Octotel and MetroFibre weigh merger to build 400 000-home fibre network

Octotel and MetroFibre Networx are assessing a combination that would create South Africa’s third-largest fibre network operator, with both companies sitting under a common investor in an AIIM-led consortium.

Octotel CEO Trevor van Zyl confirmed the talks in an interview with TechCentral, and set out the case for the deal from his side of the table. Octotel passes just under 400 000 homes across the Cape Town metropole, the West Coast and the Garden Route. MetroFibre’s network sits largely elsewhere, and Van Zyl argues the two footprints overlap very little.

That is the commercial logic in one line. Two networks built in different places, under one investor, can be run as one business without cutting into each other’s streets.

The balance sheet behind the pitch

Van Zyl told TechCentral that Octotel’s balance sheet lets the company deploy capital when and where it chooses, which is the argument a network operator makes when it wants to be judged on its own build rate rather than on a parent company’s timetable.

He also described where the next phase of roll-out goes. As fibre networks push into lower-LSM areas, the economics change. “The commercials and the economics start changing,” he said, and affordability now reaches well into the middle class.

That is a shift worth watching for any household still weighing up a fibre contract. The market’s next growth phase depends on whether operators can build into areas where the monthly bill has to come down, not just the areas where it has always been easy to sell.

Why he says fibre still wins in dense settlements

Van Zyl rejects the idea that fixed-wireless access can substitute for fibre in dense settlements. Wireless has improved dramatically, he said, “but when you look at the actual demand case and what is required in those environments, it absolutely has to be fibre”.

The harder problem, in his view, is how to distribute fibre economically once the network reaches those areas. That is a build-cost and installation-cost question, not a technology question.

Openserve’s move into internet services

On Openserve’s push into the ISP business, Van Zyl is relaxed. He said he understands why Openserve made the move, but Octotel will not follow. “We certainly don’t want to become an ISP. We’re not good at being an ISP.”

That is a clear line between the wholesale network business and the retail business of selling connections to households. It also tells ISPs riding on Octotel’s network where the company intends to stay.

Van Zyl expects consolidation among ISPs as networks saturate, sees low-Earth orbit satellite as complementary to fibre rather than a threat to it, and will not rule Octotel out of any future move by MTN on fibre network assets.

What it means for the Cape

For a household in Mitchells Plain, Atlantis or a Garden Route town still waiting for a fibre drop, the merger question matters less than the build schedule. A combined Octotel and MetroFibre would control more of the infrastructure those households depend on, which puts the Competition Commission’s conditions on any deal squarely in the public interest.

A third national fibre player of real scale is also the outcome most likely to keep prices honest against the two largest operators. The test is not the size of the merged network on paper. It is whether the build reaches the areas where the economics are hardest, and whether wholesale access terms let smaller ISPs compete on it.

Van Zyl’s own framing points at that. If affordability now reaches into the middle class, the operator that builds there first wins the next decade of South African broadband.

Source: TechCentral, TCS | Octotel’s Trevor van Zyl on the fibre merger question