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The fibre land grab

May 04 2017 11:58
Lloyd Gedye

Many of us have been through it. The first hint appears at the corners of your residential block. Mine was some pink fabric, wrapped around a few poles, to make sure nobody fell into a giant hole that had been dug. Pretty soon the work crews descended on our street, digging up trenches to lay fibre.

There was some collateral damage; a few delicately maintained verges took a knock. But within a week or two the street had returned to a semblance of its former self. Freshly laid concrete to fill trenches ran down the street, scars from the surgery that had taken place.

Our neighbourhood had fibre; we waited for the sales pitch.

Seeing as we live in a low- to middle-income area, it’s not surprising that it wasn’t a major priority for the fibre companies. But even suburbs like ours are now future assets in the land grab that is taking place across South Africa’s major cities, geared at delivering high-speed internet to homes and businesses.

In 2015, BMI-TechKnowledge released a report titled The Fibre Land Grab: The Status of FTTx in South Africa.

The report stated that fibre-to-the-home (FTTH) could potentially hit the 360 000 active subscription milestone by 2019. The report’s forecasting was based on the level of fibre investment that had taken place in 2015, with players like Vumatel, Telkom, MTN, Dark Fibre Africa and Vodacom leading the pack.

Future growth was predominantly identified as being driven by residential suburbs, a shift away from the previous gated estate-led growth. The key service expected to fuel the take-up was video-on-demand.

Aggressive acquisitions 

In 2016, Fibrehoods, an eight-month-old player in the fibre business, said it saw a high-speed fibre line as a replacement for a DStv subscription, not just an ADSL line.

“There are over 1m ADSL homes, but there are 6m DStv homes,” said Alon Hendel, director of Fibrehoods.

Just mere months after that interview, competitor Vumatel snapped up Fibrehoods for an undisclosed amount, following it up with the acquisition of Durban-based FTTH company Estate Connexions.

While Vumatel has been on the acquisition trail, it is itself constantly being courted, according to CEO Niel Schoeman. Speaking recently to TechCentral during a podcast interview, Schoeman admitted to being inundated with approaches.

“The mobile operators need to go into the fixed-line space – it’s no secret that they have to do that to provide converged services,” he said. “We have some plans we still need to fulfil before we succumb, and I’m not sure we will succumb.”

Some in the market, like Vox Telecom’s CEO Jacques du Toit, are predicting that ADSL services will be dead in five years. Vox recently announced plans to invest R550m, with most of this money to be in invested in fibre roll-out by Vox’s subsidiary, Frogfoot Networks. 

Meanwhile, fibre network giant Dark Fibre Africa has become a reported acquisition target for Internet Solutions. Remgro and New GX Capital own Dark Fibre Africa, and reports have suggested they may want as much as R10bn for the company. The deal would give Internet Solutions access to over 10 000km of fibre networks.

Although Telkom may be the biggest fibre player in the market, Dark Fibre Africa is growing the fastest.

The reports on the speculated sale of Dark Fibre Africa come a few months after Neotel was snapped up by pan-African telecommunications operator Liquid Telecoms in a R6.5bn deal.

The deal sees Liquid taking a 70% stake in Neotel, with the other 30% being held by Royal Bafokeng Holdings. Neotel had previously been the target of an unsuccessful Vodacom deal.

Liquid Telecoms operates in 15 markets across Africa and is a significant FTTH and fibre-to-business player in some of those markets.

Analysts and industry players suggest that there could be further consolidation in the market as the focus turns to monetising these vast fibre networks properly. Some players will survive and thrive; others will fail or be acquired.

Meanwhile, our fibre has been in the ground for a few months. We’re still waiting for the sales pitch.

This article originally appeared in the 11 May edition of finweek. Buy and download the magazine here.

internet  |  vox telecom  |  vumatel  |  fibre
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