Vodacom to buy Neotel for R7 billion

Vodacom has reached an agreement with the shareholders of Neotel to acquire 100% of the issued share capital in, and shareholder loans against, Neotel for a total cash consideration equivalent to an enterprise value of R7.0 billion.

This follows an announcement on 30 September 2013 from Vodacom and Neotel that they have entered into exclusive discussions regarding a potential acquisition of 100 percent of the shares of Neotel by Vodacom South Africa.

Neotel will become a subsidiary of Vodacom South Africa and the combination with Vodacom’s South African fixed enterprise business will create a national service provider with annual revenues of more than R5 billion.

Vodacom will fund the acquisition through available cash resources and existing credit facilities.

The transaction remains subject to the fulfilment of a number of conditions precedent including applicable regulatory approvals and is expected to close before the end of the financial year.

Vodacom said it sees a significant opportunity to accelerate growth in unified communications products and services by integrating its extensive distribution and marketing capabilities with Neotel’s fixed network and product capabilities.

The combined entity will be able to offer an expanded and enhanced range of converged services (e.g. hosted PBX, OneNet) to enterprise customers.

Vodacom estimates revenue synergies with a total net present value of approximately R0.9bn after integration costs.

“The combination of Neotel’s and Vodacom’s networks will improve overall network availability and reduce the cost to serve customers,” Vodacom said.

“The combined business will also be ideally positioned to accelerate broadband connectivity in line with the South African Government’s broadband targets, enabling Vodacom to take a leading position in the fibre to the home and fibre to the enterprise segments of the market.”

“The combined entity will also be able to use the radio spectrum currently assigned to Neotel more effectively,” said Vodacom.

This spectrum will enable Vodacom to accelerate the roll-out of LTE (commonly referred to as 4G) services, providing high speed, high quality wireless connectivity to a greater proportion of the South African population.

“Vodacom looks forward to welcoming Neotel’s employees. Their fixed and enterprise skills will enable the combined entity to deliver enhanced and extended service offers,” Vodacom said.

Neotel, which started operations in 2007, is the second largest provider of fixed telecommunications services for both businesses and consumers in South Africa.

The company has access to over 15,000 km of fibre-optic cable, including 8,000 km of metro fibre in Johannesburg, Cape Town and Durban.

Neotel also has access to 2 x 12 MHz of 1800 MHz spectrum, 2 x 5 MHz of 800 MHz spectrum and 2 x 28 MHz of 3.5 GHz spectrum.

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Vodacom to buy Neotel for R7 billion