Vodacom intends tabling an offer of US$460m (about R5bn) to buy Neotel, according to a report published in the Wall Street Journal on Wednesday.
The newspaper, quoting an unnamed executive at India’s Tata Communications, Neotel’s holding company, said that Vodacom, which is a subsidiary of the UK’s Vodafone, will also take on Neotel’s debt, effectively pushing up the price further.
Tata Communications is in talks to sell Neotel because it is not able to fund the local operator’s expansion into broadband and mobile, the newspaper said. Details of the deal should be announced in the next two months, it said, quoting the Tata executive.
The parties intend signing a share purchase agreement before seeking regulatory approval from the Independent Communications Authority of South Africa and the Competition Commission.
The talks between the companies have been dragging on for some time, possibly over securing approval from authorities for the transfer of Neotel’s radio frequency spectrum to Vodacom.
It’s understood Vodacom views access to Neotel’s spectrum as a cornerstone of the transaction.
But MTN, which competes with both companies, recently expressed the view that such a transfer of spectrum would not be allowed under current South African legislation.
Last month, Neotel CEO Sunil Joshi told TechCentral in an interview that the talks with Vodacom were nearing completion and that details of the acquisition could be announced in a matter of weeks.
Although rumours surfaced in January that Vodacom parent Vodafone may be in talks with India’s Tata Group to buy Tata Communications, Joshi said the Neotel-Vodacom talks have been driven from South Africa and not by an international agenda.
“The broader news is more speculative. Tata Communications made a comment that they don’t speculate on rumours,” says Joshi. “From Neotel’s standpoint, this is a domestic South African engagement that says, ‘What is the right thing for Neotel and Vodacom to do.’” — (c) 2014 NewsCentral Media