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Vodacom makes mega fibre move with CIVH fibre assets

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Vodacom Group CEO Shameel Joosub.
Vodacom Group CEO Shameel Joosub.

Vodacom Group has acquired a co-controlling equity stake in Community Investment Ventures Holdings’ (CIVH’s) fibre assets, in a deal that is set to hasten the telco’s plans to dominate SA’s connectivity market.

CIVH operates electronic communications infrastructure through its subsidiaries Dark Fibre Africa (DFA) and Vumatel.

DFA has a national metro fibre network spanning 13 000km and 37 000 connected circuits, while Vumatel operates a high-speed FTTH network, using a wholesale open-access model that passes more than 1.2 million homes and has deployed over 31 000km of fibre infrastructure across SA.

With the deal announced today, which is subject to regulatory approvals, Vodacom will hold a co-controlling 30% equity in a newly formed InfraCo entity, into which all of the assets currently owned by DFA and Vumatel will be transferred, in addition to certain Vodacom fibre assets.

Vodacom has an option to acquire an additional 10% stake in the InfraCo to 40%.

There is fierce competition in the fibre market, with most companies setting their sights on the township and smaller markets, backed by massive investments. Telkom, Octotel and Frogfoot have been aggressively bidding for dominance in the fibre market with multimillion-rand investments.

Vodacom will settle the CIVH deal 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 R4.2 billion, in return for new shares in the InfraCo.

Additionally, Vodacom says it will acquire further (secondary) shares from CIVH, sufficient to increase its shareholding to at least 30% in the InfraCo at a pre-agreed formula.

The grand plan

According to Vodacom, the transaction will enhance and scale its fixed offerings across the consumer and business segments, and leverage a shared cost model to accelerate the provision of open-access infrastructure in SA.

“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,” says Vodacom Group CEO Shameel Joosub.

“It also supports Vodacom’s purpose-driven plan to assist the government in rebuilding the economy post-COVID-19.

“This transaction also aligns with the Vodacom Group’s Africa connected campaign, which seeks to build on our existing efforts to close the digital divide to ensure everyone on the continent can enjoy the full benefits of a digitalised society, as we connect the next 100 million people in Africa. It is also an important milestone that will result in homes and businesses gaining access to fast and cost-effective digital services through fixed-line and mobile networks.”

CIVH Group CEO Raymond Ndlovu comments: “This milestone investment will boost our ambitious fibre rollout 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.”

In May, Vodacom signalled plans to ramp-up fibre plans with a multibillion investment, and the telco has experienced colossal data usage growth.

The group doubled the total number of homes and businesses connected to 126 765, and Vodacom’s fibre passed 146 401 homes and businesses as at 31 March.

The increased demand for connectivity helped Vodacom post a healthy rise in revenue growth of 7% to R56.4 billion for the year ended March.

In the period, data traffic in SA increased by 55.6%, with Vodacom saying smart devices on its network were up by 9.5% to 23.2 million, while 4G devices increased by 22% to 15.7 million. Vodacom Business service revenue increased by 11.3% to R15.9 billion.

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