23 Mar 2021
Investec supports MetroFibre’s network expansion
Investec arranges a R2.5 billion debt package for MetroFibre, supporting its fibre network rollout across South Africa. The debt package complements the recent R1.5 billion equity raise supported by new shareholder AIIM together with current shareholders.
A fast, stable internet connection empowers people. It allows them to learn, join communities, build businesses and, when they need to, escape into entertainment. Our country, and the people who live within her borders, would benefit greatly from wider access to those benefits.
It is with this backdrop in mind that Investec took the lead role in arranging R2.5 billion in debt funding for MetroFibre Networx, a Gauteng-based fibre infrastructure provider. The financing will be used to extend its world-class fibre connectivity into underserviced homes and businesses. Wayne Edwards, MetroFibre’s Financial Director, spoke to the importance of the deal.
“There’s a massive demand for fibre connectivity in many outlying regions. Filling that gap makes sense not only from a business perspective, but also from a socioeconomic upliftment standpoint. In a growing and fiercely competitive market, the timely funding arranged by Investec, together with our recent R1.5 billion equity raise, will enable us to take fibre to more individuals and more businesses, giving them the opportunity to participate in the globally connected economy.”
The funding agreement builds on an existing relationship between the two companies that dates back to 2016 when MetroFibre approached Investec for its first-ever round of debt financing. Back then, MetroFibre was still in a nascent phase, but Investec saw its potential.
“Debt funding is usually only possible once a company has a long, established track record. But we saw MetroFibre’s potential very early on and subsequently provided specialised capex funding, structured to promote their growth over time. That funding proved justified as MetroFibre’s s growth accelerated meaningfully during 2018 and 2019,” said Laverne Chetty, Investec Specialised Finance.
Together with the funding from their capital raise toward the end of 2020, MetroFibre is now well-poised for another phase of strong growth. They plan to densify their existing networks, and reach an additional 300,000 residential homes across the country over the next three years. Edwards explains the strategic importance of having funds available at this watershed moment for the fibre industry.
“We believe the fibre market has reached a tipping point. People are spending more time in their houses which has drastically increased the demand for high-bandwidth internet services, both for the purposes of working from home, education and for entertainment. Fibre is going mainstream.”
The explosion of the fibre to the home (FTTH) trend runs parallel to an insatiable thirst for bandwidth in the corporate space. As businesses migrate towards digital and cloud-based services – a structural shift that has momentum – their need for faster, stable internet is rising. In addition to MetroFibre’s extensive fibre network in the retail market, they also have a reputation for installing high-performance fibre infrastructure for businesses in the financial services sector.
“Reliable, ultra-high speed fibre lines are critical to the operations of certain financial institutions. Our team has vast experience in delivering those kind of networks,” continued Edwards.
In concluding, Investec’s Chetty reiterated that their support for MetroFibre’s next era of growth is about more than just backing a business they believe in.
“Greater access to reliable telecommunications, of which fibre connectivity is playing an increasingly bigger role, has been shown to drive economic growth, increase access to education, and provide a myriad of social benefits,” he says.
There is little doubt that high-speed internet connections create business opportunities and heighten productivity. But there are also a host of direct employment opportunities that come with the installation of fibre lines. The physical laying of cables creates jobs, as does the need for the ongoing management and maintenance of the network and the customer-service function that provides the necessary support. This is in addition to the host of indirect employment opportunities that reliable, high speed connectivity creates.
These are outcomes that South Africa desperately needs. To deliver them, nation-building businesses like MetroFibre must form alliances where the respective partners bring out the best in each other. This sentiment was echoed by Edwards.
“The fibre market moves quickly so we need a finance partner that can do the same. Investec has been with us from the beginning, so they understand our business model and what we are working to achieve. We are immensely excited about taking the benefits of high-quality fibre connectivity to the country as a whole. And for that journey to be successful, having the right partners remains paramount.”