While the South African fibre market offers many opportunities at the moment, smaller fibre infrastructure players will struggle to maintain high-enough margins to survive.
This is according to SEACOM’s chief development officer Suveer Ramdhani, who was speaking at the 2018 MyBroadband Fibre Conference.
Ramdhani said the price of a 100Mbps fibre-to-the-business connection dropped from R100,000 per month in January 2015 to around R8,000 today.
Looking at international trends, he expects prices to fall further to between R3,000 and R4,000 per month for the same service.
These dramatic price reductions will put tremendous pressure on the margins of fibre operators.
To make up for lower margins – and less money per subscriber – operators will have to significantly increase their subscriber numbers.
Scale will be needed to make a business model work, and without scale smaller fibre operators will struggle to survive.
Ramdhani said operators who will survive are those who can achieve the necessary scale, especially with very dense user bases in areas where they operate.
Densely-populated fibre users make it easier to create the larger margins which are needed to survive, he added.
Ramdhani predicts that many of the smaller fibre operators in South Africa today will go bankrupt within the next few years, and will be acquired for a bargain by bigger players.
This changing fibre environment, where lower prices are inevitable, is why SEACOM is on the acquisition trail.
He said the company needs to grow its subscriber base to ensure it achieves the scale needed to survive in an environment with lower prices and lower margins.