Photo by: Bloomberg
JSE-listed telecommunications group Vodacom on Monday concluded an agreement for the 100% buy-out of converged communications network operator Neotel for R7-billion.
The India-based Tata Communications subsidiary and its employees would now be absorbed into Vodacom’s fixed enterprise business, with the new combined subsidiary delivering yearly revenues of more than R5-billion.
“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 Vodacom group CEO Shameel Joosub in a statement.
The transaction, which was expected to be concluded by year-end, would accelerate Vodacom’s unified communications strategy as the group integrated its extensive distribution and marketing capabilities with Neotel’s fixed network and product capabilities.
Neotel, which started operations in 2007, currently had access to over 15 000 km of fibre-optic cable nationwide, including 8 000 km of metropolitan fibre in Johannesburg, Cape Town and Durban.
Neotel’s extensive network would also give South Africa’s largest mobile operator the fibre infrastructure scale required to meet government’s ambitions of delivering "broadband for all" by 2020.
Further, the combined entity would be able to leverage Neotel’s assigned spectrum of 2 X 12 MHz of 1800 MHz, 2 X 5 MHz of 800 MHz and 2 X 28 MHz of 3.5 GHz spectrum.
“This spectrum will enable Vodacom to accelerate the roll-out of long-term evolution (LTE) services, providing high-speed, high-quality wireless connectivity to a greater proportion of the South African population,” Joosub explained.
In 2012, Vodacom became the first mobile operator to launch LTE commercial services, with the group now boasting 916 LTE-enabled sites across South Africa.
“Vodacom expects to achieve substantial cost and capital expenditure synergies with a yearly run-rate of about R300-million before integration costs in the full fifth year post completion – equivalent to a net present value of about R1.5-billion after integration costs,” Joosub commented.
He explained that the savings would be obtained by merging overlapping administrative functions, joint procurement and the joint use of the fibre network, and eliminating overlapping elements.
The deal remained subject to conditions precedent, including applicable regulatory approvals.