Infrastructure

PROFILE: CIVH is active in the telecommunications and information technology sectors. The key operating companies of the group are Dark Fibre Africa Proprietary Limited (DFA) and Vumatel Proprietary Limited (Vumatel), which constructs and owns fibre-optic networks.

COMMUNITY INVESTMENT VENTURES HOLDINGS PROPRIETARY LIMITED (CIVH)

CIVH is active in the telecommunications and information technology sectors and is the holding company of a group of companies of which DFA and Vumatel are its largest operating subsidiaries.

DFA is the premier open-access fibre infrastructure and connectivity provider in South Africa. It builds, installs, manages and maintains a fibre network to transmit metro and long haul telecommunications traffic, which is leased to its customers (Telecommunication Companies and Internet Service Providers (ISPs)) using an open access wholesale commercial model. DFA has in excess of 12 000 km of fibre assets in the ground and owns fibre networks in Johannesburg, Cape Town, Durban, Midrand, Centurion and Pretoria, as well as in 25 smaller metros, such as East London, Polokwane, Tlokwe, Emalahleni and George, to name a few.

Vumatel is an open-access fibre provider at the last mile level and provides Fibre-to-the-Home (FTTH) products and services to ISPs. Vumatel installs FTTH in residential suburbs and has in excess of 18 000 km of fibre assets. After the fibre has been installed, Vumatel leases its infrastructure to Internet Service Providers (ISPs), who then provide broadband retail internet services to the end customers.

CIVH has a March year-end and therefore its results for the 12 months ended 31 March 2020 have been included in Remgro’s results for the year under review. CIVH’s contribution to Remgro’s headline earnings for the year under review amounted to a loss of R649 million compared to a headline loss incurred of R204 million in the prior year. The reason for the significant increase in the loss was due to significant transaction and funding costs incurred related to the Vumatel acquisition during the current financial year, as well as consolidating ten months of Vumatel’s accounting losses. The group results were also negatively impacted by prudent credit provisioning due to the uncertainties created by Covid-19.

The group is however highly cash generative and reinvested in excess of R2 billion of operating cash flow during the year into expanding its operations and network footprint.

CIVH has undertaken significant corporate actions during the year under review, which includes amongst others increasing its investment in Vumatel from 34.9% to 100% during May 2019 and restructuring the separate debt packages of DFA and Vumatel during December 2019 into an optimal group-wide debt facility with capacity for further growth capital expenditure.

Vumatel became the FTTH South African market leader in homes passed and active subscribers achieving approximately 40% in both verticals respectively. Infrastructure initiatives allowed the business to successfully commercialise fibre into the Lower LSM areas under the Reach product offering and it successfully launched its Reach pre-paid platform. In addition to driving uptake on the current deployed infrastructure, key focus areas in the year included the extension of its Active Ethernet and Gigabit Passive Optic Network (GPON) in Ekurhuleni and Cape Town while creating expansion capability into new Reach areas such as Mitchells Plain, Vosloorus and Soweto.

Vumatel group revenue for the period increased by 80% to R1.5 billion compared to the prior year, driven by accumulated subscriber uptake growth for the year.

DFA’s current book value of the fibre optic network is in excess of R9.7 billion. The network uptime for the year under review was 99.985%, and mean time to repair was less than 2.5 hours, well above industry standards. The DFA revenue model adapts to the customers’ needs, and DFA offers flexible payment profiles, with a mix of an upfront amount and a monthly annuity, or solely annuity based with multi-year contracts of mostly up to 15 years. The future value of the current annuity contracts (excluding orders) is in excess of R11.6 billion.

DFA group revenue for the financial year ended 31 March 2020 increased by 5% year on year to R2 465 million (2019: R2 349 million), as its annuity income grew to in excess of R179 million per month at 31 March 2020 (31 March 2019: R159 million), with the majority thereof from long-term contracts with customers.

Vumatel initiated the registration of an independent CSI Foundation with the objective of creating sustainable eco-systems in the communities in which the business operates in. The goal is to contribute meaningfully and sustainably to these communities leading to strong ties with communities that talk to the essence of the Vuma brand, a distinction that will set Vuma apart from the competition in a manner not easily replicated. Focus areas include education, safety, environment and healthcare. The business will also continue with the Vuma schools project, where 372 schools have been connected to date in areas where fibre has been deployed – providing every school that Vumatel passes with a free 1Gbps service offering.

DFA achieved a level 2 BBBEE rating for the year. Critical gaps in infrastructure development e.g. rural school connectivity remain DFA’s ongoing key focus of CSI, so that it is able to bridge the digital divide in high poverty areas. The positive impact is on providing student access to e-learning and ultimately, new job creation and access to the economy.