EBRD Funds Turkey's Investment in High-Tech Undersea Cable System

The European Bank for Reconstruction and Development (EBRD) is funding Turkey’s investment in a new high-tech fibre-optic submarine communications cable system that will carry data between 17 countries, from Singapore to France and Italy.

​Figure 8 - SEA-ME-WE-5 Cable Map

Source: NEC

The Bank is providing a US$50 million loan to Türk Telekom Group, Turkey’s largest telecommunications company, which is building the new submarine cable system in a consortium with 17 other telecommunications operators.

The financing will be used to lay cables under the sea and build a branching unit in Marmaris on the Mediterranean coast, in Muğla Province, south-western Turkey.

Branching units are used in submarine cable systems to provide traffic and power routing between the trunk and branch cables, according to EBRD.

The US$700 million network, dubbed SEA-ME-WE-5 (South-East Asia-Middle East-Western Europe-5), will be approximately 20,000 kilometres long and is expected to become operational in late 2016, connecting South-East Asia, the Indian subcontinent, the Middle East and Europe.

The cable’s design capacity is 24 terabits per second on three fibre pairs. Once completed, its advanced 100 Gbit/s technology is expected to meet the rapid growth in demand for fast internet traffic between Europe and Asia.

The system will also bolster Turkey’s internet infrastructure as the country’s growing economy needs greater connectivity and ever-stronger commercial ties with Europe, the United States of America and Asia.

Turkey has experienced a steep increase in internet use over the last couple of years thanks to investments by telecommunications operators and to enhanced competition in the market. Demand is also growing due to the popularity of video streaming, with high definition replacing lower picture qualities.

The increased capacity for data traffic will result in higher quality for internet connections in Turkey and the neighboring countries.

Jean-Patrick Marquet, Director of EBRD Operations in Turkey, said: “This mega internet infrastructure project will serve as a brand new platform for future telecommunications business. It can help build a strong digital industry in the country and attract high-tech companies, content providers and major players in the digital economy.”

Cem Velipaşaoğlu, Chief Financial Officer at Türk Telekom International, added: “We are proud to receive the EBRD loan to finance Turkey's SEA-ME-WE 5 consortium membership. The EBRD has long been an indispensable partner for the people of Turkey in sustainable growth and development, and now, by facilitating the expansion of our digital infrastructure, the EBRD is recognizing the enormous economic potential created for our customers by this essential international project.”

Speaking on behalf of the SEA-ME-WE 5 consortium, Linette Lee, Chairperson of the SEA-ME-WE 5 Management Committee, said: “This new SEA-ME-WE 5 submarine cable system is a matchless, PoP (point of presence) to PoP, multi-regional data superhighway. It is a technological breakthrough which will mark a global communications milestone when it launches by the end of 2016. Designed with the latest upgradable 100 Gbit/s technology, enabling initial system capacity of 24 Tbit/s, it will provide the lowest latency, further enhancing the diversity and resilience of the heavily loaded Asia to Europe route.”

Investing in higher-quality internet connectivity is part of the EBRD’s efforts to foster innovation in the Turkish economy.

The EBRD started investing in Turkey in 2009 and currently operates from offices in Istanbul, Ankara and Gaziantep. Some 98 per cent of the Bank’s investments in the country are in the private sector.

To date, the EBRD has invested over €8 billion in Turkey through some 200 projects in infrastructure, energy, agribusiness, industry and finance. It has also mobilized about €17 billion for these ventures from other sources of financing.

The EBRD’s strategic priorities for the period 2016-18 for its countries of operations are: re-energizing growth, strengthening regional integration, and addressing global challenges.

Source: www.finchannel.com

ANALYSIS: At US$50 million (€44 million), the EBRD's loan to Türk Telekom International is 10% above its average for a project in Turkey. Assisting Türk Telekom in this way certainly corresponds with the EBRD's strategic priorities but there is another obvious overarching political motivation.

The European Union is desperately trying to find a solution to the waves of refugees from Syria and other migrants that are entering Europe from the East. It is hoped that Turkey will provide a bulwark and absorb much of this influx while also taking back refugees that have arrived in Greece. In March 2016, the temperature of the diplomatic dialog increased significantly as Turkey pressed the EU to double compensation paid to Turkey for every refugee taken in and demanded movement on the issue of visa-free travel in the Schengen Area for Turkish citizens, and progress towards full membership of the European Union for Turkey. A compromise deal was eventually reached. Six months later, the EBRD announcement looks far from coincidental.