RMB to fund Octotel’s R2bn fibre expansion

Octotel, one of SA’s largest fibre players, has just secured R2bn in financing from RMB to push its network rollout, particularly in outlying parts of SA. This is yet another sign of the increasing appetite by local banks to get in on SA’s fibre game. 

In an increasingly connected world, fibre companies provide the connectivity between data centres, network towers and masts to homes and businesses. Companies such as Telkom’s Openserve, Liquid Intelligent Technologies and Dark Fibre Africa have ramped up infrastructure builds in recent years, so it makes sense for Octotel to raise funds to compete in this capital-intensive industry.

So vast is the opportunity at the moment that it has spawned a lot of deal activity: Vodacom joining forces with Remgro’s CIVH for R13bn and MTN’s now rescinded bid to take over Telkom, which had been estimated to be worth about R30bn, for example. 

This week, Octotel — which primarily provides fibre in the Western Cape — said the facility provided by FirstRand’s investment banking unit will assist with its journey “to double the size of their network over the next 3—5 years and to drive sustainable digital inclusion in SA”. 

“This innovative financing solution will support Octotel’s fibre rollout, particularly as it expands its network to reach areas that currently have no access to fibre.”

Octotel has passed nearly 300,000 homes with fibre, with about 100,000 customers connected. It plans to use the funds to reach 500,000 homes. 

Estimates show that 2.2-million homes are passed by fibre in SA, with a total of 17-million still to cover. Homes passed is a measure used in the fibre industry to denote the number of potential customers a company has access to by virtue of their service being available in an area.

Octotel’s ambitions put it squarely in competition with the likes of Metrofibre, which recently secured funding of R5bn from Standard Bank to push up its network expansion to 500,000 homes passed by 2025, up from 350,000 now. 

Given the goal to connect more outlying areas, RMB has structured its financing as a social loan. Such facilities are designed to finance projects and activities that address social issues, in this instance access to fibre and high-speed, affordable connectivity.

Rural internet connectivity, or that of areas outside big centres such as Johannesburg, Cape Town or Durban, remains a sore point in SA.

In a statement, Phil Norton, sustainable finance transactor at RMB, says the new funding package “will further support Octotel’s growth and investment in the construction, development, expansion, upgrading and maintenance of internet infrastructure and installations, which will help SA move forward in achieving universal access to broadband”.

gavazam@businesslive.co.za