Vodacom to buy Neotel for R5 billion: report

Vodacom has reportedly entered into exclusive negotiations to acquire Neotel for R5 billion (US$502 million), according to Bloomberg.

According to Bloomberg, Neotel parent company, Tata Communication acquired a further 2.5% stake in the operator last year, valued at R149 million (US$14.9 million).

This makes Neotel worth R5.9 billion (US$596 million), Bloomberg said.

Neotel’s current shareholders are Tata Communications (68.5%), Nexus Connection (19%) and Communitel (12.5%).

SA news site, MyBroadband first reported in May that Neotel was in the acquisition cross-hairs of mobile operators, Vodacom and MTN, citing industry sources close to the matter.

It was reported soon after that MTN had dropped out of the potential negotiations, leaving only Vodacom in the running.

Vodacom has been in advanced discussions to seal the deal since August, sources have said.

Why buy Neotel?

Speaking on CNBC Africa, Vodacom CEO, Shameel Joosub said that he sees enterprise services as one of the biggest growth opportunities in South Africa.

“There is a big opportunity [for Vodacom] to capture more of the fixed [telecoms] space,” he said.

According to analysts and commentators, Vodacom acquiring Neotel would provice the operator with an established fibre network – which is already geared towards serving enterprise clients – as well as access to valuable 800Mhz spectrum, suitable for the further rollout of LTE.

Vodacom, Neotel and Tata Communications have repeatedly declined to comment on the matter.

In May, Neotel CEO, Sunil Joshi announced that the group had achieved its first operating profit since it launched in the country in 2006.

Joshi said that the group had turned earnings before interest and taxes positive for the year ended March 2013, having first reported its ebitda positive status in 2012.

(USD 1 = ZAR 9.98)

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