With broadband fast becoming a fourth utility (after gas, electricity and water), South African telecommunications players are scrambling to get a piece of the connectivity pie. Local households and businesses are quickly developing an appetite for super fast fibre connectivity, and a small army of IT providers has sprung up to meet the demand.

“This is driving a major shift in the telecoms landscape, particularly with regard to infrastructure”, says Mike Peo, Head of Infrastructure, Energy and Telecommunications for Nedbank Corporate and Investment Banking. The lender is active around the various telecoms infrastructure layers such as towers, fibre rollout, spectrum, data centres, undersea cables, etc.

“We are starting to see consolidation in this space,” explains Peo. “Almost every piece of real estate has a fibre company rolling out fibre, and this needs to move to a more consolidated play to achieve efficiencies and long term sustainability. As it stands, there are too many small players…and we run the risk of laying fibre over fibre, for example.”

He argues that there will be an increasing move towards open access models within the telecoms infrastructure space, whereby one party owns the physical infrastructure and then leases it out as a service to other players in the sector.

This is presenting new opportunities for funding institutions, particularly as more data centres and other key infrastructure are required.

Nedbank’s Peo says that major multinational players like Google and Microsoft are engaging with telecoms players in South Africa and Africa, which is creating new platforms for growth and expansion.

“In principle, it makes sense to have as much SA content [services] being sold to SA players as possible and likewise across the region, driving the need for increasing data capacity within SA and the region.”

With regards to major challenges in the SA sector, Peo says that the lack of policy direction around spectrum allocation is still a major barrier to both growth and efficiency.

“Spectrum is undoubtedly choked in SA, and we have waited for ten years for any clear and definitive signalling around spectrum policy,” he explains. “It’s a significant constraint for local telecoms development.”

For example, Peo argues that spectrum issues rather than strong business fundamentals are often driving key telecoms consolidation deals – with new businesses beholden to existing spectrum deals and partnerships.

Looking to the rest of the continent, there is undoubtedly a shift towards greater consolidation within the telecoms infrastructure sector with a number of key deals in progress in, for example, the tower leasing space.

According to Peo, the leasing of towers has become a ‘massive business’, with increasing investment in towers, terrestrial fibre and data centres. There are also emerging opportunities for 4G data plays as demand for connectivity skyrockets across Africa – in both urban and rural areas.

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