Vodacom risks significantly overpaying for Remgro CIVH’s Maziv

An analysis of Vodacom’s planned investment in Remgro’s Maziv, which houses Vumatel and DFA, shows that it risks significantly overpaying for the asset.

In November 2021, Vodacom entered into a deal to buy a stake in the fibre assets of Community Investment Ventures Holdings (CIVH), which owns Vumatel and Dark Fibre Africa (DFA).

Vodacom offered to buy 30% of CIVH for R13.2 billion, paid in a combination of cash, fibre assets and Vodacom shares. It put CIVH’s valuation at an eye-watering R44 billion.

CIVH is Remgro’s key asset in the telecommunications and information technology sectors. It owns Maziv, which houses Vumatel and DFA.

These two companies construct and own fibre-optic networks and are digital infrastructure leaders with over 57,000 kilometres of trenched fibre.

In August 2023, the Competition Commission recommended that the Competition Tribunal prohibit the transaction. In October 2024, the Competition Tribunal blocked the deal.

Remgro and Vodacom are appealing this ruling. The Competition Appeal Court will hear the case in July 2025.

So much time has lapsed since the original agreement that the deal between Vodacom and Remgro will have to be renegotiated.

Remgro executive and CIVH chairman Pieter Uys said it was time to review the transaction again. Remgro is considering a new valuation method.

The deal would still include R6 billion in cash from Vodacom and its fibre assets, including towers, fibre-to-the-business, and fibre-to-the-home networks.

“Vodacom will then, depending on the valuation, top it up to get to at least 30% of the shareholding of Maziv,” Uys said.

In its latest financial report, Remgro valued CIVH at R26 billion. However, an independent valuation put its value at only R12.4 billion.

It raises concerns that Vodacom will significantly overpay for CIVH’s Maziv, costing shareholders billions in lost capital.

Vodacom is desperate to generate additional revenue streams, and Maziv’s fibre businesses are a logical extension to its product offerings.

However, there is a risk. Vodacom is so invested in the CIVH deal that it will most likely pay whatever is needed to make it happen.

Remgro executives, including former Vodacom chief executive Pieter Uys, know about this weakness from Vodacom. They will exploit it to drive up the deal’s value.

The same thing happened in 2019, when Vodacom acquired 51% of IoT.nxt for R1.028 billion. The R2 billion valuation of IoT.nxt was widely seen as ludicrous.

However, Vodacom was desperate to accelerate its Internet of Things (IoT) strategy and transform its dedicated IoT business unit.

The IoT.nxt owners knew this and convinced Vodacom to massively overpay for this business. Since the deal, IoT.nxt has lost money hand over fist.

The same scenario is now playing itself out with the Remgro CIVH deal and is aggravated by the fact that Vodacom has spent four years trying to make it happen.

CIVH’s required performance to make sense for Vodacom

With deals like Vodacom’s planned CIVH/Maziv investment, it is important to examine both companies’ current performance and their future expectations.

Vodacom is an excellent company producing strong profits and cash flows. The market currently values it at the following price multiples.

• Price-to-earnings ratio of 17.6 times
• Price-to-sales ratio of 1.7 times
• EV/EBITDA ratio of 5.5 times

If the Vodacom deal were to proceed, CIVH would need to justify the high price that Vodacom paid for it.

Therefore, it is worth considering what performance CIVH would need to attain to fall within the overall market-determined Vodacom valuation.

CIVH revenue requirement

CIVH would need to generate annual revenue of R26 billion to justify the R44 billion price tag that Remgro and Vodacom put on the company.

Achieving this level of revenue would put its valuation on par with the value of the Vodacom group’s overall revenue.

CIVH achieved total revenue of R6.6 billion in the past 12 months leading to its interim results. This means that CIVH would need to grow its revenue by 292%.

This is a tremendous ask from a company struggling with a high debt burden, and has started cutting capital expenditure.

EBITDA (earnings before interest, taxes, depreciation, and amortisation) requirement

CIVH reported an EBITDA (earnings before interest, taxes, depreciation, and amortisation) of R4.4 billion in its past 12-month reporting period.

To fall within the Vodacom group’s EV/EBITDA margin, CIVH would need to generate an EBITDA figure of R11.5 billion.

CIVH would therefore need to increase its overall EBITDA result by 162%. It is not clear how it would achieve that.

Headline earnings requirement

CIVH reported a headline loss of R393 million in the 12 months leading to its last reported financial figures.

To justify the R44 billion paid by Vodacom, CIVH would need to generate a headline earnings figure of R2.5 billion.

To attain this, CIVH would need to increase its headline earnings by 735%. Again, it is unclear how it would achieve such tremendous growth.