24/01/2011 A generic pic of Neotel offices in Midrand Gauteng. (470) Photo: Leon Nicholas

Johannesburg - Vodacom, the wireless operator with the most South African customers, agreed to buy local Internet-provider Neotel from India’s Tata Communications to boost its data offering.

The 7 billion rand transaction will be funded through cash and existing credit facilities, Johannesburg-based Vodacom said in a statement today.

The deal is subject to regulatory approval and the companies will start working on that process immediately, Mumbai-based Tata said in a separate statement.

Vodacom is increasingly focused on small- to medium-sized business customers and expanding Internet and data services to offset declining revenue from its domestic voice division.

Neotel’s spectrum would help Vodacom add Internet users as it competes against South Africa’s biggest fixed-line operator Telkom and MTN, Africa’s biggest mobile-phone company.

“This is good news for competition in both the consumer and enterprise sectors,” Vodacom chief financial officer Ivan Dittrich told reporters on a conference call today.

“On the consumer side the combined entity will be a stronger fixed player and will be able to offer a wider range of services. It will also help us to accelerate the provision of services like fibre to the home.”


No Debt


Vodacom has been in exclusive talks with Tata over Neotel since September, and issues relating to the deal weren’t resolved until yesterday, chief executive Shameel Joosub said on the same call.

The company won’t have to take on Neotel’s debt as part of the acquisition, while the next step would be to gain clearance from the Independent Communications Authority of South Africa and the Competition Commission, Joosub said.

Vodacom shares fell as much as 1.7 percent and traded 1.5 percent lower at 127 rand as of 9:37 a.m. in Johannesburg, valuing the company at 189 billion rand.

The stock is down 4.6 percent this year.

Mobile operators around the world are turning to fixed-line assets that allow them to sell a wider range of services and carry data traffic more efficiently.

Vodacom’s parent, Newbury, England-based Vodafone, last year bid for Kabel Deutschland, a German fixed-line telephony, cable TV and Internet-access service provider.

Vodacom full-year net income increased 1.9 percent to 13.2 billion rand as data usage and a rise in international customer numbers offset a fall in domestic voice revenue, it also said today.

The company is expanding in markets such as Mozambique and Democratic Republic of Congo as the South African market becomes saturated.

In a separate deal, Paris-based Orange said it sold a majority stake in its Uganda unit to closely held Africell for an undisclosed amount.

Investment bank Rothschild advised Vodacom on the Neotel deal, while Standard Chartered worked with Tata. - Bloomberg News