Johannesburg
– 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
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.”