The expected completion of Vodacom and Remgro’s fibre merger may open the floodgates for other deals in SA’s telecom sector.
Since the merger of the two fibre businesses was rejected by the Competition Tribunal in October, many thought the transaction was dead in the water. The implication was bad news for other players in the sector that are mulling their own transactions.
But the tide has turned, renewing hope for deal making in the space.
Last week, the Competition Commission said it had reached an agreement with Vodacom and Remgro’s fibre unit, Maziv, on revised conditions that “substantially remedy the competition concerns raised by the commission in its recommendation to the Competition Tribunal that the Vodacom-Maziv merger be prohibited”.
This comes as the telecom industry is moving towards more co-investment, or at least the pooling of resources, regarding fibre investment requirements.
As with the R10bn spent annually by Vodacom and rival MTN in recent years to cover 99% of the country with their mobile networks, a similar effort is needed in fibre and other infrastructure, which will come at a huge cost. As such, operators are finding ways to pool their resources and share the risk.
The biggest deal on the table now is Vodacom’s bid to take a 30% stake in Remgro’s telecom unit Community Investment Ventures Holdings (CIVH), operating as Maziv, together worth an estimated R13bn with the option of 40%. If this deal does go through, it is likely to open the door for others to follow.
Given its size and rival status with Vodacom, MTN is the most likely candidate to open its cheque book.
For now, what is clear is that MTN sees building out its own fibre network as unviable in SA, even with its ambitions to be a big player in the market. The group has stated this position on a number of occasions. This leaves only an acquisitive strategy on the table.
MTN, which made an estimated R30bn bid to buy 100% of Telkom in July 2022, withdrew its offer after rival operator Rain made its own approach to merge with the fixed-line operator. It has been widely accepted that MTN was mainly interested in the deal over Telkom’s large fibre trove.
This is not to say that no deals have been allowed to go through in the space.
In February, Frogfoot — the open-access infrastructure unit of technology and telecom operator Vox — said it had acquired more than 11,000km of fibre assets of American Tower Africa, a provider of wireless and fibre infrastructure in SA, for an undisclosed sum.
In March, Maziv — which houses Vumatel, SADV, Rise Telecoms and BritelinkMCT — received good news when competition authorities approved Vumatel’s purchase of internet provider Herotel.
Understandably, MTN would likely need to make a number of deals to rival Telkom’s Openserve or Maziv.
Estimates show that less than 3-million homes are passed by fibre in SA, with 17-million still to cover. Homes passed is a measure used in the fibre industry to denote the number of potential customers a company has access to through their service being available in an area.
At last count, MTN is said to pass more than 50,000 homes with its fibre network, far below Openserve.
Openserve, SA's largest fibre network operator with 180,000km of fibreoptic cable, improved its fibre to the home connectivity rate in the 12 months to end-March to 50.4%, which the group said is the highest in the market. The unit continued to push its fibre rollout, increasing homes passed by 13.3% to 1.38-million, and a 17.6% increase in homes connected.
A deal with Telkom would immediately give MTN the scale that it needs to compete locally in fibre. However, the group is likely to face opposition from the government, Telkom’s largest shareholder, if another approach were to be made. The company is one of the better run state-affiliated entities, and it delivered more than R1bn into state coffers as dividends in the past financial year.
The state is likely to not want to repeat past mistakes, such as Telkom letting go its 50% Vodacom stake in 2009.
Another possibility is Metrofibre. Since December 2024, Metrofibre’s network passed an estimated 510,000 homes across SA. The company has also stated plans to expand its reach by an additional 500,000 homes by the end of 2025, which would bring the total to about 1-million homes passed if those expansion goals are met.
Other smaller players to consider are: Octotel, Frogfoot, Link Africa, Evotel and Zoom Fibre.
If all else fails, MTN could just give up and buy the fibre services as and when they need them. This is the route that data centre operators such as Teraco and Dimension Data have taken when connecting their infrastructure to the internet.
MTN still needs fibre. The question is do they make a fresh bid just for Openserve, or pursue some of the smaller players.
Alternatively, the company can keep investing in technologies such as fixed wireless access, competing with fibre in the home and business using technologies including 4G LTE and 5G. By late 2022, the company’s AirFibre service covered more than 3.4-million homes.
In another reality, MTN can wait for the wave of consolidation among smaller players in the field to occur, then swoop into acquire the larger entity when it reaches an appropriate size.
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