Remgro’s big Vumatel bet pays off

When Community Investment Ventures Holdings (CIVH) acquired Vumatel in a multi-billion-rand deal in 2018, industry players questioned the decision. Three years later, it proved to be a stroke of genius.

On 10 November, Vodacom announced it has agreed on terms to acquire a 30% co-controlling stake in Vumatel and Dark Fibre Africa in a deal worth R13.2 billion.

The Vodacom deal places a future valuation of around R44 billion on CIVH – significantly higher than Telkom’s market cap of R25 billion.

The valuation may sound rich — and it most likely is — but Dark Fibre Africa (DFA) and Vumatel are strong businesses generating around R3 billion in EBITDA per year.

They also have a firm foothold in the South African fibre market.

Vumatel has deployed over 31,000 kilometres of fibre infrastructure across South Africa and now passes 1.2 million homes.

To duplicate fibre-to-the-home networks in neighbourhoods seldom makes commercial sense. Vumatel, therefore, has a strong position in most areas where it has a network.

DFA, in turn, has 13,200km of fibre assets in the ground and owns fibre networks in Johannesburg, Cape Town, Durban, Midrand, Centurion and Pretoria.

DFA also has fibre networks in 24 smaller metros, such as East London, Polokwane, Tlokwe, Emalahleni and George.

To replicate these assets will cost billions and take many years, and Vodacom is clearly willing to pay a premium to accelerate its fibre ambitions.

MyBroadband spoke to the man behind the Vumatel acquisition and CIVH’s success, Pieter Uys, about the Vodacom deal.

He said the partnership with Vodacom will give them enough cash to strengthen the balance sheet and allocate additional capital to expand the Vumatel and DFA fibre network.

As part of the deal, CIVH will also acquire Vodacom’s fibre assets to give it additional scale and help it roll out fibre faster across South Africa.

It will convert Vodacom’s fibre network to an open-access network, giving ISPs the ability to offer services over this network and increase competition.

A big part of this fibre rollout strategy is Vuma Reach, which provides affordable uncapped fibre to low-income areas like Mitchells Plain and Alexandra.

Uys said Vodacom’s cash and resources would help them democratise Internet access in South Africa.

Commenting on the decision to acquire Vumatel in 2018, Uys said it proved to be an excellent investment that has doubled in value in 3 years.

Through the Vodacom deal, CIVH will get enough cash to cover its fibre rollout ambitions and pay a dividend to its shareholder, Remgro.

Uys’ decision to acquire Vumatel and build a fibre powerhouse was, therefore, an astute business decision, with a noble twist of providing uncapped fibre to all South African households.

Now read: Vodacom acquiring co-controlling share in Vumatel and DFA for R13.2 billion