Vodacom’s 100% stake in Neotel a competitive advantage

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Vodacom has upped the ante with its R7 billion acquisition of Neotel, South Africa’s second fixed-line telephone network provider. It is not yet clear what the transaction means for bigger rival Telkom, but experts said the purchase was indicative of ongoing consolidation in the industry.

The deal would undoubtedly assist Vodacom in gaining a competitive advantage over other telecoms players in the country, increasing its market share and revenues across various enterprise and individual customer segments, industry insiders said.

Lloyd Chater, a director at pan-African corporate law firm Bowman Gilfillan, which advised Tata Communications on the transaction, said in a statement: “South Africa’s telecommunications industry is in a state of flux. The market is maturing and the Vodacom and Neotel transaction is indicative of the trend towards greater levels of consolidation.

“We advised Tata Communications, which is selling its shareholding in Neotel to Vodacom, partly through a scheme of arrangement. Bowman Gilfillan has advised in relation to all aspects of the transaction, including capital market merger, telecommunications, corporate, financing and other aspects.”

In a statement, Vodacom said the move would ensure that Neotel became a subsidiary of Vodacom South Africa and that the combination with its fixed enterprise business would create a national service provider with annual revenues of more than R5bn.

As for what it means for employment, analysts said there were likely to be restrictions on retrenchments in the first few years as part of getting approval for the deal. Over the longer term there might be consolidation of functions which would provide an insight into how the economic benefits of the deal may be measured.

The combined company will be able to offer an enhanced range of converged services to enterprise customers. Vodacom argues that the deal will also improve network availability and reduce the cost to serve customers.

Brining levels

Maybe, just maybe, one could buy frozen chicken pieces according to one’s desired brine levels, just like consumers choose whether to buy low fat, fat free or full cream milk.

This is according to Astral Foods chief executive Chris Schutte, who insists his company supports the brining levels proposed by the Department of Agriculture, Forestry and Fisheries, although Astral wants the 15 percent levels debated.

Schutte says should the department impose this maximum brining level, then consumers may have to pay R4 more for a kilogram of chicken. “We are not against this intervention, we are in support of it but we want it to be opened for debate.”

He says the issue of brine should possibly be treated like milk, where consumers choose the percentage of fat in the product. “Why not have frozen portions that have zero brining, 5 percent or even 10 percent? Why don’t we let the consumer decide?”

Poultry producers are using brine levels of up to 30 percent in individually quick frozen (IQF) portions. They have reacted differently to the proposed 15 percent levels. Rainbow Chicken and Afgri agreed on this level, while no reaction has been received from Sovereign Foods.

Kevin Lovell, the chief executive of the SA Poultry Association, previously said the industry was united behind the position that brining regulations must be comprehensive and technically correct. However, there were fears that producers had invested sizable sums in brining machines.

Schutte said that although Astral had spent the past couple of months focusing on fresh chicken and value-added products, frozen portions were an important part of the business. “Astral’s broiler production performances improved for the period in line with our exposure to IQF portions decreasing by 2 percent and an increase in fresh sales.”

Edited by Banele Ginindza. Contributions from Ayanda Mdluli and Nompumelelo Magwaza.


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