Vumatel says there is a major opportunity in South Africa to provide fibre to households earning less than R5,000 per month, and that it is busy testing the viability of lower-cost services for this market.
The company revealed details about its plans during presentations to investors on behalf of holding company Remgro.
Remgro holds a stake in Community Investment Ventures Holdings (CIVH), which owns Vumatel and Dark Fibre Africa.
Vumatel already offers a prepaid service called Vuma Reach aimed at lower-income households.
Vuma Reach is a prepaid product, the cheapest being uncapped 20Mbps download with 10Mbps upload speeds. ISPs charge between R375 and R400 for 28 days of access.
More expensive 40Mbps and 100Mbps Vuma Reach services are also available.
However, where Vuma Reach is aimed at households with a monthly income of between R5,000 and R30,000, Vuma Key will be for families who get by on less.
In his presentation, Vumatel CEO Dietlof Mare said that the addressable market for their “Vuma Core” product, available in more affluent suburbs around South Africa, was 2.2 million households.
Vuma Reach’s market is 4.8 million households, whereas Vuma Key’s target market includes 9.7 million homes.
Mare said that CIVH’s networks are currently predominantly in urban areas.
In line with their Unlimited Access Strategy — “leaving nobody behind” — they will expand into rural towns.
“CIVH’s network will cover urban, peri-urban and rural areas across South Africa, democratising Internet connectivity for everyone,” said Mare.
Mare said that Vumatel is currently running an FTTH pilot project in Alexandra to measure the technical and commercial viability of rolling out fibre networks in lower-income areas.
Vumatel announced its plans to provide 10 million homes with uncapped 100Mbps fibre for R89 per month in 2017.
The project was the brainchild of Vumatel founder and former CEO Niel Schoeman.
He emphasised that the service would be a profit-making endeavour and not a charity or based on cross-subsidisation by clients in more affluent areas.
Schoeman said the product had to be sustainable to be successful.
Sadly, Vumatel’s pilot in Alexandra was beset by delays.
Even though Vumatel said it had completed project planning by April 2018, it was still awaiting wayleave approvals from the City of Johannesburg by July 2019.
However, that same month Vumatel launched a trial in Mitchells Plain, in the Western Cape.
By October, it had launched its prepaid uncapped fibre offering that would become Vuma Reach.
Although the product’s pricing didn’t live up to Schoeman’s original ambition of R89 for 100Mbps uncapped, it was a step in that direction.
CIVH interim CFO Graham McGregor said in their investor presentation that Vumatel could successfully implement a strategy for mid-to-lower income customers.
It does this using roll-out methods that are lighter on capital expenditure, allowing it to be sustainable even at lower average revenues per user.
McGregor also emphasised that there are significant differences between Vumatel’s Core, Reach, and Key business models.