Vodacom agrees to acquire Neotel

Vodacom agrees to acquire Neotel

South Africa’s leading mobile operator Vodacom has agreed the 100 per cent acquisition of fixed line provider Neotel for ZAR7 billion (US$676.6 million), saying the deal will accelerate the rollout of broadband services in the country.

Neotel will become a subsidiary of Vodacom South Africa, with the companies saying the combined fixed line business will create a national service provider generating revenues in excess of ZAR5 billion (US$483.3 million) per year.

Vodacom also heralded the deal as enabling the acceleration of broadband services in South Africa in line with the government’s Broadband Policy targets, saying the acquisition will allow the operator to move forward quickly with fibre-to-the-enterprise and fibre-to-the-home rollouts.

“Through the combination of these two businesses, the provision of a wider range of business services and much needed consumer services like fibre-to-the-business and fibre-to-the-home becomes a concrete reality – it will be good for the consumer, good for business and good for the country,” said Shameel Joosub, chief executive officer (CEO) of Vodacom.

“And for our investors, the transaction fits perfectly within the priorities of Vodacom’s growth strategy focused on continuing our investment in data and our Enterprise business.”

Under the deal, Vodacom will acquire 100 per cent of issued share capital and shareholder loans against Neotel for ZAR7 billion (US$676.6 million), to be paid in cash and existing credit facilities.

The acquisition is expected to complete before the end of the financial year, subject to fulfillment of certain conditions such as obtaining the requisite regulatory approvals.

Vodacom said the combining of its existing network with that of Neotel – which includes access to over 15,000 kilometres (km) of fibre-optic cable, including 8,000km of metro fibre in Johannesburg, Cape Town and Durban – will achieve much improved network availability, and will reduce the costs of providing connectivity to customers.

Neotel also has access to 2 x 12 MHz of 1800 MHz spectrum, 2 x 5 MHz of 800 MHz spectrum and 2 x 28 MHz of 3.5 GHz spectrum, which Vodacom said will be used “more effectively” following the acquisition, citing plans to roll out LTE services.

“The combined entity will also be able to use the radio spectrum currently assigned to Neotel more effectively. This spectrum will enable Vodacom to accelerate the roll-out of LTE (commonly referred to as 4G) services, providing high speed, high quality wireless connectivity to a greater proportion of the South African population,” Vodacom said.

Vodacom said the acquisition will result in significant cost and capex savings, primarily due to the envisaged joint utilisation of Neotel’s fibre network, the elimination of overlapping elements, joint procurement and the combination of overlapping administrative functions.

Neotel’s staff is to join Vodacom under the combined entity.

HumanIPO reported in September last year Vodacom confirmed it had begun talks with Neotel regarding a potential acquisition, following months of rumours suggesting an imminent sale of the fixed line provider.

Image courtesy of Shutterstock.

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