DFA looks to expand into data centres, towers

Dark Fibre Africa is keen to buy or build tower and data centre assets as it expands beyond the provision of fibre telecommunications infrastructure in South Africa.

That’s according to DFA CEO Thinus Mulder, who was speaking last week at an event hosted by Absa Corporate and Investment Bank, arranged by Digital Things and FTTx Council Africa, and moderated by TechCentral.

DFA, which was launched in 2007 as an open-access fibre provider, now has over 15 000km of fibre infrastructure in 25 metros and secondary cities across the country. Now the company sees an opportunity to expand from the “fibreco” model into the adjacent areas of “datacos” and “towercos”.

Listen to Thinus Mulder’s presentation

“Datacos, towercos and fibrecos are all linked to each other,” Mulder said. “We play in the same value chain.”

Datacos offer “promising returns at higher multiples”, he said. “There will be a growing demand for dataco companies, though the barriers to entry are fairly high. A dataco, if well managed, is definitely a good investment opportunity. Probably the only negative thing from a dataco perspective is (access to a reliable source of) power and to deliver it at affordable rates and (that) probably also means some pressure on pricing.”

As for building a towerco, Mulder said South Africa hasn’t seen much appetite by the mobile operators to sell their tower assets to independent companies. Though it’s been a trend in Africa for many years — and even in Europe, Vodafone has announced plans to hive off its tower assets — the only significant deal in the past decade has been the sale by Cell C of its towers to American Tower Corporation.

“A tower is a depreciating asset on the balance sheets of the service providers,” he said. “If you can take that tower out of the service provider environment and build multi-tenancy contracts, it can become an attractive proposition. Towercos trade at a lower multiple than the dataco, but still higher than the fibreco. With the growing demand for 5G densification and (the Internet of things, or IoT), towers will become very attractive.”

Mulder said it has always been DFA’s strategy to expand into data centres and tower management. In towers, though, South African operators tend to see these as a “strategic asset” and are reluctant to offload them.

Acquisitions

He said DFA has tried on several occasions to acquire assets that would allow it to expand beyond its core fibreco business. “We have aimed a few times, but we’ve missed. We have not been successful with an acquisition yet, but if the right opportunity comes along, it’s something we’d look at.”

He expects the market will change in the coming years, with service providers increasingly looking to split out their infrastructure. “We’ll see a lot of consolidation happening in the industry,” he said, especially as the capital expenditure required to roll out 5G and IoT networks grows. “This will force the industry to look at reorganising itself.”  — © 2019 NewsCentral Media