Vumatel and DFA report R134 million loss – MyBroadband

Vumatel and Dark Fibre Africa’s holding company CIVH recorded a R134-million loss in the last financial year, majority shareholder Remgro has reported.

According to Remgro’s 2023/2024 annual results, CIVH’s contribution to Remgro’s headline earnings swung from a profit of R206 million in 2022/2023 to a loss of R75 million.

Community Investment Ventures Holdings (CIVH) owns 57% of Maziv, which houses CIVH’s current interests in Vumatel and DFA.

This means that Maziv swung from a profit of R361 million in 2023 to an approximate loss of R134 million in 2024.

Remgro explained the decrease in earnings was mainly due to higher finance costs resulting from increased interest rates, higher network maintenance and security costs, and the continued impact of the tough economic environment on consumers and persistent competition in the market.

While both Vumatel and Dark Fibre Africa (DFA) recorded revenue increases in their last financial year, these were marginal compared to previous years.

Vumatel’s revenue for the year ended 31 March 2024 increased by 3.2% to R3.543 million.

Between its 2021 and 2022 financial years, Vumatel’s revenue grew by 26.3%. That was followed by 15.1% growth between 2022 and 2023.

DFA’s revenue for the year ended 31 March 2024 increased by 2.3% to R2.715 million, compared with 4.1% and 6.8% growth in the previous two years.

While Vumatel and DFA’s aggressive rollout strategy has made them leaders in their respective home and business fibre markets, it required taking up R20.5 billion in debt — most of which belongs to Vuma.

Remgro strategic investments head Pieter Uys previously told MyBroadband that Maziv would be extremely cautious about taking on more debt.

Without additional funding, Vumatel’s ability to expand its fibre-to-the-home (FTTH) connectivity is constrained, which limits potential revenue growth.

The home fibre industry has seen a slowdown in rollouts due as the addressable market has shrunk, with FTTH expansion having reached a large portion of the affluent suburbs that can afford the product.

Vumatel has increasingly looked towards the lower-income market as a potential new growth area.

Its more affordable Vuma Reach product provides 10Mbps, 20Mbps, 40Mbps, and 100Mbps packages to less affluent neighbourhoods, with pricing starting from R249 per month.

In its last financial year, the Reach network expanded by 12% with Reach homes passed exceeding one million and Reach subscribers jumping by 39% year-on-year.

The company also launched an even cheaper Vuma Key product earlier this week, offering 10Mbps home fibre connections at R99 per month.

This product is aimed at the bottom end of the market in terms of affordability, with poor townships like Alexandra and Kayamandi part of the initial rollout.

Awaiting big acquisition decision

CIVH and the broader fibre industry are currently waiting with bated breath for the Competition Tribunal’s decision on Vodacom’s proposed acquisition of a 40% stake in Maziv.

Vodacom and CIVH first announced the deal in November 2021 and a year later, the Independent Communications Authority of South Africa gave its approval for the acquisition to proceed.

Meanwhile, the Competition Commission took nearly two years to negotiate numerous conditions to be attached to the transaction but ultimately recommended that the Competition Tribunal block the deal.

The Commission maintains that the deal would decrease competition in the connectivity market to the detriment of smaller operators and consumers.

However, other telecoms experts believe the industry will suffer if the deal is not approved.

In addition to providing Vumatel and DFA with a significant funding injection, the approval of the deal could give some assurance to other fibre network operators regarding future mergers and acquisitions.

These transactions will be key to unlocking more funding for fibre rollouts.

The Tribunal’s hearings into the deal started in May 2024 and are expected to be completed in September 2024, following closing arguments, with a decision expected at the end of October.