Tuesday, January 18

Vodacom to buy Vumatel, Dark Fiber Africa

Vodacom Group will acquire a co-controlling stake, along with Remgro and New GX Capital, in a new entity comprised of assets including Vumatel and Dark Fiber Africa.

Upon completion of the transaction, Vodacom will have a 30% stake in a newly formed entity, called InfraCo, which will house the assets of DFA and Vumatel, as well as certain fiber assets that Vodacom will contribute to the new business.

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DFA and Vumatel’s parent CIVH will have a 70% co-controlling interest in InfraCo and CIVH’s existing investors, including Remgro and New GX Investments, will continue to invest in CIVH.

Vumatel is the largest fiber-to-the-home (FTTH) network operator in South Africa, while Dark Fiber Africa offers fiber services in and between towns and cities in the country.

The FTTH and fiber assets for Vodacom’s business will be contributed to InfraCo. These assets will be open access in accordance with Vumatel and DFA business models.

“We hope that Vodacom’s investment will accelerate South Africa’s fiber reach, network quality and resilience, fostering economic development and helping to bridge South Africa’s digital divide in some of the most vulnerable parts of our society.” Vodacom said in a statement to shareholders.

Joint control

“Through Vodacom’s investment, InfraCo would accelerate and expand its low- and middle-income product offering to bring affordable high-speed broadband access to a broader segment of the population, including small and medium-sized businesses.”

Vodacom explained that the transaction is structured in a series of steps, all of which would occur upon completion once regulatory approvals are received.

“This will result in Vodacom obtaining a 30% stake in InfraCo, where Vodacom will jointly control InfraCo together with CIVH, which will hold the remaining 70% stake,” he said.

  • Step 1: CIVH will transfer all of its tangible assets and operations, including Vumatel and DFA, to a newly created entity, InfraCo.
  • Step 2: Vodacom will subscribe for new InfraCo shares in exchange for R6 billion in cash.
  • Step 3: Vodacom will contribute its FTTH, FTTB and business-to-business transmission access fiber network infrastructure to InfraCo, at a valuation of R4.2 billion in exchange for new shares in InfraCo.
  • Step 4: Vodacom will acquire more (secondary) shares of CIVH sufficient to increase its stake to at least 30% in InfraCo with a previously agreed formula.

“The value of the secondary purchase as described in step 4 is a function of InfraCo’s valuation as described and therefore cannot be pre-calculated with certainty. Based on Vodacom’s current expectations, including the closing date and InfraCo’s valuation, the secondary purchase is estimated to be approximately R3 billion. This would imply that the total purchase price paid by Vodacom, including the value of the transfer assets, is equivalent to R13.2 billion ”.

Vodacom also has an option, which can be exercised for 180 days after the implementation of the transaction, to acquire an additional 10% stake in InfraCo to increase its stake to 40% with the same implicit valuation.

The transaction should now result in CIVH owning less than 50.1% of InfraCo’s common shares.

The proposed deal must also be approved by the competition commission, which could be misleading, and by communications regulator Icasa.

For the year ended March 31, 2021, CIVH reported net assets of R8.7 billion and a loss attributable to shareholders of R1.1 billion.

Duncan McLeod is an editor at TechCentral, where this article was first published. here.

(c) 2021 NewsCentral Media


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