iBurst secures expansion funding

Local broadband service provider iBurst has raised the R350 million in capital it requires for its 2007 network infrastructure expansion plan.

Marketing manager Callia Doucas says the funds were raised from shareholders including Vodacom, which has a 10% stake in the wireless provider. Cash-on-hand raised through current operations and third-party investors also contributed to the pot. Doucas says funding from Investec is a loan, which iBurst expects to repay in about five years.

The Development Bank of Southern Africa (DBSA) says it is investing R50 million to support the network infrastructure investment, while Investec has chipped in another R50 million.

Earlier this year, iBurst revealed a growth strategy that would include a capital expenditure roll-out of R350 million in new network infrastructure to relieve backlogs and aid the company in reaching its growth targets.

MD Alan Knott-Craig Jnr says the broadband provider hopes to more than double its subscriber base by adding 50 000 subscribers to its current 35 000 subscribers. "We attribute the anticipated growth to the overall increased demand for broadband services throughout SA."

However, a financial analyst, who asked not to be named, says despite growth in broadband demand, he does not expect iBurst to ever be a large threat to heavyweight contenders such as MTN and Vodacom. Instead, he sees Vodacom buying out the rest of the company. "iBurst will be more a partner than a competitor."

The only other contender in the wireless provisioning space, Sentech, is not a threat, he notes.

Doucas says the network expansion, which is already is progress, will begin during the course of this year and should be completed by February 2008. iBurst already has 128 live base stations across the country, which it aims to have almost doubled to 250 stations when its capital expansion plan is complete.

The broadband provider is signing up new subscribers at a rate of 3 000 subscribers per month and, as a result, iBurst needs to expand its network to meet this growing interest and demand for broadband Internet services, Doucas says.

The financial analyst says, as iBurst is not a public company, he is unfamiliar with its cash position and expansion plans. However, he would not be surprised if there were more bottlenecks in heavy usage areas. "More subscribers want to be online than they can handle."

But, as Vodacom has a vested interest in the company, it is likely to fill any funding gaps the wireless provider may have. "Vodacom will be willing to fund their roll-out."

DBSA's principal investment officer on the project, Simon McGill, says the investment in iBurst will enable the bank to advance its own mandate, which is to drive economic growth and regional economic integration.

The investment will also drive broad-based black economic empowerment, particularly in the ICT sector where transformation has been sluggish, McGill says.

The funding also fits the DBSA's policy to make ICT more accessible to previously disadvantaged communities, he says. "This project will help extend the development impact of information technology to previously disadvantaged communities."

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