Vodacom is reportedly in discussion with Remgro to acquire Community Investment Ventures Holdings (CIVH), which owns Vumatel and DFA. This is feedback from well-placed sources who confirmed that Vodacom’s interest in Vumatel did not die down after the CIVH acquisition. Though Vodacom didn’t comment on the discussions, saying “we do not comment on market speculation”.
In May 2018, there were reports that both CIVH and Vodacom were in discussions to acquire Vumatel. At the time, Vodacom CEO Shameel Joosub said the company wanted to become a bigger player in the fibre-to-the-home market. CIVH won the battle and acquired 34.9% of Vumatel for an undisclosed amount in June 2018. It bought the remaining 65.1% in May 2019.
This means that CIVH, which is majority-owned by Remgro, now owns two of South Africa’s biggest fibre players – DFA and Vumatel. After the acquisition, Vumatel started working in tandem with DFA to provide fibre access to South African businesses and homes. Their fibre rollout in recent years is impressive. Vumatel and DFA’s 29,300km fibre network scales across all key metros in South Africa.
It passes 690,000 premises and connects 11,500 mobile base stations and 240,000 homes and businesses. This valuable telecommunication asset remains attractive to Vodacom, and well-placed sources told MyBroadband it is in discussion with Remgro to acquire CIVH.
While the details of what such a deal may look like remain sketchy, it is widely accepted that Vodacom will have to pay a premium for this asset. Remgro has invested a large amount of money and resources into building CIVH into a strong fibre player. According to Remgro’s financial results for the period ended 31 December 2019, the net current book value of DFA’s fibre-optic network is more than R9 billion.
The future value of DFA’s current annuity contracts – excluding open orders – is more than R12 billion. Add Vumatel’s fibre assets and its strong position in the fibre-to-the-home (FTTH) market to the mix and it makes for a valuable telecoms player. Remgro put an intrinsic net asset value of R16.44 billion on CIVH, which gives an idea of where negotiations will start.
Remgro and CIVH comment
Remgro did not directly answer questions related to discussions with Vodacom, saying it does not comment on speculation. Remgro executive and CIVH chairman Pieter Uys, did, however, did say that CIVH started a primary capital raise programme last year.
CIVH appointed advisors in November 2019 to help with this new capital raise. As part of the capital raise, some of the minority shareholders indicated they are ready to sell their stake in CIVH. There was a lot of interest from both local and international players to invest in CIVH – both directly and to buy out other investors.
Uys said both these processes have stalled during the COVID-19 pandemic and subsequent lockdown. However, the markets are starting to function again, which means CIVH’s management has reignited the search for new investors. There is also still the possibility that the smaller CIVH investors may sell their stake in the company. Uys added that Remgro remains very happy with its stake in CIVH and is currently not looking to dispose of this investment.
CIVH history and opportunities
