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South Africa’s second national operator on Friday officially joined the Econet group – through its Liquid Telecom subsidiary – as a R6.55 billion deal was wrapped up.
The deal, announced last June, marked the second time Neotel – initially set up as a competitor to SA’s Telkom when the market was liberalised – had been a takeover target.
It is now set to be recapitalised so it can compete more effectively.
Liquid Telecom CEO Nic Rudnick says: “Today is an important new chapter for Neotel. The refinancing of the company’s balance sheet will see a revitalised Neotel enter the market with the ability to offer consumers and businesses greater quality services and products delivered through world-class networks.”
A previous bid, by Vodacom, failed when SA’s largest operator withdrew its offer.
Vodacom dropped its bid last March after it lapsed, almost a year after the Competition Commission gave it provisional approval to buy the operator. In December 2015, the two companies had amended the terms of the deal so that it excluded permits for spectrum and electronic-communications network services and was more limited to the fixed-line assets.
This was after Vodacom’s bid drew fierce criticism from competitors, who argued it would give Vodacom a spectrum edge.
Neotel was established as SA’s second national operator in 2006 as a way of breaking Telkom’s monopoly. However, analysts have previously pointed out that it failed to gain much traction in the consumer market, and has been burdened by debt.
Read also: Second time the charm for Neotel?
The deal is a discount to the R7 billion Vodacom put on the table for Neotel more than two years ago as it sought to expand its fibre ambitions.
In a statement, Liquid Telecom says the finalisation of its bid marks “a new era of investment in Neotel’s network and services across South Africa”.
At the time the bid was announced, it said the combination of Liquid Telecom and Neotel is set to create the largest pan-African broadband network. “Through a single access point, businesses across Africa will be able to access 40 000kms of cross-border, metro and access fibre networks. These currently span 12 countries from South Africa to Kenya, with further expansion planned.”
Royal Bafokeng Holdings, a South African investment group, has committed to take a 30 percent equity stake in Neotel, as it expands its holdings into telecoms.
In the Friday statement, Liquid Telecom says, through substantial new capital injection from Liquid Telecom, “a revitalised Neotel will emerge on the South African market with significantly enhanced service offerings for enterprises and consumers”.
“Over the coming months, Liquid Telecom plans to make extensive upgrades and expansions to Neotel’s network, delivering greater levels of high-speed connectivity to more customers across South Africa.”
Liquid adds it also plans to make substantial investment in Neotel’s data centre capabilities, which currently include two Tier 3 designed state-of-the-art data centres in Johannesburg and Cape Town.
“For the first time, Neotel’s operations and focus will also become pan-African. Its network in South Africa will link together with Liquid Telecom’s extensive fibre footprint to offer access via a single connection to over 40 000km of cross border, national and metro fibre networks. This will give Liquid Telecom unrivalled reach across Eastern, Central and Southern Africa.”
-iol.co.za
