SA's largest network operator, Vodacom, will spend R17 billion this year as it seeks to gain a march on its competitors in areas such as fibre and digital services.
Vodacom, which has 33 million customers in SA, is spending R7 billion to buy out Neotel, SA's second national operator, as well as around R900 million to buy back the 400 000 Vodacom customers that Nashua Mobile serves.
In April, Nashua Mobile said it would sell its MTN and Vodacom subscriber bases back to the mobile duopoly in a surprise move that would see it earn R2.26 billion, before eventually shutting down.
Vodacom is also spending about R9 billion on capital investment this year as it seeks to boost coverage and add more long-term evolution (LTE) towers. It aims to more than double its LTE sites, from almost 1 000, by the end of next March, and increase 3G coverage to closer to 100% of the population.
Converging
CEO Shameel Joosub says Vodacom is speeding up its capital spending over the next three years, as it moves towards offering more converged services, which includes fibre, cloud, a network that can handle video, as well as digital services.
Vodacom is not alone in this move, as MTN is now rolling out an "aggressive deployment" of fibre-to-the-home (FTTH) to high-density urban areas, like upmarket gated communities, boomed-off suburbs and high-rise buildings. The official commercial launch for the product in these areas is set for 1 June, with "advanced discussions" under way with several additional residential sites.
Telkom, which has the biggest fibre footprint in SA, with 147 000km or 80% of all fibre in the ground, is also planning its FTTH launch for this year, as operators battle it out to grow their top lines as voice revenue continues to dwindle.
Next year, Vodacom will spend around 17% of its revenue on capital investments, a number that will taper down to about 14% in the following two years. It turned over R75.7 billion in the year to March, and had free cash flow of R13.2 billion, with enough capacity on its balance sheet to fund its expansion plans.
Joosub notes SA is fast becoming a mature market and Vodacom is looking to new areas for growth. Key aspects include data and the enterprise market, as well as fixed to mobile substitution, he says.
Getting ready
Data is set to explode, notes Joosub, especially as machine-to-machine technology takes off. This will require a "big investment", he says. Vodacom's entire network will be LTE-ready by August, and Joosub hopes its bid to buy Neotel will also go through quickly, as that will help the company fast-track its fibre offerings.
Joosub says Vodacom is busy with FTTH trials, but will focus on rolling out to business this year before ramping up its focus on the home next year. He notes that its move to be a bigger digital services player comes on the back of its network investment.
Vodacom wants to bring in services such as TV and music, as well as expand its cloud offerings, says Joosub. He notes the global trend is towards converged services and Vodacom is moving that way.
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