The man who grew Vox from a small ISP to a household name

The foundations of Vox Telecoms’ empire, now Vivica Group, were laid by an entrepreneur who spent 16 years selling hardware — as in DIY, tools, and equipment — before making a hard turn into IT at age 38.

Douglas Reed completed the first year of his BCom before taking a job on a North Sea oil rig. After returning to South Africa, 22 years old, he took over Sandton City Hardware.

This was followed by numerous start-ups, including a career as managing director of Mica Distributors and later a Mica Hardware group board member.

In his late 30s, Reed realised he was wasting time working for other people. However, he could not afford to start a business from scratch.

Luckily, he received an offer from Control Instruments to head up its IT business, DataPro.

DataPro had provided IT support for Reed’s stores, and he knew the company’s outgoing MD well.

A small company at the time, DataPro was turning over R150,000 per month in 1997 (roughly R630,000 in today’s money).

Reed took a salary cut and bought 30% of the business with the ambition of turning it into a national Internet service provider.

According to Reed, moving from retailing hardware to IT was not as much of a leap as it sounds, as he had always been interested in technology.

His stores often had systems that were ahead of their time relative to the rest of the fairly conservative hardware industry.

“I took over a company that had no business plan in place. The first three years demanded 12-hour days, six days a week,” Reed said in a 2009 interview.

DataPro launched Internet services aimed at small and medium businesses in 1998 and Reed lays claim to being the first company to offer cheap email services for people on dial-up.

By 2000, it was one of the first ISPs in the country to become cash-flow positive.

Reed said this was huge for them. “Even when you have budgeted to lose money, it’s horrid,” he said.

Reed said that one of the first management lessons he ever learnt was that, during these early days, leaders must be measured against good metrics.

He believes entrepreneurs must be managed loosely, but stringently.

“That sounds like a contradiction, but the first MD I worked for was very clear on this. I had the freedom to run my store as I wished, but I was measured on four things — debtors’ days, creditors’ days, stock turnover, and profit.”

Shortly after DataPro started making money, its parent company went looking for a buyer.

Control Instruments was an electronics company that dealt with aviation and vehicle tracking, and DataPro was not part of its core business.

Reed agreed that it would have been pointless for them to remain with Control Instruments. However, it was also the beginning of the Internet boom, and he wanted to grow the company.

He approached three financiers to orchestrate a management buyout, and BoE Private Equity Investments came to the party.

They bought DataPro at a premium. Reed said the company was worth R15 million at the time, but they paid double that amount. He said they recognised the value of a customer base that no other ISP could match.

The relationship between DataPro and its bankers started well, with a five-year plan to make shareholders R50 million. However, things changed when Nedbank took over BoE.

“The bank wanted to sell us to the highest bidder, and we had no desire to be owned by anyone,” said Reed.

Mweb made a R65-million offer for the company, but the bankers fortunately turned it down.

DataPro continued its meteoric growth throughout the early 2000s.

By 2004, it reverse-listed on the JSE’s AltX through an acquisition by Casey Investment Holdings — a company the brothers who founded Esquire had founded and exited.

Casey’s name changed to DataPro Group, and the company raised enough money to part ways with BoE.

Reed said the experience with the bank was a hard lesson.

“If you ask for money from a bank, you’re screwed,” he said.

“But if there is no alternative, the best thing to do is hold onto as many shares as possible, and then double the size of the company so that your money doubles, work hard for five years and buy back your business.”

DataPro continued expanding its product set.

In 2005, it branded its voice division as Vox Telecom. This was followed by several significant acquisitions.

These included Durban-based regional ISP WickIT, consumer-focused ISP @lantic, Pretoria-based corporate ISP Netralink, and consumer ISPs MJVNET, XsiNet, and Shisas.

It also expanded its least-cost routing (LCR) business by acquiring Definity Telecom and Orion Telecom.

At the time, Definity was South Africa’s fourth-largest LCR provider, and Orion was the biggest.

Reed’s approach to acquisitions was always emotionless.

“If the company you take over is your core business, then people are not an issue, and we take virtually none of them into the fold,” he explained.

“However, if it’s not our core business, it’s vital to buy a company that is well run, which means we bring the people on board.”

Reed said every acquisition was a learning experience.

“These transactions have a major impact on both the company being bought and the buyer. Each time we conclude a deal, both sides stop in their tracks for a few months, which costs us a lot of money,” he said.

“It’s vital to plan everything in great detail beforehand so that you minimise downtime. Rather take longer to conclude the deal and have the ability to hit the ground running.”

By 2007, DataPro had a market cap of R2.3 billion and was the largest listed company on the AltX.

It changed its name to Vox Telecom to reposition itself as a full-service telecommunications provider.

Unfortunately, Vox was hit hard by the 2008 financial crisis when a brokerage it used went under. By the end of that year, Vox wrote off R60.8m in related losses.

Down, but not out, the company hatched a deal for a buyout and delisted from the JSE in 2011.

IT industry veteran Angus MacRobert was appointed co-CEO of Vox alongside Reed until 2013.

They both stepped down that year and handed the company’s reins to its current CEO, Jacques du Toit.

MacRobert went on to pursue other interests, while Reed stayed on as executive head for strategy and innovation until January 2015.

Later that year, Vox acquired Frogfoot Networks, one of South Africa’s largest fibre network operators.

Vox Holdings rebranded to Vivica Group in 2022, restructuring its business into several sister companies, with Vox continuing to exist as a company within the group.