SOUTH Africa's biggest mobile operator Vodacom and investment holding company Remgro are combining their fibre businesses in a boost for the local network.
Vodacom said yesterday that it would acquire a strategic stake in Community Investment Ventures Holdings' (CIVH) fibre assets, which is 57 percent owned by Remgro.
CIVH operates electronic communications infrastructure through its subsidiaries Vumatel, South Africa's leading fibre network provider, and Dark Fibre Africa (DFA), which operates a national metro fibre network spanning 13 000km.
Vodacom told investors it would hold a co-controlling 30 percent equity interest in a newly formed InfraCo entity into which all of the material assets currently owned by DFA and Vumatel would be transferred in addition to certain Vodacom-owned fibre assets.
The telecommunications company said it had an option to acquire an additional 10 percent stake in InfraCo to 40 percent.
Vodacom said it would pay for the transaction through a combination of R6 billion cash and the contribution of its fibre-to-the-home, fibre-to-the-business and business-to-business transmission access fibre network infrastructure to the InfraCo, at a valuation of R4.2bn, in return for new shares in InfraCo.
The transaction would enhance and scale Vodacom's fixed offerings across both the consumer and business segments and leverage a shared cost model to accelerate the provision of open-access infrastructure in South Africa.
It said ultimately, the consumer would benefit from the fresh capital injection and shared cost approach as it will significantly scale up the fibre reach of InfraCo's various fibre brands, including smaller towns.
Vodacom chief executive Shameel Joosub said: “Our agreement with CIVH aligns with Vodacom Group's strategy to build high quality and resilient fixed and mobile networks with and through selected strategic partnerships across the African continent. It also supports Vodacom's purpose-driven plan to assist the government in rebuilding the economy post-Covid.”
CIVH Group chief executive Raymond Ndlovu said: “This milestone investment will boost our ambitious fibre roll-out programme across the country and assist in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of our society. Ultimately, it will result in much-needed inclusive economic growth.”
Commenting on the transaction, Ofentse Dazela, director for pricing research at Africa Analysis, said CIVH shot to prominence in the ICT space a few years when they acquired controlling stake in Vumatel, which is currently the largest fibre network operator (FNO) in the local market in terms of the number of houses it has covered with its fibre network. The company also owns DFA, the largest dark fibre (unlit fibre) provider in SA.
“The combined fibre assets of DFA, Vodacom and Vumatel will see the newly envisaged entity (InfraCo) emerging as one of the formidable FNOs in the country, especially when considering that Vumatel is already a leader in the FTTH infrastructure market.
Openserve, which was previously a leader in terms of fibre deployments, will remain in a distance second position,” said Dazela.
Dazela said the move would effectively consolidate CIVH's dominance in the fibre infrastructure market. “Thus, it remains to be seen whether this deal will be approved by regulatory authorities considering all the heavyweights at play here,” he said.
Yesterday Vodacom's shares closed 2.87 percent higher at R140.86 on the JSE.
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