Maziv shows massive growth

Remgro’s interim results for the six months to 31 December 2022 showed that CIVH, which owns Vumatel and DFA, showed strong growth over the reporting period.

CIVH is majority owned by Remgro and is the holding company of Maziv, which in turn owns Dark Fibre Africa (DFA) and Vumatel.

DFA specialises in long-distance fibre infrastructure and has total fibre assets spanning 13,600km. DFA leases its assets to telecommunications companies.

Vumatel specialises in fibre-to-the-home networks, with its fibre assets spanning 31,000km. It leases its fibre assets to internet service providers.

Vumatel is rapidly expanding its network coverage and, by the end of 2022, passed 1,805,000 homes with 600,000 homes connected.

Building fibre networks is highly capital intensive as it typically involves trenching and laying down the fibre in protective tubing.

Even when aerial fibre is used, it still requires a great deal of work to build the network and get the fibre into people’s homes.

However, after the fibre is installed, it requires minimal maintenance and has an extended useful life spanning over 20 years.

Unlike mobile networks that require continual re-investment to remain competitice, existing fibre networks require far less money to do so.

The underground fibre tubing also makes it easy to replace damaged fibre strands or upgrade the fibre network if needed.

Fibre’s tremendous bandwidth capacity further means these networks don’t easily run into capacity constraints.

Simply put, fibre network operators spend billions up-front on building networks and only reap the rewards much later.

When the money starts rolling in, it can become very profitable and generate great earnings for many years.

Remgro’s interim results illustrate how quickly a fibre operator can start making money and capitalising on annuity revenue.

Over the six months to 31 December 2022, Maziv reported a combined R524 million in profit, up from the prior period’s R85 million.

This profit increase contributed R184 million in headline earnings for Remgro from the previous period’s R23 million loss.

Remgro said that the large increase in earnings is due to the significant expansion in Vumatel’s and DFA’s fibre networks over the past two years.

In the six months which ended on 30 September 2022, Vumatel grew its revenue by 14.2% to R1.6 billion. DFA increased its revenue by 10.5% to R1.2 billion.

Maziv is not slowing down its network investment. It already passes over 1 million homes in high LSM areas and is now moving to less affluent areas.

Remgro executive director, Pieter Uys, said they currently see the largest potential for growth in the lower LSM areas, and it now focuses most of its efforts on expanding in these areas.

The return on invested capital is higher for these clients as houses tend to be built closer to one another, requiring less intensive capital outlay to reach a wider audience.

Maziv CEO Dietlof Mare said they have been able to reduce the cost of connecting a home from R18,000 to under R4,000.

Another interesting development is that the update in lower LSM areas is higher and faster than in high-end suburbs.

The reason is the better price proposition. “You are coming in at R399 per month for an uncapped 30Mbps connection,” Mare said.

Uys said that the mid to lower LSM market is estimated to have an additional 4 to 5 million houses that could be serviced.

CIVH has rapidly expanded its fibre infrastructure and built a large customer base in the high-LSM and now lower-LSM areas.

To compete against an established fibre player in a neighbourhood is very difficult as the capital requirements are high without a guaranteed return.

It has, therefore, created small fibre monopolies across South Africa and continues to do so through its aggressive network rollout.

This strategy positions Remgro, through Maziv, well to generate significant profits from its fibre investments in years to come.