War is on for local fibre market
The battle for supremacy in the multibillion-rand local fibre-to-the-home market is just beginning, with established telecommunications players and a number of independents all vying for their share.
Vumatel CEO Niel Schoeman said he expected that, over the next two to three years, about R10 billion was likely to be spent on fibre-to-the-home installations, including R3 billion by Vumatel itself.
The company has already spent between R300 million and R400 million since June 2014 on developing fibre infrastructure in Johannesburg.
The first neighbourhood where Vumatel installed its fibre broadband connectivity was in the suburb of Parkhurst, whose residents were “fed up with slow speed”.
Since then, the company had increased the suburbs where it had installed Vumatel fibre to 30 in Johannesburg, covering about 33 000 households, Schoeman added. Such neighbourhoods are called “fibrehoods”.
The company is also planning to open up in Cape Town. Suburbs identified include Newlands, Sea Point and Vredehoek.
At any time, Vumatel employs 4 000 permanent staff and contractors.
The biggest driver of growth in fibre-to-the-home has been the growth in popularity of high-definition and ultrahigh definition video delivered over the internet, as provided by Netflix and Showmax.
The installation of fibre will ultimately replace copper.
Schoeman said that about 95% of the internet in South Africa was currently delivered by copper lines and 5% by fibre lines, but the latter was set to grow.
Vumatel’s key competitors are Telkom, Fibrehoods and Metrofibre Networx, in which billionaire businessman Patrice Motsepe’s African Rainbow Capital and Sanlam Private Equity have stakes.
Fibrehoods declined to answer questions regarding its fibre-to-the-home plans. Metrofibre Networx did not respond to questions from City Press.
MTN and Vodacom are also eyeing the high-speed, open-access internet connectivity space.
MTN has declared its intentions of taking a leading position in the local business and household fibre market.
Vodacom has noted fibre as a new revenue opportunity. The company has so far passed 25 725 homes and businesses, as well as 190 estates, for its fibre-to-the-home projects in the pipeline.
Telkom has intensified its roll-out of fibre, having identified this form of network coverage as a key investment area.
Telkom CEO Sipho Maseko said this week that fibre had long-term growth potential as online video became more important.
In the year to March, Telkom spent R757 million on installing fibre-to-the-home – up 200% from R252 million for the previous year.
This financial year, Telkom is planning to triple its fibre spend to almost R2.3 billion to expedite this type of network coverage.
The company has passed 81 503 homes for fibreto-the-home, and more than 850 gated communities have been covered with fibre. By 2018, Telkom aims to pass 1 million homes with fibre.
Regarding future growth, Schoeman is expecting consolidation to happen in the fibre sector, and Vumatel would like to be the predator rather than the prey when that consolidation happens.
Vumatel is Schoeman’s third business after he co-founded the Birchman Group in 2003 in the UK, followed by a fibre-to-the-business company, which was sold to Dark Fibre Africa two years ago.
The shareholders of Vumatel are Schoeman, Johan Pretorius, Richard Came and Investec.