Softbank Maruyama CLS

The two partners on the trans-Arctic cable project Arctic Connect, the Finnish state-owned operator Cinia Ltd and Russian MegaFon, have suspended the Arctic Connect project for further assessment. Russian news agency Interfax reported on Thursday May 27, Megafon has decided to review the structure and economy of the Arctic Connect project, and it will take some time to regroup. Cinia had a formal press release on Friday May 28, annoucing the suspension of the Arctic Connect project.

According to Cinia, the objective of the Arctic Connect project has been to build the first trans-Arctic submarine telecom cable between Europe and Asia. Arctic Connect development project has been executed through a separate SPV, a project company domiciled in Finland. The plan has been to run the development phase of the project in 2020-2022, and to make the final investment decision for potential construction at later stage through separate assessment. 

Planned Route of Arctic Connect
Planned Route of Arctic Connect

 

In March 2016, Cinia Ltd announced to build the Arctic Connect undersea data cable connecting Europe with Asia. Spanning about 13,800 km. the Arctic Connect subsea cable project is expected to cost 0.8 to 1.2 billion USD.

In June 2019, Cinia and Megafon signed a memorandum of understanding (MoU) on the Arctic Connect subsea cable project. In December 2019, Megafon agreed to create the split-ownership joint venture Arctic Link Development Oy with Cinia for the construction of the Artic Connect submarine cable.

MegaFon and Cinia each owns 50% stake in the joint venture. MegaFon was supposed to be engaged in the construction and operation of the network, and Cinia was to attract investment in the project outside of Russia.

In 2020, Cinia signed a cooperation agreement with the Japanese trade and investment company Sojitz Corporation to fund the project.

"Despite the fact that the development phase of the project has progressed as planned and the funding for this phase has been secured, the key stakeholders have now decided to put the development project on hold. To correct some completely misleading information appeared in the media, this suspension is not due to Cinia Alliance members as we believe that the opportunity still exists with a great international interest.” says Ari-Jussi Knaapila, CEO of Cinia Ltd.

According to Vedomosti, the decision is due to the delay in negotiations on the implementation of the project by the Japanese side. The Japanese trade and investment company Sojitz Corporation signed a cooperation agreement with Cinia to fund the project. However, its structures, under various pretexts, are delaying negotiations on co-financing the project and providing services to connect to a new network of customers in Japan. Many of them seem frankly far-fetched.

Anyway, the partners of the Arctic Connect project have reached a right decision.

There were rumors that the Arctic Connect project was backed by Chinese fund. The project was presented to Chinese operators. And I was approached several occasions to comment on the project as well. As I understand, all the leading Chinese operators are not positive on the project. The Arctic Connect project will cost 0.8 to 1.2 billion USD and even more, and there are various uncertainty on the repair, operation and maintenace during the system lifetime. The Arctic Connect project is less competitive than other subsea and terrestrial cable projects between Asia and Europe. In my view, it is commercially infeasible so far.

Not only the trans-Arctic project Arctic Connect, there were proponents for a trans-Pacific subsea cable project to connect Chile to China. I also commented commercially infeasible for this project. Now, the planned trans-Pacific cable to connect Chile to China has been changed to a project connecting Chile to Australia and New Zealand. I still doubt its commercial feasibility.