The fi­bre land grab

The race to sup­ply cus­tomers with fi­bre op­tic ca­bles is be­com­ing ever more ag­gres­sive, with com­pa­nies mak­ing ma­jor plays to be­come the top ser­vice provider.

Finweek English Edition - - ON THE MONEY TECHNOLOGY - Ed­i­to­rial@fin­week.co.za

manyof us have been through it. The first hint ap­pears at the cor­ners of your res­i­den­tial block. Mine was some pink fab­ric, wrapped around a few poles, to make sure no­body fell into a gi­ant hole that had been dug. Pretty soon the work crews de­scended on our street, dig­ging up trenches to lay fi­bre.

There was some col­lat­eral dam­age; a few del­i­cately main­tained verges took a knock. But within a week or two the street had re­turned to a sem­blance of its for­mer self. Freshly laid con­crete to fill trenches ran down the street, scars from the surgery that had taken place.

Our neigh­bour­hood had fi­bre; we waited for the sales pitch.

See­ing as we live in a low- to mid­dlein­come area, it’s not sur­pris­ing that it wasn’t a ma­jor pri­or­ity for the fi­bre com­pa­nies. But even sub­urbs like ours are now fu­ture as­sets in the land grab that is tak­ing place across South Africa’s ma­jor cities, geared at de­liv­er­ing high-speed in­ter­net to homes and busi­nesses.

In 2015, BMI-TechKnowl­edge re­leased a re­port ti­tled The Fi­bre Land Grab: The Sta­tus of FTTx in South Africa. The re­port stated that fi­bre-tothe-home (FTTH) could po­ten­tially hit the 360 000 ac­tive sub­scrip­tion mile­stone by 2019. The re­port’s fore­cast­ing was based on the level of fi­bre in­vest­ment that had taken place in 2015, with play­ers like Vu­ma­tel, Telkom, MTN, Dark Fi­bre Africa and Vo­da­com lead­ing the pack.

Fu­ture growth was pre­dom­i­nantly iden­ti­fied as be­ing driven by res­i­den­tial sub­urbs, a shift away from the pre­vi­ous gated es­tate-led growth. The key ser­vice ex­pected to fuel the take-up was video-on-de­mand.

Ag­gres­sive ac­qui­si­tions

In 2016, Fi­bre­hoods, an eight-month-old player in the fi­bre busi­ness, said it saw a high­speed fi­bre line as a re­place­ment for a DStv sub­scrip­tion, not just an ADSL line.

“There are over 1m ADSL homes, but there are 6m DStv homes,” said Alon Hen­del, di­rec­tor of Fi­bre­hoods.

Just mere months af­ter that in­ter­view, com­peti­tor Vu­ma­tel snapped up Fi­bre­hoods for an undis­closed CEO of Vu­ma­tel amount, fol­low­ing it up with the ac­qui­si­tion of Dur­ban­based FTTH com­pany Es­tate Con­nex­ions. While Vu­ma­tel has been on the ac­qui­si­tion trail, it is it­self con­stantly be­ing courted, ac­cord­ing to CEO Niel Schoe­man. Speak­ing re­cently to TechCen­tral dur­ing a podcast in­ter­view, Schoe­man ad­mit­ted to be­ing in­un­dated with ap­proaches. “The mo­bile op­er­a­tors need to go into the fixed­line space – it’s no se­cret that they have to do that to pro­vide con­verged ser­vices,” he said. “We have some plans we still need to ful­fil be­fore we suc­cumb, and I’m not sure we will suc­cumb.” Some in the mar­ket, like Vox Tele­com’s CEO Jac­ques du Toit, are pre­dict­ing that ADSL ser­vices will be dead in five years. Vox re­cently an­nounced plans to in­vest R550m, with most of this money to be in in­vested in fi­bre roll-out by Vox’s sub­sidiary, Frog­foot Net­works. Mean­while, fi­bre net­work gi­ant Dark Fi­bre Africa has be­come a re­ported ac­qui­si­tion tar­get for In­ter­net So­lu­tions. Rem­gro and New GX Cap­i­tal own Dark Fi­bre Africa, and re­ports have sug­gested they may want as much as R10bn for the com­pany. The deal would give In­ter­net So­lu­tions ac­cess to over 10 000km of fi­bre net­works. Al­though Telkom may be the big­gest fi­bre player in the mar­ket, Dark Fi­bre Africa is grow­ing the fastest. The re­ports on the spec­u­lated sale of Dark Fi­bre Africa come a few months af­ter Neo­tel was snapped up by pan-African telecom­mu­ni­ca­tions op­er­a­tor Liq­uid Tele­coms in a R6.5bn deal. The deal sees Liq­uid tak­ing a 70% stake in Neo­tel, with the other 30% be­ing held by Royal Bafo­keng Hold­ings. Neo­tel had pre­vi­ously been the tar­get of an un­suc­cess­ful Vo­da­com deal. Liq­uid Tele­coms op­er­ates in 15 mar­kets across Africa and is a sig­nif­i­cant FTTH and fi­bre-to­busi­ness player in some of those mar­kets. An­a­lysts and in­dus­try play­ers sug­gest that there could be fur­ther con­sol­i­da­tion in the mar­ket as the fo­cus turns to mon­etis­ing these vast fi­bre net­works prop­erly. Some play­ers will sur­vive and thrive; oth­ers will fail or be ac­quired. Mean­while, our fi­bre has been in the ground for a few months. We’re still wait­ing for the sales pitch.

Some in the mar­ket, like Vox Tele­com’s CEO Jac­ques du Toit, are pre­dict­ing that ADSL ser­vices will be dead in five years.

Niel Schoe­man

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