In September, Vodacom announced that it had entered into exclusive negotiations to acquire Neotel, ending months of speculation that the two sides were talking to each other. Neotel is controlled by India’s Tata Communications.
“Our anticipation is that it will take maybe six months. The sooner we get clarity around it would be great,” Joshi said.
If the deal goes through, it will result in a combined entity offering “greater choice for customers, a wider product offering, and incremental funding that will allow Neotel to get greater capillarity in the South African marketplace”.
Joshi said that there were two hurdles that still had to be crossed beyond Vodacom’s due diligence: getting the necessary approvals from the telecommunications regulator and from the competition authorities.
“We’re in progress on these areas and right now there isn’t anything more that we can share,” he said at a media conference at which Neotel provided some insight into Neotel’s financial performance for the first half of its 2014 financial year, which included its first-ever pre-tax profit. “In this phase, there is nothing we can talk about beyond [that there is]due diligence.”
The exclusive talks revolve around Vodacom taking a 100% stake in Neotel, whose other shareholders include Communitel and Nexus Connection. Reports have suggested the deal value could be worth north of R5bn, with some reports suggesting a R10bn tag — though it’s unclear whether that figure includes or excludes the debt on Neotel’s balance sheet.
Rumours have been swirling around Neotel for months, with talk that MTN and Dimension Data had also considered making an offer for the company, which has access to a network of fibre-optic infrastructure and radio frequency spectrum that can be used to deliver broadband services.
The proposed deal is likely to attract close regulatory scrutiny given Vodacom’s size in the market — it controls 50% of the mobile market and is increasingly positioning itself as a provider of converged wireless and fixed services, especially in the business market.
“This transaction, if concluded, would stimulate greater competition in the South African fixed telecoms sector and accelerate the provision of high-speed data links,” the companies say in their statement. “It would also result in the combined entity being able to offer an expanded product range and, as a consequence, enhanced customer choice.”
If the deal is concluded successfully, Vodacom intends putting “significant investment into the combined entity to provide high-speed fixed connectivity to many more businesses and consumers”, said group CEO Shameel Joosub. — (c) 2013 NewsCentral Media