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Dec 10, 2008

Neotel secures R7,5bn to fund infrastructure roll-out

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Neotel CEO Ajay Pandey explains the importance of its funding deal with a consortium of financial institutions
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South Africa's second fixed-line operator Neotel was now assured that its infrastructure roll-out would not be constrained by a lack of funding, after having raised R4,4-billion in debt, CEO Ajay Pandey announced on Wednesday.

A consortium of financial institutions, comprising Nedbank Capital, Investec Bank, the Development Bank of Southern Africa, the Industrial Development Corporation and the Infrastructure Finance Corporation, would provide the funding.

Combined with R3,1-billion in equity raised by its shareholders, Neotel had R7,5-billion funding in total, which was its peak funding requirement.

The operator planned to spend between R10-billion and R11-billion on its infrastructure roll-out, with generated revenues expected to provide the balance of the funding.

Pandey said that the deal it had signed with the consortium was significant, given the current market turbulence and the difficulty companies had in raising capital.

He noted that this was a clear indication that the financial institutions in South Africa had confidence in the telecommunications industry.

Nedbank Capital head of infrastructure project finance Mike Peo agreed that the telecommunications sector was one of the key sectors the bank needed to be in.

Meanwhile, Neotel had already spent about R2-billion on its infrastructure roll-out and would be spending from another R1,5-billion to R2-billion in the next three years, said Pandey.

He noted that Neotel had, so far, gained entry into the wholesale, enterprise and the consumer markets.

Pandey said the uptake of its products and services by the enterprise market had been good, with plenty of new clients, as well as repeat business.

Further, he said that while its entry to the consumer market was still limited, the response from the marketplace had been "phenomenal".

Neotel had only been providing its products and services to the consumer market for about six months and planned to grow its market share further.

"We are definitely making substantial progress," commented Pandey, adding that the price and value for both enterprise customers and consumers should make for an attractive offering, especially with the slowdown in the economy.

This would allow Neotel to increase its market share, despite the tough economic conditions.

 

Edited by: Mariaan Webb
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