Vox boss shares his multimillion-rand fibre plan

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Vox Telecom CEO Jacques du Toit.
Vox Telecom CEO Jacques du Toit.

Integrated ICT and infrastructure provider Vox Telecom has announced a fibre network plan for the small towns and outlying areas of the country, pledging to spur economic activity.

The company has expressed its intent to establish stable, high-speed Internet in the smaller towns, aiming to give household access to fibre broadband.

These plans see Vox join the great trek by other operators from major cities heading to smaller towns and townships, which have been dubbed secondary markets.

In May, Telkom went live with its fibre connectivity at Orlando West High School in Soweto, giving learners Internet access.

Octotel joined in, becoming the first independent open-access fibre network operator to reach 110 000 homes in Cape Town.

Last month, Vumatel announced it will roll out broadband connectivity to connect 900 000 households in Ekurhuleni and 450 000 in Soweto.

Frogfoot has followed the N4 through Witbank and Middelburg and onwards.

Analysts believe the most lucrative parts of the major metros in South Africa have become saturated.

Soweto expansion

Vox CEO Jacques du Toit says: “All fibre operators are slowly but surely moving away from the big cities to the secondary towns; so we have started in Richards Bay, we have done deployment in Bloemfontein, and now we are extending the network.

“Our board has approved plans to connect 200 000 households in the next 18 months. We only started in 2015; that’s only four years of us being in the market. We are in the process of expanding, starting in Soweto and we are going live in the next 15 days in Protea Glen.”

However, he cautions that building fibre networks in townships comes with challenges.

“The biggest challenge is the cost of backhaul. You can’t build a little island in isolation; in some areas there aren’t enough people, not enough households and there is the cost of bringing traffic to the central node.”

The Vox announcement comes a few days after finance minister Tito Mboweni, at the World Economic Forum on Africa in Cape Town, called for an aggressive push to reach universal broadband adoption.

Mboweni told business leaders and policy-makers that without broadband access, lives on the continent would be radically upended.

In an interview, the Vox boss told ITWeb: “The drive to secondary towns is going to increase significantly. Operators are moving away from the big cities. We have pretty much reached saturation; gone are the days when you could sign up to 100 customers in a specific area. It is great for the economy as a whole because suddenly you bring life in an area that has never had superfast broadband before.”

Some analysts agree with Du Toit.

Brian Neilson, director of BMIT, says: “Large parts of the major metros have been covered with fibre, especially in the more financially attractive parts of Johannesburg and Cape Town.

“Metros like Ekurhuleni, Durban and Pretoria are following suit, although lagging slightly in respect of penetration. As the most lucrative parts of the major metros become saturated, fibre network operators (FNOs) are moving into secondary opportunities. These include high-density buildings in suburbs which may be considered higher-hanging fruit with lower average household incomes; these are cost-effective to deploy due to the closer spacing of the residences.”

Ofentse Dazela, director of pricing research at Africa Analysis, says: “The addressable fibre-to-the-home (FTTH), which to this point has been the affluent areas mainly in Gauteng, Western Cape and KZN that have benefited from the roll out of an FTTH network, is increasingly presenting limited opportunities for fibre network operators, and this has in some instances resulted in fibre infrastructure duplications in these targeted areas.”

However, Mark Walker, associate vice-president at International Data Corporation, is of the opinion that competition is pushing the FNOs to secondary markets.

“The big city market is not saturated – rather the low-hanging opportunities (office and residential estates, office towers) are now highly competitive. Opportunity still remains but it will be more costly and fragmented to win in these areas.”

According to Walker, technology such as LTE/4G/5G are stronger contenders in the metro areas as the technology matures and is cost-effective.

“Areas that have been underserved in the city/metro areas are attractive.”

Market consolidation

Turning to possible tie-ups in the industry, Du Toit says these will happen as the pressure increases, particularly for the smaller players.

“There is a lot of talk going on; we have four to five big operators that basically dominate 80% of the market and then you have these small localised players.

“I think small operators are not going to survive, they don’t have the scale. The problem is that they built islands in isolation of each other; you can’t run a network like that.”

Dazela agrees, saying: “The fibre network rollout business requires deep pockets to establish a decent and profitable footprint. Many of the smaller FNOs that we see today will not be able to compete with established market players in the long-term and this will inevitably result in consolidation in this market.”

Walker notes: “We have seen many players arising over the last five years – consolidation is likely as well as acquisition of players by larger telco operators or ISPs.”

“Consolidation of operators has happened in the past and it is likely to continue as a normal course of industry maturation. Some entrepreneurial FNO players are likely to be happy to ‘flip’ their businesses after a few years, and move onto the next exciting opportunity,” says Neilson.

He points out there has been a number of changes in the market this year that will likely require investors to re-look at the business case, both for further new fibre deployments and for acquisitions.

Neilson explains: “One of these is the reality that alternative wireless-based technologies may be more attractive when seeking to penetrate the aforementioned ‘secondary opportunities’. Telkom, for its part, has a dual strategy with fibre and fixed-LTE. As 5G networks are launched, with Rain likely to be the first in South Africa, this will be an even more attractive alternative. Wireless networks have a potentially quicker return on investment than fibre.”

He also believes the announcement by Telkom of its intention to speed up its copper network’s end-of-life will put a spanner in the works.

“It means there is higher potential for substitution of DSL by both fibre and wireless.”

Frogfoot deal

Meanwhile, Vox-owned open access provider, Frogfoot, today announced that it has acquired the existing network and customer base of Blitz Fibre, and entered into an exclusive partnership with the company to accelerate the rollout of fibre in multi-dwelling units across the country.

Abraham van der Merwe, CEO of Frogfoot Networks.
Abraham van der Merwe, CEO of Frogfoot Networks.

The deal will add another 15 000 homes be serviced by Frogfoot, bringing the total homes to 102 000 as of August 2019.

Blitz Fibre has presence in Gauteng, Eastern Cape and KwaZulu-Natal and focuses on building fibre infrastructure in multi-dwelling residential and business complexes, as well as small and large scale business parks.

The transaction is limited to the acquisition of Blitz Fibre existing customer base not the company itself.

Abraham van der Merwe, CEO at Frogfoot Networks said: “Frogfoot encountered Blitz in Port Elizabeth and Richards Bay, and instead of duplicating the fibre network, we decided to partner with them instead. We were impressed with the Blitz team’s ability to secure and build multi-dwelling units and their ability to scale in such a short space of time and this was one of the key drivers of the acquisition.”

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