Vantage Capital, Africa’s largest mezzanine debt fund manager, recently announced that it has fully exited its investment in Vumatel.
Vumatel was founded in October 2014 by Niel Schoeman and Johan Pretorius to provide fibre-to-the-home (FFTH) services in South Africa.
At the time there was virtually no FTTH coverage in South Africa, and the incumbent Telkom was not in a hurry to replace its ADSL network with fibre.
Schoeman and Pretorius saw an opportunity and signed a deal with the Parkhurst Residents Association to install fibre in their neighbourhood.
What seemed like a small fibre rollout involving a little-known company at the time changed the South African broadband market forever.
It proved there was strong demand for fibre and that fibre network operators and neighbourhoods could partner to roll out fibre.
Vumatel also forced companies like Telkom, Vodacom, and MTN to look at their business models and start to roll out fibre.
Fast-forward six years and Vumatel is now the biggest FTTH network operator in South Africa and a household name in the broadband market.
Vantage Capital investment
Four years ago, Vantage Capital saw the potential which Vumatel had and supported it with R250 million in funding to accelerate its rollout.
At the time of Vantage’s investment in 2016, Vumatel had deployed its open-access fibre network across 14 suburbs in Johannesburg.
It was still early days and only 16,000 homes had been passed – with around 4,000 subscribers.
“Whilst banks were unwilling to fund the company at this early stage in its life, Vantage recognised the tremendous potential,” Luc Albinski, co-managing partner at Vantage Capital said.
Their decision was vindicated. Within four years, Vumatel became the largest provider of FTTH in South Africa.
Over the life of Vantage’s investment, the number of homes passed has grown 40-fold and the number of subscribers 50-fold as the company laid thousands of kilometres of fibre.
Vumatel’s success then drew the attention of Remgro.
CIVH, which is majority-owned by Remgro, secured a 34.9% stake in Vumatel in 2018.
Last year, CIVH acquired full ownership of Vumatel – adding to its other telecoms assets DFA, SqwidNet and SADV.
Albinski said that as a result of Vumatel’s growth, they made a return in excess of 2.5-times the initial amount.
While Albinski could not disclose the precise numbers to MyBroadband, due to confidentiality clauses, a 2.5-times return in four years is excellent – especially in the South African market.
“Vumatel is one of our many success stories where we have supported businesses with mezzanine debt to achieve their growth ambitions,” said Albinski.
Albinski told MyBroadband they are looking to make another investment in the technology sector in South Africa soon.