KATE THOMPSON DAVY: Fibre for Africa! Vodacom goes large with hefty partners

A series of announcements from Vodacom earlier in the week signals big, bold moves for the red telco brand and its new (and old) partners as it aims to grow the local fibre footprint and firm up its position on the continent.

The announcements included a R13.2bn deal that will see Vodacom taking a considerable chunk — a co-controlling interest, at that — of a new entity provisionally known as InfraCo. This will be made up of Dark Fibre Africa (DFA) and Vumatel assets owned by Community Investment Ventures Holdings (CIVH).

Vumatel is one of the largest fibre-to-the-home network operators in SA, with more than 31,000km of fibre assets, and DFA is a major player in the regional carrier-grade fibre backbone, with 13,000km of national metro fibre network. Vodacom will sell its fibre network into this entity and back that up with cash to the tune of R6bn.

Assuming the regulators give it the go-ahead, when all is said and done, Vodacom should have at least 30% equity interest in InfraCo. The remaining 70% lies with CIVH and its shareholders, including Remgro (55.2%) and New GX Investments.

But let’s leave the unpacking of that to the investment boffins. From a tech perspective, InfraCo is about to be a big deal, bringing together fibre infrastructure from three major players. With their combined powers, this will hopefully drive an acceleration of digital transformation across the country, including into the desperately neglected townships and lower-middle-class areas that have been largely left in the analogue cold. They may take exception to this, but the cost of mobile data and the upfront costs of fibre connections mean Vodacom products have focused largely on the middle-class-and-up and business markets until now.

This lower-LSM tactic is one of the explicit inclusions in Vodacom’s announcement of the deal. Right up front in the bullet points of its media advisory it wrote: “Vodacom’s investment will foster economic development and help bridge SA’s digital divide in some of the most vulnerable parts of our society.” Those of a cynical bent might argue that this narrative is almost a given for local corporates announcing new infrastructure, but still the signs are good that this will be a lot more than lip service.

Early this week TechCentral reported that stakeholder New GX — headed by businessman Khudu Pitje — also announced a deal with Stanlib Asset Management, specifically to deploy fibre to the townships, plus investments in data centres and telecoms towers. Pitje told TechCentral the “market potential” is estimated to be about 3-million township homes, and this will surely play into the thinking with InfraCo too. In March, Vodacom reported it had connected about 146,401 homes and businesses to its fibre offerings — good growth for the company, but a drop in the ocean of an addressable market of 3-million. 

Remote working 

Another big opportunity this tees up is that of connectivity provision for a world in which remote work and remote learning are increasingly the norm. Commercial property has been battered by the pandemic stayaway. Last week, the SA Property Owners Association reported that office vacancies hit new highs in early 2021, with a second-quarter vacancy rate of 15% — the highest since 2004.

Corporates remain divided on the future models of work, with many hedging their bets on a hybrid model. However, office workers generally seem to favour remote work, which keeps them out of their cars at rush hour and promises a semblance of work-life balance (whatever that is). Remote learning also offers many advantages and could be a game-changer for local students if we can connect the wider population in a meaningful way.

The InfraCo deal is also part of a wider Remgro play for fibre and other digital-future-style investments. Four months ago, Financial Mail’s Marc Hasenfuss reported that Remgro planned to “pour R3.7bn into a telecoms infrastructure firm to take advantage of soaring demand for fibre” (“Remgro’s R3.7bn bet on fibre”, July 22). He wrote that the CIVH holding was the odd-one-out in Remgro’s “traditionally ‘old economy’ interests”, adding that the “only other technology-aligned investments would include its 30% stake in Seacom and broadcast business eMedia Investments”.

In 2019, Vodacom chief technology officer Andries Delport left the mobile company Vodacom after more than 20 years to join the Remgro family as CEO of DFA. And CIVH chair Pieter Uys left Vodacom in July, to be replaced as CEO by Shameel Joosub. Remember, the of-years-past, Rembrandt, cofounded Vodacom as SA’s first cell company back in 1993. It’s really starting to look like a reunion.

The second announcement from Vodacom was that it would be buying a 55% stake in Vodafone Egypt in a R41.3bn deal. This is the biggest mobile operator in the country with about 43-million customers. Vodacom made specific mention of the strength of the mobile wallet Vodafone Cash in the region, a good fit to boost its own fintech ambitions.

Vodacom launched its VodaPay “super app” locally in October, which includes digital financial services. At the time, Joosub described the launch as part of a “vision of moving from a telco to a tech-co”, and this week’s announcements arguably takes it one sizeable step closer to those aspirations.

Viewed collectively, these moves give us a glimpse into the strategic thinking of some of SA’s blue chips, and they prompt consideration — or perhaps even optimistic daydreaming — of what kind of future Remgro and its partners are gearing up for: a connected, remote and digitally transformed Africa.

• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.