Behind Vodacom’s decision to rethink the Neotel deal

Vodacom recently announced it was relooking its planned acquisition of Neotel, in what it called “exploring a revised transaction structure”.

Competition Tribunal hearings over the Vodacom-Neotel merger were scheduled to start on 23 November. However, these have been postponed indefinitely.

Considering Vodacom has worked hard for the last 2 years to make this deal happen, it raises the question as to what could have forced such a sudden turnaround.

An obvious answer is the allegations of bribery at Neotel. Earlier in 2015, Neotel’s auditors Deloitte blew the whistle on R100 million in questionable payments to a company called Homix.

These payments were allegedly linked to a bid to clinch R2-billion worth of deals from Transnet.

Neotel launched an investigation into the matter, and director in charge Kennedy Memani said in October that the company was nearing the end of the disciplinary process involving CEO Sunil Joshi and CFO Steven Whiley.

Memani said Neotel was expected to make an announcement regarding the outcome of the disciplinary process in early November.

If the outcome of this investigation showed that the allegations of bribery were true, it would definitely have influenced Vodacom’s plans to buy Neotel.

Vodacom owner Vodafone is subject to the United Kingdom’s anti-bribery laws, and clearly states it has a zero-tolerance approach to any form of bribery.

Corruption Watch’s David Lewis told the Sunday Times that “you can take it as read that Vodacom would not proceed until this is settled”.

“I’m sure Vodacom would have sought assurances from Neotel that there were no unresolved corruption allegations or issues whatsoever,” said Lewis.

He said if Neotel hid information about corruption from Vodacom, the mobile giant will likely pull out of the deal.

Vodacom would not answer questions as to whether the bribery allegations against Neotel influenced its decision to revisit the deal.

A Vodacom spokesperson said they are in active discussions with Neotel and its shareholders regarding an amended transaction structure.

Neotel said it is “unable to disclose further information due to the confidentiality agreement that the parties are bound by”.

It said discussions between the parties are being “pursued vigorously”. “Once we have finalized discussions, we will be able to provide further details,” it said.

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Behind Vodacom’s decision to rethink the Neotel deal