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E x p a n d at the speed of light
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Communications
Metrofibre, a South African open access fibre network and broadband fibre provider, has seen impressive expansion recently and continues to extend its operations. spoke to head of Fibre to the Home (FTTH) business development Jacque de Villiers about recent capital investment and an exciting new partnership with Link Africa.
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etrofibre, based in Johannesburg, started in 2010 as a Layer 2 provider, concentrating on installing networks into business parks. In 2014 it established its FTTH division, which has since become a new source of focus for the company. Metrofibre has a goal of reaching 14,000 in-points by 2018 (in-points are not necessarily live customers but in-points into a property), with a penetration rate of 60%, resulting in around 25,000 active network users.
Raising and investing capital
Metrofibre has an ambitious expansion plan, which has resulted in a need to raise capital to invest in the business at the ground level. In March this year Metrofibre sold an 18.14% stake to African Rainbow Capital, a fairly young company and a subsidiary of Ubuntu-Botho Investments. De Villiers says that investment from a company not in Metrofibre’s industry is suited to its current needs: “African Rainbow Capital is not in the telecoms industry at all, and from our point of view this suited us very well, because at
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“Metrofibre has an ambitious expansion plan, which has resulted in a need to raise capital to invest in the business at the ground level
this point we don’t necessarily want to deal with other telecoms companies as shareholders.” Metrofi bre has earmarked this investment entirely for expansion, and especially into the world of FTTH. Metrofi bre’s FTTH strategy is to identify specific residential areas and undertake extensive engagement with the community and relevant associations. Having an available network already in place and being able to quickly give a start date results in high levels of success. In fact the largest obstacle faced by Metrofi bre in its FTTH operations seems to be fi nding the right external workforce to implement its services. De Villiers tells us that “the biggest challenge at the moment is to fi nd enough competent contractors to do the actual work. We prefer to give responsibility to one contractor to deliver solutions to us, from the civil work right through to activating the customer.”
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Finding the right people is, according to de Villiers, a problem for many in the industry at the moment, although not so much that it will inhibit Metrofi bre’s expansion strategy.
The domestic fibre market
Metrofibre’s ability to delivery quickly after initial interest is demonstrated means that appetite for its services is high. While with lower income customers living in smaller units the numbers are lower, in more affluent areas uptake reaches 50% and beyond within six months. De Villiers says that, “On our business cases we go on an assumption that we will reach a ceiling of 60% uptake in 24 months, after the project is finalised. This is an international benchmark that seems to be the right number for us.” De Villiers is confident that, as demand for internet connectivity rises, this benchmark could reach 90% – something that will require further investment. As de Villier says, “the rise in demand will
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ProLabs require deep pockets, which is why the capital raise was made to put capital into the ground. The business is self-sufficient as we sit here, if we did nothing today we’d make money going forward, but obviously we want to expand aggressively.”
Fibre connectivity in South Africa
Even since Metrofibre started its FTTH services in 2014 the fibre connectivity market in South Africa has changed. De Villiers says that the industry is waking up to the fact that “the cost of what was charged for 24 month contracts was excessive. Consumers want
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month-to-month contracts and are increasingly looking at uncapped products.” The desire for more flexible contract terms and uncapped bandwidth reflect a market in which an increasing number of households have a demand for things like streaming services, which require high speed and data allowances to work. Flexible contracts mean that lowerincome households will feel less financial strain from such services and will be able to enjoy them without the concerns that longerterm contracts might bring, and the fact that Metrofibre is listening to these consumer
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demands means that its uptake levels are likely to increase. Something that differentiates Metrofibre from competitors is the control that it has over its own network capabilities. “What we pride ourselves on is that we own our own network. The end customer is on a Metrofibre network from the main data centre right through to us, there’s no one else involved, and that will continue to be our strategy.”
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“The business is self-sufficient as we sit here, if we did nothing today we’d make money going forward, but obviously we want to expand aggressively
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Co-build with Link Africa
In April this year Metrofibre announced an exciting new partnership with Link Africa. All of Metrofibre’s previously leased fibre infrastructures are set to be replaced, with two major routes being completed by the end of the year. The partnership will allow Metrofibre to fast track the rollout of its fibre infrastructure, expanding its footprint and solidifying its already ambitious expansion plans. Having raised almost all of the capital that it intended to, Metrofibre is looking at the possibility of developing overseas partnerships. “We’ve basically achieved the amount we set out to raise,” says de Villier, “but we’re also not averse to looking at international investment.”
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82 Roan Crescent, Corporate Park North Old Pretoria Road Midrand 1682 Tel: 087 151 4000 Email: sales:sales@metrofibre.co.za
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www.essentialbusinessmag.com ŠEssential Business Magazine 2015