Vumatel earmarks R3bn for FTTH - TechCentral

Vumatel earmarks R3bn for FTTH

Vumatel CEO Niel Schoeman

Vumatel CEO Niel Schoeman

The fight over who controls home broadband in South Africa is getting a lot more serious.

South African fibre-to-the-home (FTTH) pioneer Vumatel announced on Tuesday that it has reached a “significant finance deal” with Standard Bank and now plans to spend R3bn over the next two years dramatically stepping up its home broadband footprint.

The Standard Bank investment will provide the company with the resources it needs to speed up the delivery of fibre broadband and expand into new markets, it said.

Vantage Capital will provide mezzanine financing.

Though neither Vumatel nor Standard Bank is saying exactly how much money is involved, they have described it as “one of the largest debt capital-raisings of its kind in the FTTH industry to date”.

Vumatel CEO Niel Schoeman said in a statement: “It is important that South Africa keeps pace with the rest of the world. We need to ensure that we invest in long-term sustainable infrastructure that can support the growth in demand for high-speed connectivity. That is why we plan to invest R3bn over the next two years in fibre-optic networks to service the residential sector.”

The deal with Standard Bank, with an agreed drawdown facility, will facilitate the exponential growth of Vumatel, the company said.

Since it first deployed fibre broadband in Parkhurst in Johannesburg 18 months ago — at a cost of R30m — Vumatel has expanded to a range of suburbs in both Gauteng and Cape Town.

It now appears that it sees an opportunity to take the fight with incumbent fixed-line operator Telkom — which has also promised to step up its FTTH roll-out plans in the coming years — to an entirely new level.

Standard Bank will become the lead financier of Vumatel’s bid to expand its business “exponentially”, the operator said.

The deal was structured through Standard Bank’s business acquisition team, which concentrates on debt-focused financing for top-line commercial clients.  — © 2016 NewsCentral Media

9 Comments

  1. This FTTH bubble will burst very soon and the over-indebted like Vumatel will go under a big brother.

  2. Greg Mahlknecht on

    Why do you think it’s a bubble? The FTTH players are just switching the customer payments from Telkom to themselves. The business models are sound with 10-year recoup costs, and if the customers have stayed with Telkom that long, it’s not hard retaining their business with a FTTH service!

    Rough figures – R3bn over 10 years – R300M/year. R25M a month; I’ve heard figures of R300/month per fiber installation from the FTTH providers to run a profit, so that’s about 85,000 customers to break even over the 10 year period. Very rough calculations, but you can see these aren’t pie-in-the-sky numbers. There’s 1 million ADSL customers for the taking, Vumatel’s obviously going for 10% of that.

  3. If the Openserve competitors don’t go all out then they may as well not bother. Openserve would love to slowly but surely replace their copper network.

    Fortunately for all of us they can’t do this because people will switch to one of the alternatives.
    So Openserve will therefore also go all out as will Link Africa etc.
    The result is that FTTH is expaniding very fast.

    I question the medium term profitability of the smaller guys but in the longer term it will be fine as long as they can stay the course.
    I don’t doubt that there will be huge consolidation in about 5 years or so. The new players wil have large blocks of users to sell to the big boys.

  4. Everyone is rolling out FTTH, this will build up excess capacity and the price will tank along with the over indebted minnows. yes of indeed it is good news for consumer no doubt.

  5. Greg Mahlknecht on

    The trend it towards open access networks, with Vumatel being one of the big guys leading the charge. I don’t believe there will be as much overlap/redundancy as people think. Even Telkom are being dragged kicking and screaming towards letting others play nicely on their FTTH networks. They still have an awful IPC-type model, but I’m sure this will change in time.

  6. Andrew Fraser on

    There can’t be excess capacity unless operators are targeting the same consumers, surely? There is a vast untapped market, some of whom are not even on ADSL due to Telkom’s limited service. 85-100K customers is not a pie-in-the-sky target.

    That said, there may well be some consolidation, and I wouldn’t be surprised if Neil Schoeman has an exit plan that includes selling the assets to a bigger player in a year or two.

  7. bird_of_yellow on

    How about you expand the network somewhere other than the Northern Areas of Johannesburg. Our property valuations on my side of the city are fairly similar to those in the North, but I’ve been told by multiple ISPs that we can’t really expect FTTH anywhere else in the near future for economic reasons. Apparently, we can afford living standards equal to the Northern Suburbs, but the service providers don’t seem to think that means that we can also afford similar internet prices.

  8. Rajesh Parbhoo on

    I have engaged my suburb and there is huge interest and signup for Fibre ?How can I get Vuma to lay fibre in the Mayfair, Mayfair West, Crosby, Homestead Park area ?

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