In perhaps one of the most unexpected executive moves in South Africa’s telecommunications industry in 2019, it emerged this week that Vodacom Group chief technology officer Andries Delport will join Community Investment Ventures Holdings (CIVH), a company that doesn’t enjoy much brand recognition among ordinary consumers but which bears close watching.

CIVH, which is controlled by the Anton Rupert-founded Remgro, is quietly becoming a serious player in the country’s telecoms landscape — one that has the potential, if it executes well on its plans, to become a major contender in a rapidly shifting sector.

CIVH, which is chaired by former Vodacom Group CEO Pieter Uys, has quietly been amassing fibre broadband assets. It owns Dark Fibre Africa, which provides backhaul to many of the country’s telecoms providers, and this year acquired fibre-to-the-home specialist Vumatel, which is successfully challenging incumbent Telkom’s former monopoly in fixed lines. While CIVH isn’t a household name, Vumatel certainly is.

In an interview with TechCentral on Tuesday, Uys provided some insight into CIVH’s plans — and what attracted Delport to the business, where one of his first duties as CTO will be developing strategy around 5G mobile technologies.

CIVH, Uys said, is looking beyond the fibre industry into new areas of telecoms, including data centres, tower assets and open-access wireless infrastructure. That last one is particularly interesting given that communications regulator Icasa is expected to start licensing 5G-suitable spectrum as early as next year.

Woah, Woan

Uys hinted in his interview with TechCentral that CIVH might be interested in participating in government’s planned wholesale open-access network, or Woan, which he said will be built on the same open-access principles pioneered by CIVH group companies. With Telkom already voicing strong support for the Woan — its CEO, Sipho Maseko, has argued that the new operator should perhaps build South Africa’s wholesale 5G infrastructure — it’s an idea that may fly, confounding critics, this writer included, who have questioned the Woan’s feasibility. A Telkom- and Remgro-backed Woan would be an interesting proposition indeed, especially if it gets access to the right radio spectrum for 4G and 5G.

But it’s not only wireless networks where CIVH wants to extend its reach. It has also set its sights on tower infrastructure and data centres. The former is already an attractive proposition in Africa, with companies such as American Tower Corporation (ATC) and IHS Towers building big businesses on the back of buying tower infrastructure from mobile operators and then leasing capacity on these “high sites” to other providers. It’s big business elsewhere in Africa, but less so in South Africa where the two big incumbents, MTN and Vodacom, have held on tightly to these assets. As operator profit margins come under increasing pressure, that could change. Already Cell C has sold its towers to ATC and Telkom has said it sees opportunities in monetising its high-site assets.

Dark Fibre Africa CEO Thinus Mulder said in July, at an event hosted by Absa Corporate and Investment Bank — arranged by Digital Things and FTTx Council Africa – that the company is keen to buy or build tower and data centre assets. You can listen to Mulder’s presentation here.

DFA, which was launched in 2007 as an open-access fibre provider, now has over 15 000km of fibre infrastructure in 25 metros and secondary cities across the country. Mulder said the company sees an opportunity to expand from the “fibreco” model into the adjacent areas of “datacos” and “towercos”.

“Datacos, towercos and fibrecos are all linked to each other,” Mulder said at the Absa-hosted event, which was moderated by TechCentral. “We play in the same value chain.”

Datacos offer “promising returns at higher multiples. There will be a growing demand for dataco companies, though the barriers to entry are fairly high. A dataco, if well managed, is definitely a good investment opportunity.”

As for building a towerco, Mulder said South Africa hasn’t seen much appetite by the mobile operators to sell their tower assets to independent companies. Though it’s been a trend in Africa for many years — and even in Europe, Vodafone has announced plans to hive off its tower assets — the only significant deal in the past decade has been the sale by Cell C to ATC.

But with the growing demand for 5G and the Internet of things, towers will become very attractive, Mulder said.

‘Big daddy’

He said DFA has tried on several occasions to acquire assets that would allow it to expand beyond its core fibreco business. “We have aimed a few times, but we’ve missed. We have not been successful with an acquisition yet, but if the right opportunity comes along, it’s something we’d look at.”

In data centres, an acquisition may be the best option. The “big daddy” in this space in South Africa is Teraco Data Environments, which was acquired earlier this year by Berkshire Partners, a Boston-based investment firm. (The Permira funds, an existing shareholder, remains a “significant” investor alongside Berkshire, while management is also still invested.) The value of that deal was not disclosed. Teraco has invested R3-billion in its facilities to date.

Whether Berkshire would consider selling so soon after buying into Teraco is far from clear. At the time the deal was announced in January, Teraco MD Jan Hnizdo described Berkshire Partners as a “like-minded and committed long-term partner that shares our vision for the future”.

The author, Duncan McLeod, argues that Vodacom’s Andries Delport is joining CIVH at an opportune time

There are, of course, other data centre assets that CIVH could look at, but they’re all smaller than Teraco’s. It really depends how quickly CIVH and DFA wants to build the dataco business.

Whatever course they take, it’s clear that Delport is joining CIVH from Vodacom at an opportune time. He understands the sector in South Africa intimately and is an expert on infrastructure roll-out and radio frequency spectrum. It’s clear he will be a major asset to CIVH and parent Remgro as the group embarks on the next stage of its expansion.