Billions for fibre roll-out

By Duncan McLeod

30 November 2007

A new telecommunications infrastructure company plans to invest billions in running fibre-optic cables across SA’s cities and towns in direct competition with Telkom.

A new telecommunications infrastructure company, backed by former public enterprises director-general Eugene Mokeyane, Dimension Data co founder Richard Came, and investment holding company VenFin, plans to invest billions in the next few years, running fibre-optic cables across SA’s cities and towns in direct competition with Telkom.

The new company, Dark Fibre Africa, plans to raise as much as R2bn in debt in the next 18 months as it gears up to deploy the high-speed infrastructure on behalf of licensed telecom operators. The shareholders have also stumped up R100m between them in initial equity financing.

The company enjoys the backing of Absa Capital and another, as yet unidentified, bank. The two institutions have supplied initial debt financing of more than R500m, though that is expected to rise sharply. “We’ll be in the billions soon,” says Came.

Already it is laying fibre between New Doornfontein, Johannesburg, and Germiston on behalf of cellular giant Vodacom, which is a client.

VenFin has a 30% stake in Dark Fibre Africa, whose CEO is former Plessey finance director Gustav Smit. Empowered investment firm Community Investment Ventures (CIV) has 70% of the equity. CIV’s directors include Came and former Plessey MD Nic Venter.

CIV, which has investments in the telecom, IT services and power & energy sectors, is headed by businessman Joe Madungandaba. Empowerment firm New GX Capital, headed by Mokeyane and his business partner Khudusela Pitje, has a 37,3% stake in CIV.

Came says Dark Fibre Africa is entering the telecom sector at the right time as the industry is being opened to competition and operators other than Telkom have the right, for the first time, to build fixed-line networks. Mobile operators MTN and Vodacom, and second network operator Neotel, are all building fibre networks with the hope of taking market share from Telkom.

Big Internet service providers like MWeb, Internet Solutions and Verizon Business are also expected to soon be licensed to deploy their own networks. It will be compelling for these companies to lease fibre access from a third-party rather than to roll out their own fibre, Came says. Dark Fibre Africa sister company Muvoni Weltex won a contract this year to lay fibre for Neotel using trenching machines imported from France. As many as 18 of the machines, which cost nearly R50m apiece, will be imported by the second half of 2008 as the company steps up its roll-out programme.