Capitec Connect ‘SA’s fastest-growing mobile business’

Could fibre be the next frontier?

When Capitec Bank launched its mobile business two years ago, the plan was never to become South Africa’s biggest telecommunications company but rather to challenge the high prepaid data and airtime prices charged by traditional operators.

This is the word from Dalene Steyn, head of Capitec Connect – the name of the Stellenbosch-based bank’s mobile virtual network operator (MVNO).

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But just two years into existence, it has over 1.2 million active SIM cards in the market, which makes it the biggest MVNO in South Africa and its fastest-growing mobile company.

Data usage at the end of August 2024 was 5.1 petabytes – “equivalent to streaming 1.7 million rugby games”, it says.

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Steyn and four of Capitec’s executive heads hosted a media gathering on Friday to discuss the company’s digital offering and plans for the future.

Capitec Connect 

Since Capitec started in March 2001, it has grown from a startup offering loans and banking to the previously unbanked in South Africa to a fully-fledged fintech company.

Capitec Connect made its debut as an MVNO in September 2022.

MVNOs are non-telecommunications companies that make use of the infrastructure of existing mobile operators.

Other companies in South Africa with MVNOs include FNB, Standard Bank, Pick n Pay, and Mr Price.

Capitec, which has partnered with Cell C for infrastructure usage, initially entered the mobile space by offering voice and data bundles that did not expire.

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“We felt the bigger telecommunications companies were exploiting our clients with the rates they charge and we initially offered non-expiry products at a flat rate. But our clients said if we can make the rates even more affordable, they are willing to use bundles that expire,” says Steyn.

Capitec Connect started offering one-day, seven-day, and 30-day bundles in July 2024. Users can therefore opt for no-expiry or a more affordable expiry product.

Since Capitec Connect entered the mobile market, it has grown into a significant telecommunications player. Net income from the mobile segment was R69 million at the end of August 2024 – up from R4 million in the comparative period in 2023.

Branch footprint 

Steyn attributes the rapid uptake of the Capitec Connect service to the lender’s 23 million-strong active client base and its large physical footprint across South Africa. At the end of August 2024, Capitec had 873 branches across the country.

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“Our branch staff are also our sales consultants because you can only buy a Capitec SIM at a physical branch,” Steyn notes.

Capitec is already annually selling R2 billion of data and airtime products from big mobile operators like MTN and Vodacom to its approximately 12 million clients who use the Capitec app.

“Those are the low-hanging fruit and if we can offer these clients [who buy from the bigger operators] a better and more affordable service, there’s no reason why they won’t convert to Capitec Connect,” she adds.

Towards the end of October, Capitec Connect will offer additional products – such as social media and streaming bundles for Showmax, larger data bundles for gamers, and smaller one-day voice bundles.

(Capitec Bank partnered with MultiChoice to offer discounted rates for the streaming service Showmax to its customers through its voucher system and will soon offer DStv Stream vouchers to allow customers to buy access to specific programmes or channels.)

Steyn also hints at the possibility of expanding into the fibre market at some point. “We have been approached by a number of ISPs [internet service providers], although it might not happen within the next three to six or 12 months.”

Building block for drive to digital 

An extra benefit of Capitec Connect is that it serves as a building block to get more of Capitec’s 23 million clients to switch to using the app, says Graham Lee, group executive of retail banking.

Capitec has 13.7 million active app users at present. “When clients have data through Capitec Connect, they will also be able to use the app [whereas] they were previously excluded [from] doing so,” he says.

Capitec intends to spend R174 million in the next six months on expanding its technology and cloud services.

“We made the decision a few years ago to be cloud-first. All of our data across our segments, like retail and business banking and insurance, are in one place in the cloud,” says Wim de Bruyn, chief investment officer.

The data from all these clients, as well as those who use Capitec products such as digital payments and its value-added services, means the company has access to around 2.5 trillion data points.

“Our products are largely digital and technology products. For this reason, Capitec has become more of a fintech company than a bank nowadays,” De Bruyn says.

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