The pain of a lost WiMax bet

Vodacom and WBS’s (iBurst’s) bet on WiMax in South Africa seems to have been a very expensive gamble – which did not pay off.

Vodacom, in partnership with iBurst, rolled out a WiMax network in 2008 in Gauteng and Cape Town, targeting small and medium sized businesses with their wireless broadband offerings.

The two companies competed head-on with ADSL, but from the outset the pricing was considered far too high to beat Telkom’s ADSL services.

Unsurprisingly these WiMax services failed to gain traction in the price-sensitive SA broadband market.

Vodacom and iBurst refused to give actual subscriber numbers when asked for comment, but industry speculation suggests that they have less than 1,000 active WiMax subscribers.

Considering that Vodacom has invested around R100-million to roll out a WiMax network (with around 150 base stations), it translates into roughly R100,000 per subscriber (excluding operating costs).

With such a high cost-per-subscriber figure it is clear that a WiMax network was a gamble which did not pay off for Vodacom (and possibly iBurst).

iBurst and Vodacom mum on actual figures

When quizzed about the WiMax network, iBurst would not provide details about the network ownership, operations or subscriber numbers.

Vodacom responded to questions about the network, but did not want to reveal what the network really cost them, what their subscriber numbers are or what is happening with the network at this stage.

Vodacom would only say “we have deployed approximately 150 WiMax base stations with WBS (we’ve not disclosed the amount invested)” and that “WiMax is one part of our overall enterprise product offerings”.

Selling WBS/iBurst stake

Pieter Uys

The pain for Vodacom may, however, run deeper than merely wasting money on a WiMax network.

Vodacom’s decision to sell their WBS stake in 2009 was partly based on ICASA’s previous plans to block any company with a shareholding of 5% or more in another 2.6GHz spectrum applicant from applying for their own spectrum.

Vodacom’s previous 24.9% shareholding in iBurst/WBS would therefore have disqualified them from applying for 2.6GHz LTE spectrum. Vodacom duly sold their WBS shares to remove this hurdle.

Fast-forward three years, and the situation has changed. ICASA now plans to block all the operators with spectrum from applying for 2.6GHz spectrum.

This means that Vodacom may have been better off keeping their stake in WBS/iBurst, and through this partnership, gain access to WBS’s valuable 1800MHz and 2.6GHz spectrum which are suitable for LTE networks.

Vodacom CEO Pieter Uys however says that “knowing what we know now, we’d still have made the same decision”.