South Africa’s fibre war

Vumatel has reported a significant increase in the number of homes connected to its fibre network, once again overtaking Telkom-owned Openserve.

Telkom reported higher connection numbers in a voluntary fourth-quarter trading update in February, briefly overtaking Vumatel by nearly 20,000 subscribers.

However, Vumatel’s parent company Community Investment Ventures Holdings (CIVH), which is 57% owned by Remgro, last reported homes connected figures for July.

Remgro has since provided new numbers for CIVH that are current as of September 2022, and Vumatel has provided further updated figures for December 2022.

CIVH owns Vumatel and Dark Fibre Africa (DFA).

Further complicating the corporate structure, the fibre assets of the two companies were spun out into a CIVH subsidiary called Maziv.

This has no functional impact on the financial results, but it is useful to start thinking of the network operator as Maziv rather than CIVH, or Vumatel and DFA separately.

Should the Competition Tribunal approve the proposed merger of CIVH and Vodacom’s fibre network, Maziv will be the combined network.

Remgro reported that Maziv passed an additional 85,000 homes between July and September 2022, bringing the number of homes passed to 1,685,000.

By December 2022, this figure had increased to 1,805,000.

Maziv also increased the number of homes connected to its network from 450,000 to 570,000 in September. By December, it was at 600,000 homes connected. This is a 33% increase between July and December 2022.

With this substantial increase in homes connected, Maziv once again overtakes Openserve to comfortably take the lead as South Africa’s biggest fibre network operator by number of customers.

Openserve still has significantly more physical fibre in the ground than all its next-nearest competitors combined, providing backbone connectivity to cities and towns around South Africa.

Vumatel and DFA combined have over 47,000km of fibre, whereas Openserve has more than 169,000km.

However, Maziv outspends Telkom to develop its fibre network infrastructure with capital expenditure (capex) of over R2 billion, while Openserve’s fibre capex is under a billion rand.

When MyBroadband previously asked Telkom about its network investment strategy, group chief financial officer Dirk Reyneke said it is important to consider the capex on their core network between 2018 and 2020.

“We spent significantly on our core to enable the fibre [rollout]. I think that did us well during Covid when we really monetised as a result of that,” said Reyneke.

“We’ve built that core now. Where we’re currently spending is what I call SOD — service-on-demand — that’s your fibre-to-the-curb and fibre-to-the-basestation. There we build on-demand. It’s not speculative,” he explained.

“We’ve by and large completed the backbone to enable the fibre-to-the-home, and we intentionally did that first.”

Reyneke said their decision had given them a lot of headroom to enable the fibre-to-the-home rollout, which Telkom is prioritising and accelerating.

The table below summarises how Maziv and Openserve compare on key financial and operational metrics.

It should be noted that Openserve’s total revenue is derived from more than providing fibre connectivity. For example, it still operates Telkom’s legacy copper network and offers international backhaul and managed services.

Telkom is currently seeking a buyer for a minority stake in Openserve.