Remgro’s investment in Vumatel and DFA hitting a bumpy patch
Remgro’s investment in South Africa’s telecommunications sector through Community Investment Ventures Holdings (CIVH) is hitting a bumpy patch.
CIVH is one of Remgro’s key investments. The company is active in the telecommunications and information technology sectors.
Its operating companies are Dark Fibre Africa (DFA) and Vumatel, which construct and own fibre-optic networks.
Following an internal restructuring in 2023, DFA and Vumatel are held under Maziv, a newly formed wholly-owned subsidiary of CIVH.
Maziv houses Vumatel and DFA, while Vumatel holds a 49.96% stake in Herotel, a South Africa-based Internet service provider.
Remgro has an equity interest of 57% in CIVH, and the company contributes 10.6% to Remgro’s net asset value.
The restructuring formed part of preparing for a deal with Vodacom, where the mobile operator is looking to buy up to 40% of Maziv for at least R10.2 billion.
The R10.2 billion includes a combination of R4.2 billion in Vodacom fibre assets and at least R6.0 billion in cash.
The proposed transaction will dilute Remgro’s indirect interest in DFA and Vumatel due to Vodacom’s entrance as a shareholder.
However, Remgro will also obtain an indirect interest in the fibre assets contributed by Vodacom.
While the deal made sense for all parties involved, it faced challenges in gaining approval from the Competition Commission.
In August 2023, the Competition Commission of South Africa recommended that the Competition Tribunal prohibit the transaction.
The Tribunal hearings commenced in May 2024, with final arguments set to be heard at the end of September.
CIVH chairman Pieter Uys said if the Vodacom CIVH deal were not to go through, it would not signal a crisis to CIVH.
He said they already have plans with banks to lower the entity’s debt covenants. During the 2024 financial year, Maziv’s debt increased from R18.32 billion in 2023 to R19.50 billion.
Uys added that the three-year drag on the deal did not change anything regarding the valuation and what Vodacom is expected to pay.
CIVH finances
In its 2024 results presentation, Remgro revealed that the CIVH group’s revenue increased by 2.3% to R6.35 billion. However, that is the only positive growth number.
CIVH’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) fell by 1.6%, and operating earnings dropped by 15.6%.
CIVH’s headline earnings for the year were in the red, dropping from a profit of R361 million in 2023 to a loss of R134 million.
Remgro said the decrease is mainly due to higher finance costs resulting from increased interest rates and higher maintenance and security costs.
CIVH’s subsidiaries housed under Maziv, Vumatel and DFA, did not fare much better in the 2024 financial year.
DFA’s revenue for the year ended 31 March 2024 increased by 2.3% to R2.72 billion, driven by demand in its fibre-to-the-business vertical.
However, DFA’s headline earnings fell by 39.6% but remained profitable at R345 million.
Vumatel’s revenue for the year ended 31 March 2024 increased by 3.2% to R3.54 billion, driven by its fibre infrastructure expansion programme and subscriber uptake growth.
Vumatel’s headline earnings dropped by over 550% – decreasing from a profit of R82 million in 2023 to a loss of R374 million in 2024.
Uys said CIVH’s financial performance should improve once interest rates come down, and in the meantime, the business’ cash flow will remain strong.
CIVH’s pre-capex cash flow for 2024 was R2.01 billion, down slightly from R2.19 billion in 2023.
The table and charts below give an overview of CIVH’s performance over the last four years.
| CIVH (R millions) | 2021 | 2022 | 2023 | 2024 |
| Revenue | R 4,639 | R5,324 | R6,213 | R6,353 |
| Operating Earnings | R955 | R1,470 | R2,475 | R2,090 |
| EBITDA | – | R3,641 | R4,360 | R4,290 |
| Headline Earnings | (R797) | R81 | R361 | (R134) |
