Seacom ramps up its enterprise unit
• CEO wants network capacity business to account for half of revenue
Fibre network operator Seacom, whose shareholders include Sanlam and Remgro, will ramp up its unit that sells network capacity to companies in a bid to increase its contribution to half of total revenue, CEO Byron Clatterbuck says. Seacom sells internet data capacity on its networks to businesses, internet service providers and mobile operators on a wholesale basis.
Fibre network operator Seacom, whose shareholders include Sanlam and Remgro, will ramp up its unit that sells network capacity to companies in a bid to increase its contribution to half of total revenue, CEO Byron Clatterbuck says.
Seacom sells internet data capacity on its networks to businesses, internet service providers and mobile operators on a wholesale basis.
It connects SA’s internet traffic to Europe via its East Africa undersea cable launched in 2009 and holds 25% of the wholesale fibre market locally, competing with firms such as Telkom, Vodacom, Liquid Telecom and Dimension Data’s Internet Solutions.
The enterprise business was launched five years ago and accounts for 40% of the business. While the plan is for this enterprise business to account for half the company’s total revenues in future, Clatterbuck said, “I don’t think there’s a happy mix”, explaining that sometimes the revenue split depends on the projects being worked on.
Locally, the corporate and enterprise data and internet market generates more than R300bn in revenue annually and has been growing at more than 7% a year, despite slow overall economic growth in the country, said Seacom. This is mainly driven by more businesses moving to the cloud.
Seacom has 5,000 business customers across its operations, with 4,500 being in SA. Clatterbuck said its largest operations are now in SA and Kenya.
The unit is adding 200 to 300 new customers a month.
However, the Covid-19 pandemic has hampered Seacom’s network rollout plans as companies have shut their offices with employees working from home after the governmentimposed lockdown.
Without people in offices, Seacom is unable to install and connect internet routers and other equipment. For now, “we’re in more of a maintenance mode”, Clatterbuck said.
Seacom’s strategy is to “deepen its presence” in countries where it already has a presence, he said.
Given the time and resources needed to build a network, he said Seacom is mainly focused on growing by acquiring strategic assets. In 2017 it bought FibreCo, which has a fibre infrastructure network in Johannesburg, Cape Town, Bloemfontein, Durban, Port Elizabeth and East London.
ACQUISITION
FibreCo’s national network has helped Seacom’s enterprise strategy to extend countrywide. This included the acquisition of several internet service providers, such as MacroLan and SAI, that already had numerous small and medium business customers.
Clatterbuck said they have recently invested more than R100m in the undersea infrastructure alone and are upgrading the Seacom cable systems’ traffic-carrying capability.
Dobek Pater, director and analyst at ICT research firm Africa Analysis, said the opportunity in the corporate sector will depend on the products or solutions one is considering.
For example, traditional voice is on the decline but other services used by organisations, such as cloud, have seen growing demand.
The impact of the SA government’s response to Covid-19, and whether it will be short or long term, temporary or permanent, would also have to be taken in account, he said.
Seacom is looking to grow its fibre-to-the-home business, Clatterbuck said. The company has 2,000 customers so far, with the number growing rapidly, helped by increased demand for home internet services during the national lockdown.
An immediate challenge of the Covid-19 crisis has been the weakening of the local currency against the US dollar, he said. With operations in countries outside SA and much of their equipment bought in the US currency, this was something Seacom is keeping an eye on.
Seacom has faced supplychain issues in getting equipment to some of its sites or points of presence in various countries, given the lockdowns and restrictions in the movement of some goods.
As a private company, Seacom
would not disclose how much revenue it makes.
However, 30% shareholder Remgro received a R22m dividend from the fibre operator for the six months ended December 2019. The Stellenbosch-based investment company’s actual portion of Seacom’s headline earnings amounted to R21m compared with a loss of R1m in the previous comparable period.
This increase is mainly due to positive growth in the traditional business, as well as a stronger performance in the service provider segment, due to the inclusion of FibreCo, said Remgro.
WITHOUT PEOPLE IN OFFICES, SEACOM IS UNABLE TO INSTALL AND CONNECT INTERNET ROUTERS AND OTHER EQUIPMENT
AN IMMEDIATE CHALLENGE OF THE COVID-19 CRISIS HAS BEEN THE WEAKENING OF THE LOCAL CURRENCY AGAINST THE DOLLAR