Vodacom M&A on ice
Vodacom CEO Shameel Joosub says that there are no imminent merger and acquisition targets on the horizon outside of South Africa, with focus on a deal to purchase fixed line player, Neotel.
“We’ve been involved in a few processes. Some of these things are stop-start. Some of these things, you get what I call seller’s remorse…they decide to pull out after you have spent millions on it.
“M&A is never easy, and I think its quite time consuming. Neotel is taking a lot of time, let’s be honest,” the chief executive said.
Vodacom and the shareholders of Neotel confirmed on 30 September, that they had entered into exclusive discussions regarding a potential acquisition of 100% of the shares of Neotel by Vodacom SA.
Joosub said that it was difficult to put a time frame to a potential conclusion of the Neotel deal, however, Sunil Joshi, MD & CEO of Neotel said last month that a deal between the fixed line operator and Vodacom could be concluded in six months.
“I think the big part for us is to have avenues for growth, more so than just adding countries,” Joosub told BusinessTech.
Vodacom said that service revenue for its international operations improved 34.7% and EBITDA recorded growth of 39.2% for the six months ended September 2013.
When asked if there were any opportunities on the horizon, Joosub said: “Not imminently, no”.
Vodacom was believed to have expressed interest in expanding into Madagascar through an acquisition of Telecom Malagasy SA in mid-July.
Capital Investment
Vodacom said on Monday (11 November) that it aims to accelerate network investment in order to cater for projects including fibre to the home, and fibre to the business.
Joosub added that the capital investment would enable the group to capture further opportunities within those markets in which the group already has a presence.
“To cater for continued growth, we plan to accelerate network investment and we are currently in the process of determining the investment allocation per country.”
Neotel acquisition
A deal between Vodacom and Neotel could be valued at as much as R10 billion rand ($994 million) according to a report in Bloomberg, citing a person close to the negotiations.
In a Q2 FY14 Investor Fact Sheet, Neotel’s majority shareholder Tata Communications put Neotel’s net debt at R4.946 billion as at September 30, 2013, up from R4.918 billion in June 2013.
Gross debt amounted to R5,09 billion, from R5.1 billion before.
Joosub said that Vodacom would benefit from Project Spring – a programme initiated by its parent company, Vodafone, after it sold its stake in Verizon Wireless for $135 billion – aimed at establishing “further network and service leadership” through network upgrades and increased capacity.
In a conference call on Monday, Joosub said that Vodacom put together a programme of how it wanted to grow in South Africa, noting that Project Spring helped in getting those projects approved.
The CEO stressed that Vodafone had not provided Vodacom with a lump sum to fund the Neotel acquisition.
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