How Vodacom can get a slice of Vumatel and DFA

MyBroadband recently reported that Vodacom is in discussions to acquire a stake in Community Investment Ventures Holdings (CIVH), which owns Vumatel and DFA.

Vodacom and Remgro would not provide details about these discussions, saying they do not comment on market speculation.

Remgro CEO Jannie Durand did, however, share his views on the matter in a recent discussion with investors.

He said while he was not going to speculate on the discussions with Vodacom, he can assure investors they were happy shareholders in CIVH.

He said CIVH was one of their growth assets which are operating in a high-growth area in the South African market.

“We love the asset and we have assembled a great management team now,” Durand told investors.

Durant was referring to former Vodacom CEO Pieter Uys as CIVH chairman, the new CEO Raymond Ndlovu, and former Vodacom CTO Andries Delport as CIVH’s new CTO.

This management team positions CIVH as a strong telecommunications player in South Africa and a potential mobile player in future.

Durant said Remgro is not a seller of CIVH’s assets at the moment, adding that they are, in fact, investing in the business.

“We are still seeing a lot of growth in CIVH – not only in the fibre space but also in other areas,” he said.

How Vodacom can get a slice of Vumatel and DFA

It is common knowledge that Vodacom was in discussions to buy Vumatel but that it ultimately lost out to CIVH.

Vodacom CEO Shameel Joosub said the company wanted to become a bigger player in the fibre-to-the-home market, and Vumatel, therefore, remains a valuable asset to the mobile operator.

Vodacom is clearly still keen to get its hands on Vumatel, but if Remgro is not interested in selling its stake in CIVH it raises the question as to why Vodacom and CIVH are in discussions.

The answer may lie in CIVH chairman Pieter Uys’s comments regarding the future plans for the company.

Uys said Remgro sees a lot of opportunities in CIVH which can replicate its open-access, wholesale business model to other areas like data centres and mobile towers.

Telecommunications, however, is a capital-intensive industry and CIVH’s main growth restriction is getting enough money into the business.

To address this challenge, CIVH’s management launched a primary capital raise programme in November 2019 targeting R6 billion in funding.

This money will be employed for capex and to be ready to pay off some of CIVH’s debt over the next two years.

This process slowed down during the COVID-19 pandemic, but it was recently reactivated with a lot of interest from the market.

At the same time as the capital raise, certain CIVH minority shareholders indicated their intention to exit their investments.

This means a potential investor with deep pockets can acquire a significant share in CIVH through the capital raise and by buying out smaller shareholders.

Uys told MyBroadband that around 30% of CIVH is up for grabs, which will drop Remgro’s shareholding to below 50%.

This, Uys highlighted, is not a problem for Remgro, as Remgro does not currently have shareholder control over CIVH.

He would not comment on whether Vodacom is interested in this stake but highlighted that a strong BEE shareholding remains an important consideration for CIVH.

CIVH history

Now read: Vumatel and DFA’s impressive valuation

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How Vodacom can get a slice of Vumatel and DFA