Vodacom set for fibre spree

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Johannesburg - Vodacom, the cellular operator with the most subscribers in South Africa, plans to increase its capital expenditure by more than R2 billion as it develops its fixed-line business.

Vodacom, which is 65 percent owned by Vodafone Group, would spend more than R9bn next year on its infrastructure in South Africa compared with about R7bn this year, chief executive Shameel Joosub said in a presentation to staff.

“We’re going to start building fibre into the home, fibre to the business and so on, and really start trying to play a bigger role in the fixed space,” Joosub said in a video message last week. “We’re going to spend over R9bn next year and that’s so we can help deliver on the strategy of helping the government get to the 2020 broadband strategy [target].”

Vodafone, Europe’s biggest cellular operator, is putting aside about £7bn (R118bn) from the sale of its Verizon Wireless stake in the US to upgrade networks for units including Vodacom, as part of an investment plan known as Project Spring.

The government wants 90 percent of the population to have access to reliable and affordable broadband internet by the end of this decade.

Vodacom is increasingly focused on small to medium-sized business customers and is in exclusive talks to buy fixed-line provider Neotel. Including acquisitions, the phone company may triple its capital expenditure next year, according to the presentation.

Vodacom had also increased its market share in South Africa to more than 53 percent at the year-end from about 50 percent in its first quarter, Joosub said. The company’s biggest domestic rival is MTN, which is Africa’s largest cellular network provider.

Zunaid Bulbulia, the chief executive of MTN South Africa, said last week that MTN had invested nearly R10bn to improve its network in South Africa, where the subscriber base declined to 25 million by June from 25.4 million previously, due to competition.

MTN is expected to spend in that order over the next year, primarily to lay fibre-optic cabling underground for the network.

“The primary focus of the investment has been around being able to carry data. This year we’re going to be close to the number we’ve had in the previous two years in terms of capital investment. Our plans for next year again will be in that order.

“The reality is if we don’t invest in infrastructure to carry data, you’re not going to have the quality of service around data that I think everybody in South Africa wants,” Bulbulia said.

MTN had also held talks with Neotel but pulled out of discussions, Sifiso Dabengwa, MTN Group’s chief executive, said in August.

Neotel, which has focused primarily on businesses rather than consumers, was attractive due to its radio frequency spectrum, which Vodacom and MTN are short of, according to industry analysts.

Smaller rival Cell C announced in August that it would spend more than R200m on its network including 100 new sites in Johannesburg as well as indoor coverage sites. – Bloomberg (with additional reporting by Asha Speckman)

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