Vodacom in talks to buy Neotel

The cellphone giant wants to buy 100% of Neotel in a move aimed at improving data capabilities.

The cellphone giant wants to buy 100% of Neotel in a move aimed at improving data capabilities.

JOHANNESBURG - Vodacom said on Monday it was in exclusive talks to buy Neotel, a unit of India's Tata Communications, in a potential R5.9 billion deal that would give it a large fibre optic network for high-speed internet.

Acquiring Neotel would be a major boost to Vodacom's ambitions to grow its data business.

Vodacom, a unit of Britain's Vodafone Group, is the most popular mobile carrier in South Africa, but has little presence in fixed-line and fibre-optic services, both key to winning business clients.

"The benefit they would gain is an expanded client base in the fixed-line market segment," said Dobek Pater, an analyst at consultancy Africa Analysis. "They would gain access to fibre footprint and spectrum, and probably some additional skills to augment their current skills base."

Vodacom CEO Shameel Joosub said the company would aim to deliver more high-speed internet to homes and businesses. Neotel has access to more than 15,000 km of fibre-optic cable, with over half of that in major urban areas, he said.

Neotel, which has mainly small and medium-sized businesses as its clients, has invested some R7 billion in developing infrastructure, Pater said.

The local fixed-line market is dominated by former utility Telkom, which is still part-owned by the government and has plans to roll out broadband internet in rural areas.


Vodacom said it was looking to acquire 100 percent of Neotel and any shareholder loan claims. It did not give a potential value for the deal.

However, Tata Communications said in its latest annual report it had paid 922.4 million rupees (R148 million) for an extra 2.5 percent stake in Neotel, which would value it at about R5.9 billion and bring Tata's stake to 67.32 percent.

Neotel's other two shareholders are CommuniTel, a partnership that includes Telecom Namibia, and a black empowerment shareholder, Nexus Connexion, according to Neotel's website.

Neotel said CommuniTel holds 12.5 percent. That would put Nexus' stake at 20.18 percent, according to Reuters calculations.

Neotel posted a 17.7 percent annual rise in quarterly revenue to R812 million in the three months to June. Tata, in comparison, has posted losses in four straight years to March 2013.

Africa's biggest telecoms operator MTN said last month that talks to acquire a Neotel stake had fallen through.

Vodacom shares finished down 1.2 percent at R124.45 compared with a 0.8 percent decline by The JSE's benchmark Top-40 index.