Dark Fibre Africa (DFA), which constructs and owns fibre-optic networks, has reported a 41.1% rise in revenue for the six months ended December 2012, to R302 million – however, its holding company, Remgro has noted that challenges remain.
Listed entity Remgro has an effective interest of 43.8% in the CIV (Community Investment Ventures) group which is active in the telecommunications and information technology sectors.
CIV has decided to focus on the telecommunications infrastructure market and, as a consequence, the company is in the process of disposing of companies that are not directly aligned with this market.
All of its power industry investments (CIV Power) have already been sold, while the balance of the non-core operating assets in its telecommunications (CIE Telecommunications) portfolio is at various stages in the disposal process, Remgro said.
The key operating company is DFA.
The CIV group’s contribution to Remgro’s headline earnings for the period under review amounted to R34 million (2011: R37 million), of which the major contributors were CIE Telecommunications (R18 million) and DFA (R10 million).
“It is anticipated that CIV group’s future growth will be DFA and other potential aligned investment opportunities,” Remgro said.
While DFA’s revenue for the period under review increased by 41.1%, Remgro noted that the main operating challenge that DFA faces is the slower than anticipated customer site build that affects its ability to link the sites to the fibre network.
“Another challenge is the delay in way leave approvals from municipalities and road authorities which prevent DFA from completing fibre rings on time.”
“Both these challenges delay revenue income generation to offset increasing depreciation and finance charges incurred on network rollout costs, resulting in lower earnings for the period under review,” Remgro said.
DFA has fibre network rings in Johannesburg, Cape Town, Durban (expanding to Pietermaritzburg), Midrand, Centurion and Pretoria. During the past year, the network has been expanded to a further 15 smaller towns.
The Johannesburg ring is regarded as one of the most important communication rings in Africa. At 31 December 2012, a total distance of 6,915 km has been completed in the major metropolitan areas and on long-haul routes, Remgro said.
Long-haul routes include Durban to the Seacom landing station in Mtunzini, which was extended through Empangeni to Gauteng.
DFA also completed building a long-haul route to link Cape Town to the WACS (West African Cable System) undersea cable landing station in Yzerfontein. WACS has the largest capacity of all the undersea cables to South Africa.
In 2010, DFA commenced with the fibre-to-tower project linking mobile phone operators’ base stations to the core communication rings, and the project will continue through 2013 and beyond as demand for mobile backhaul increases due to, amongst others, a strong growth in data demand by smart phones.
“Mobile backhaul is a major growth driver for DFA due to the increased demand for mobile broadband. DFA has 4,069 base transceiver station sites on the network that cover three of the four mobile operators,” Remgro said.
It noted that DFA has signed commercial lease agreements with 41 customers that have Electronic Communication Network Licences ranging from the largest incumbents to small niche operators.
“The revenue model is flexible to adapt to the customers’ needs and is to either sell an IRU which is a lump sum in advance or on an annuity basis with multi-year contracts. Presently approximately 63% of revenue is annuity which ensures good visibility for the foreseeable future,” Remgro said.