The fibre giant driving rollouts in South African townships

The fibre network operator (FNO) is currently the country’s largest, with over 800,000 homes connected to its fibre-to-the-home (FTTH) network.

However, these customers are primarily located in mid-to-upper-income areas, as fibre rollouts over the past decade have prioritised these communities.

Vumatel, a little-known company at the time, began rolling out in Johannesburg’s leafy suburbs more than ten years ago, when FTTH infrastructure was still scarce.

This was mainly due to the high costs of deploying the last-mile infrastructure, which raised questions about the viability of offering this service for home consumption.

However, Vumatel proved this model was financially feasible, causing a land grab with FNOs targeting wealthy suburbs, as FTTH prices were initially relatively expensive.

Over time, FTTH technology and rollouts became more affordable. Prices steadily declined due to greater economies of scale and a revolution in international bandwidth costs.

This allowed FNOs to expand to middle-income neighbourhoods, smaller towns, and eventually lower-income areas.

The fact that most FNOs operated on an open-access basis by selling wholesale access to their lines to Internet Service Providers ensured competition in pricing and service delivery.

Vumatel’s early mover advantage and aggressive rollouts allowed it to become a leading force in the market, with its most recent homes passed figure at just over 2 million.

Homes passed is a measure FNOs use to refer to the number of premises that could connect to the fibre network.

Vumatel’s connectivity ratio is currently at 40.4%, with 830,000 homes either connected or ready to go live.

The second-biggest FNO is Telkom-owned Openserve, which has so far passed roughly 1.34 million homes and connected just under 670,000 of them.

Other major players include Herotel, which targets mainly smaller towns and was recently acquired by Vumatel, MetroFibre, Frogfoot, and Octotel.

A new gold rush

Vumatel mast with fibre drops

While this increased competition was conducive for affordability and technological developments, upper-middle-income areas soon became saturated with fibre infrastructure.

This saw Vumatel look to the lower-income segment of South Africa to expand broadband access through new growth markets.

The FNO announced a pilot project in Alexandria in 2017 that would provide users with an uncapped 100Mbps line for R89 per month.

This project aimed to defy the odds as it had done in Parkhurst and provide a commercially sustainable service that did not have to be subsidised by wealthier clients.

However, due to several unforeseen snags, it would take years for the pilot to launch in Alex, with Vumatel instead launching a similar pilot in Mitchells Plainin the Western Cape in 2019.

This product eventually became known as Vuma Reach and rolled to Retreat, Vosloorus, Soweto, Grassy Park, Blue Downs, and several Tshwane neighbourhoods.

Vumatel developed a new rollout approach in Alexandra, where fibre is laid to poles from which several homes can be served, rather than trenching or traditional aerial fibre. It called the product Vuma Key.

Towards the end of 2024, Vumatel officially launched Vuma Key at R99 for 30 days of uncapped broadband access, aimed at households earning less than R5,000 monthly.

According to Phila Dube, the chief commercial officer of Vumatel-holding company Maziv, more than two-thirds of South African households lack access to fibre.

Dube recently said that 6.4 million South African households have been provided with fibre. However, considering network overlap, only 5.4 million unique homes have access to a fibre connection.

This means 28% of South African households have access to fibre, based on Statistics South Africa’s most recent household survey.

This represents a significant growth opportunity for South African fibre network operators, provided they can unlock the necessary capital to continue rolling out to underserviced areas.

Issued on MyBroadband by Daniel Puchert | https://mybroadband.co.za/news/broadband/600819-the-fibre-giant-driving-rollouts-in-south-african-townships.html