A new platform, Merge X, has been introduced into the South African market to increase competition among internet service providers (ISPs). The platform creates a shared services backend to address challenges like limited capital and skills, and enable tier 3 and 4 ISPs to compete against tier 1 and 2 counterparts.
With ICASA’s March 2024 deadline mandating 30% ownership equity for black South Africans and disadvantaged groups, Merge X ensures sustainability and growth for businesses, levelling the playing field and advancing the economy.
The platform has been developed and refined over the past year. It is targeted at ISPs that service clients within small towns and communities and have under 10 000 customers across both B2B and B2C segments.
Merge X co-founders Farhad Suleman and Tholo Lerotholi say consolidation continues to dominate ISP markets abroad, and South Africa’s ISP industry is no exception.
Suleman says from a local perspective it is being driven by the tier 1 ISPs acquiring tier 2 or 3 players. “… as we have seen over the last six-to-nine months with Afrihost buying Home Connect, and WebAfrica buying MWeb.”
In addition to M&A activity, Suleman and Lerotholi emphasize the significance of the industry regulator ICASA’s March 2024 deadline, mandating 30% equity ownership for black South Africans and highly disadvantaged groups. Merge X secures a minimum of 50% equity in the ISPs it partners with.
"As a level 1 BBBEE value-added partner, we assist our subsidiaries in meeting the ICASA regulatory requirements for ISPs," say the founders. While potential partners may have concerns about equity share, most recognise the value of the Merge X platform in lowering their current costs and enabling more effective competition, they add.
"Many of the ISPs we engage with understand the necessity to transform their operations, not just to sustain commercial viability but also to seek opportunities for expansion and growth. Additionally, our initial partners get in on the ground floor and provide valuable insights that shape our growth story while also being involved in the centres of excellence within our shared services platform,," says Lerotholi.
Merge X is well into its initial round of capital raising, expected to be completed by Q1 of 2024, with an aim