South Africa signs $700 mln sea cable agreement

CAPE TOWN, March 14 (Reuters) - South Africa has signed a memorandum of understanding (MOU) to help fund a $700 million submarine cable to boost broadband capacity and ease Internet tariffs, a government official said on Friday.

"The shareholder's agreement will be signed on the April 15, 2008 with financial close the same day," Lulu Bam, a spokeswoman for the Department of Public Enterprises, said in a statement.

Bam did not name the 11 companies involved.

South Africa's state-owned telecom infrastructure company, Broadband Infraco, will hold a 26 percent stake in the cable project with the remainder in to private hands.

South Africa, the continent's biggest economy, has only one cable linking it to the rest of the world and this has been controlled by former monopoly Telkom (TKGJ.J).

Telkom's market dominance is being challenged by Neotel [NEO.UL], South Africa's second telephone network operator, which has signed an agreement to build a private equity-funded submarine cable along the country's east coast.

This cable, which will also boost Internet capacity, will connect South Africa to India and Europe and was expected to enter service by early 2009. (Reporting by Wendell Roelf; Editing by Mike Elliott)