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 construct and own 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 the 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 13 200 km of fibre assets in the ground and owns fibre networks in Johannesburg, Cape Town, Durban, Midrand, Centurion and Pretoria, as well as in 24 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 27 500 km of fibre assets. After the fibre has been installed, Vumatel leases its infrastructure to ISPs, which in turn provide broadband retail internet services to the end customers.

CIVH has a March financial year-end and therefore its results for the 12 months ended 31 March 2021 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 R435 million compared to a headline loss incurred of R649 million in the prior year. The losses contributed by CIVH have decreased as a result of a significant improvement in revenue, as well as an improvement in gross margins and lower interest costs, offset by an increase in depreciation charges.

The group generates healthy cash flows from operations, contributing R1.8 billion to a reinvestment in excess of R3.1 billion into expanding its operations and network footprint during the year.

CIVH issued share capital of R2.8 billion in January 2021 in terms of a rights issue. The capital was used to settle part of the CIVH holding company debt and inject capital into DFA and Vumatel in order to unlock an additional R2.5 billion of borrowing facilities, of which R1.5 billion was drawn down in the year. During July 2021, CIVH also completed a further rights issue to successfully raise R3.72 billion in equity to repay all its debt at the holding company level. This equity capital injection has strengthened CIVH’s capital structure and enables it to retain flexibility to capitalise on future opportunities.

Vumatel retained its position as the FTTH South African market leader in homes passed and active subscribers, achieving approximately 39% market share in both verticals. The business continues to successfully commercialise fibre into the lower Life Standard Measurement (LSM) areas under the Reach product offering, including a Reach pre-paid platform which has exceeded expectations on uptake. In addition to driving uptake on the current deployed infrastructure, key focus areas in the year continued to be 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 50% to R2.4 billion compared to the prior year, driven by subscriber uptake growth for the year.

DFA’s current book value of the fibre optic network is in excess of R9.8 billion. The network uptime for the year under review was maintained at 99.98%, 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 R12.4 billion.

DFA group revenue for the financial year ended 31 March 2021 increased marginally year on year to R2 483 million (2020: R2 465 million) impacted by lower once-off revenue as a result of the impact of Covid-19 on the markets. Annuity income grew to in excess of R192 million per month at 31 March 2021 (31 March 2020: R179 million per month), with the majority thereof from long-term contracts with customers.

Vumatel continued to support its independent CSI Foundation, which has 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. Focus areas include education, safety, environment and healthcare. The business remains committed to the Vuma schools project, where 445 schools have been connected to date in areas where fibre has been deployed – providing every school that Vumatel passes with a free 1 Gbps service offering.

DFA retained their 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, enabling it 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.