Neotel gets R2bn for network

[Gatecrasher]

http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A340596

and

http://www.mybroadband.co.za/nephp/?m=show&id=5144

 

[telkomsuig]

So VSNL is not investing in any major way into neotel. If they are going finance their expansion solely with debt the return they need to make from customers is much higher..hence higher prices for us.

 

[Origin248]

So VSNL is not investing in any major way into neotel. If they are going finance their expansion solely with debt the return they need to make from customers is much higher..hence higher prices for us.

Actually, the last time I checked, required return on debt is much lower than equity. People want more return for holding shares/buying company than simply lending it money, that's why share prices/stock market has to perform better than debt instruments such as bonds/t-bills.

Therefore by your logic, it actually lowers their need to make more money

 

[ads]

So VSNL is not investing in any major way into neotel. If they are going finance their expansion solely with debt the return they need to make from customers is much higher..hence higher prices for us.

In the article, it says, "The debt is complemented by in excess of R2 billion of equity that will be contributed by the Neotel shareholders." Sounds like normal gearing for a company like this.

 

[darkone]

If it wasn't for all this Bee nonsense I am sure more liquid foreign investors would have been interested.

I am getting a little sick of people who will bash BEE for anything and everything. Come on, can't you think any more, its just become a habit to blame BEE. What has raising R2 billion in the local debt market got to do with BEE, many companies have done that before (Cell-C as a prime example). And by the way, there's no problem with companies being required to meet certain equity requirements especially in the african telecoms market which is largely still regulated.

 

[darkone]

Examples such as Iran which asked MTN to give it 51% come to mind. Nigeria also had its own local ownership conditions when privatizing Nitel, Ghana is doing the same with Ghana Telecom and India too had similar type of requirements with cellular and fixed line operators etc. Just say that you don't like the idea of black people being empowered and then we can at least have a decent debate, instead of acting like a hypocrite. BEE has its own problems such as people abusing it and only enriching a few black elite and the usual corruption that accompanies any form of economic, but its intentions are and have always been noble. It is a necessary evil that SA needs if we want to see this country in one piece, cause we can't have 90% of the wealth controlled by a minority.

 

[telkomsuig]

Actually, the last time I checked, required return on debt is much lower than equity. People want more return for holding shares/buying company than simply lending it money, that's why share prices/stock market has to perform better than debt instruments such as bonds/t-bills.
money

You looking at it from an investors point of view not from the companies point of view.

 

[Origin248]

You looking at it from an investors point of view not from the companies point of view.

Is there really a difference? Investors and companies think alike in their choice, homogeneous expectation of investments.

 

[telkomsuig]

In the article, it says, "The debt is complemented by in excess of R2 billion of equity that will be contributed by the Neotel shareholders." Sounds like normal gearing for a company like this.

My mistake I read the article on moneyweb and did not see the equity part. But

After 12 months, Neotel will refinance the debt with a long-term facility worth more than 4 billion rand, it added.

 

[Sneeky]

All good news, 1 step closer.

Neotel gets R2bn finance while Telkom stares a potential R2bn claim in the face. Nothing wrong here, lets hope the trend continues

 

[telkomsuig]

Is there really a difference? Investors and companies think alike in their choice, homogeneous expectation of investments.

To determine a companies cost of capital of you have to take into account both debt and equity. The higher portion of your capital consists of debt the higher the financial risk to both equity investors and lenders and thus higher resulting in a higher cost of capital. Obviously there is a sweet spot where financial risk is balanced with cost of capital.

My point is ultimately neotel if it does not make sufficient profit it will be quite thinly capitalized ... after two years it will be at the tipping point

 

[telkomsuig]

I am getting a little sick of people who will bash BEE for anything and everything.

Point taken this should rather be discussed in the current affairs/news forums.

 

[Tanarri]

I am getting a little sick of people who will bash BEE for anything and everything. Come on, can't you think any more, its just become a habit to blame BEE. What has raising R2 billion in the local debt market got to do with BEE, many companies have done that before (Cell-C as a prime example). And by the way, there's no problem with companies being required to meet certain equity requirements especially in the african telecoms market which is largely still regulated.

I don't know. CellC is a bad example. It's probably the worst mobile provider in the country. I don't want Neotel compared to CellC for hope's sake. Oh well.

 

[lenosb]

It will bring positive developmental impact and effectively address Government's key priorities through reducing backlogs in the telecommunications sector.

I don't think so......

Governments key priorities are to :

a) Keep their profitable baby Telkom in power as long as possible.
b) Keep ripping us off.
c) Keep SA in the telecoms dark ages.
d) Make sweet sounding promises with no intention of keeping them.

Remember Presidents Mbeki's promise in February 2005......If you don't then don't feel bad 'cause he has!