says BMI-TechKnowledge MD Denis Smit.
Samuels will not say how much Telkom has invested in these undersea cables, but says the investment will pay for itself over 25 years. Smit suggests these cables generally pay for themselves in 10 years.
But undersea cables are only one part of the growth in telecom networks in Africa and SA in particular. Local telecom operators are investing heavily in national networks - Telkom is putting up R20bn and Neotel R7bn. "It's not unlike the laying of railroad tracks in US in the late 1800s," says Smit.
The prize connection is the "last mile" from the telecom operator's exchange to the consumers' homes. This connection is seen as key because it does not matter how reliable the services offered by undersea cables are or how much they reduce prices; without this final line, telecom operators struggle to compete.
Here, Telkom still has an advantage. It still controls all the exchanges in SA.
But even this looks set to change. The industry regulator and government are determined to bring this monopoly control to an end. It's not great news for Telkom, but with ownership in four undersea cables, it's not a train smash either.
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