South Africa’ s telecommunications market has a handful of dominant players and many people are eager for a fresh face in the local broadband scene to shake things up.
Telecommunications is a capital-intensive business, though, and to take on large companies like Vodacom and MTN requires deep pockets. It is therefore not surprising that two bankers – former FNB CEO Michael Jordaan and former FirstRand CEO Paul Harris – are behind the country’ s latest broadband network.
Jordaan and Harris are majority shareholders in Multisource, which acquired iBurst parent WBS Holdings in 2016. WBS owns spectrum in the 1.8GHz and the 2.6GHz bands, which is perfect for rolling out a 4G broadband network. Following the acquisition, Harris, who serves as WBS chairman, announced a multi-billion-rand investment in a new high-speed LTE-A national data network for South Africa.
To build a new broadband network from scratch can be challenging and time-consuming, which led WBS to sign an agreement with Vodacom that allows it to lease aspects of Vodacom’ s sites and facilities.
Harris said they will have at least 500 sites active on Vodacom’ s network by March 2017, 2,000 by the end of 2017, and 5,000 by 2020. WBS also plans to have a further 5,000 sites in operation, consisting of its own sites and sites of other telcos and tower companies.
The two bankers have been successful in striking deals and raising funds to roll out the national LTE-A network – but why did they decide to invest in the telecommunications market in the first place?
The investment
Jordaan said there are remarkable similarities between mobile connectivity and digital banking.“ In fact, some experts predict that the two industries will converge in future as more banks start offering MVNO services – like FNB Connect is already doing successfully – and mobile networks start offering payment services like M-Pesa has done in emerging markets,” said Jordaan.
Other similarities are that both industries offer intangible products – billing in the telco world is similar to an account in the banking world- and both industries are dominated by a few large players. Pricing in both markets is also relatively high and complex.