Vumatel and DFA earnings plummet

Remgro released its results for the six months to 31 December 2023, which revealed that CIVH’s earnings plummeted by 97% compared to the same period the previous year.

Remgro owns 57% of CIVH, which in turn owns the fibre-to-the-home operator Vumatel and wholesale fibre-infrastructure provider Dark Fibre Africa (DFA).

CIVH’s contribution to Remgro’s headline earnings over the last six months of 2023 amounted to R6 million, down from R184 million over the same period in 2022.

The 96.7% decrease in earnings is mainly due to higher finance costs resulting from increased interest rates.

Vumatel’s revenue for the six months to 30 September 2023 increased by 11% to R1.818 billion, driven by its fibre infrastructure expansion program and subscriber uptake growth.

Vumatel expanded its Reach network by 11%, with homes passed exceeding one million and subscribers increasing by 20%.

DFA’s revenue for the six months to 30 September 2023 increased by 3% to R1.341 billion.

DFA’s annuity income increased to R215 million per month from R210 million per month a year earlier.

CIVH’s earnings decline resulted in its intrinsic value of Remgro’s 57% share declining from R14.3 billion to R31.1 billion.

It is understood that the pressure from increased interest payments has forced Vumatel to cut its capital expenditure and freeze debt.

The biggest casualty is its Vuma Key project, which provides low-cost, uncapped Internet connectivity to poor families.

The problem can easily be solved if Vodacom is allowed to buy a stake in CIVH’s wholly-owned subsidiary, Maziv. It holds CIVH’s current interests in Vumatel and DFA.

Vodacom and Remgro penned a deal where the mobile operator will acquire up to 40% of Maziv through a combination of assets of R4.2 billion and cash of at least R6.0 billion.

However, in August 2023, the Competition Commission recommended that the Competition Tribunal prohibit the proposed transaction.

Remgro and CIVH remain committed to the proposed transaction and will argue their case before the Competition Tribunal on 24 May 2024.

Remgro said the Vodacom deal will deliver significant benefits to South African consumers and the broader economy.

The benefits include rolling out fast and affordable Internet access to lower-income areas and greater access to cheap fibre.

In turn, it will fuel entrepreneurship, improve education, and ultimately lead to job creation and economic growth.