Saturday , September 18 2021

Revenge of landlines: How fiber is threatening mobile devices in South Africa



South African mobile phone operators, including Vodacom, MTN and Rain, will face a major challenge for their business models from the unexpected quarter: broadband in the fixed network.

This statement may seem almost incomprehensible. At least in the last decade, the opposite has been true: consumers are disconnecting fixed conductors, especially abandoned Telkom copper cables, which provide (now hopelessly slow) ADSL internet to people’s homes, in favor of fixed fiber where available, but also opting for domestic 4G LTE provided by mobile infrastructure.

In cities and other areas not yet offered by fiber providers such as Vumatel, Openserve and Frogfoot Networks, LTE has become a popular choice for home access. Consumers simply use mobile data bundles or expensive ad hoc prepaid data on their smartphones – an expensive option, especially if someone is consuming a lot of multimedia content online (Netflix, YouTube, streaming music, etc.).

The reception of optical services across South Africa in recent years has been nothing short of spectacular. The fibers begun to be taken by the risk-takers behind Vumatel (Niel Schoeman and Johan Pretorius) are now almost everywhere in well-developed parts of cities such as Johannesburg and Cape Town, and are increasingly breaking into smaller towns and cities. to traditionally undernourished areas in cities like Soweto.

Billions of investments

News that the parent company Vumatel CIVH raised R 3.7 billion in the second tranche of the rights offer (bringing the total amount of shareholders to R6 6.6 billion in just six months) shows that CIVH and its largest investor Remgro domestic option of fixed fiber really really. The supply that has been prescribed comes as Vumatel expands its network, including increasing coverage in areas never covered by fixed lines caused by an explosion in demand for unlimited internet as people increasingly work from home and educate themselves online and have fun.

The second tranche of the rights offer, which gave CIVH, which also owns dark-fiber Africa, an estimate of R 27 billion – a few billion rand more than Telkom, which once enjoyed a full monopoly in the South African telecommunications industry. In fact, Telkom was late in introducing domestic fibers instead of highlighting its aging copper assets, which allowed Vumatel and others, such as Frogfoot, a Vox-owned company, to position themselves as strong candidates in the domestic fixed market. telephony.

Remarks by Pieter Uys, head of strategic investment at Remgro and chairman of the parent company Vumatel CIVH, made it clear in an interview with TechCentral on Monday that domestic fiber investors not only see strong economic growth in the coming years, but will challenge mobile operators fixed infrastructure providers such as Telkom for the share of consumer wallets.

“A lot of the demand is coming from residential areas where we wouldn’t expect that, like Soweto,” Uys said. “Extraction in these areas is twice as fast as in Sandton. If Sandton takes two years to achieve 50% penetration (homes connected where service is available), Soweto or Vosloorus will penetrate equally in 12 months. “

This is unbelievable! Many players in the industry have speculated that given the cost of introducing fiber optics, it would never make sense to extend them outside the leafy suburbs of large South African cities. Vumatel, Frogfoot and others now deny this assumption and argue that the demand for unlimited fiber is universal – and should be profitable as well.

Vumatel’s Reach, which is used mainly in underserved areas on the outskirts of South Africa’s main urban areas, costs R399 / month for unlimited, prepaid 20-bit / symmetrical fibers. Not surprisingly, it turned out to be very popular after Uys. Instead of relying on expensive mobile data, consumers in these areas strive to sign up for unlimited fiber optics that allow them to use the Internet as intended – without fear of reaching the data ceiling or incurring costs. , which would be generated outside the package.

“There is a demand and our ambition is to change the situation. We really think we can democratize the internet in South Africa, ”said Uys, former president of Vodacom. Of course, mobile data will continue to play a big role, especially in areas where fiber will simply never be installed, such as on a rural eastern cape or on farms in the town of Karoo. Here, the mobile phone will continue to be the main way to connect, although satellite solutions have also greatly improved and become cheaper in recent years.

The biggest pressure

But in urban areas like Soweto and Mamelodi and Vosloorus, where mobile networks could feel the greatest pressure from the aggressive push of Vumatel, Frogfoot and others into these areas. And if they have unused fiber at home, consumers will spend less mobile data – probably much less! Companies like Vodacom and MTN will have to lower data prices (more than they already have) to stay competitive. And even then, they will strive to provide unlimited services at a similar price given the spectrum constraints they still face – and may continue to face even after the Icas communications regulator eventually ends its long delay in the 4G and 5G of the appropriate spectrum.

If Uys and the teams at Vumatel, CIVH and Remgro are right, the fixed lines are far from dead – they will soon make a big and unexpected comeback. – © 2021 NewsCentral Media

  • Duncan McLeod is the editor of TechCentral. Follow him on Twitter

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