Neotel, Vodacom a R10 billion deal?
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.
The operators confirmed on Monday (30 September) that they have entered into exclusive discussions regarding a potential acquisition of 100% of the shares of Neotel by Vodacom SA, ending months of speculation.
Bloomberg reported on Tuesday (1 October) that Vodacom’s proposed takeover of Tata Communications’ South Africa unit would include up to $500 million (R5 billion) of debt, citing two people familiar with the negotiations.
“The deal could be valued as high as 10 billion
The media firm noted that Neotel’s parent company, Tata Communication acquired a 2.5% stake in the operator last year, valued at R149 million (US$14.9 million), thus taking its total share in Neotel to 68.5%, and valuing the company at R5.9 billion (US$596 million).
“Excluding the wholesale carrier business, a Neotel deal would triple the size of Vodafone’s enterprise business in South Africa,” telecommunications analysts at the Lisbon-based brokerage Espirito Santo said in a research note. “We expect similar deals to boost Vodafone’s fixed-line capability and also a continued push into enterprise fixed and mobile services globally.”
In May, Neotel CEO, Sunil Joshi announced that the group had achieved its first operating profit since it launched in the country in 2006.
Joshi said that the group had turned earnings before interest and taxes positive for the year ended March 2013, having first reported its ebitda positive status in 2012.
UBS AG analyst Chris Grundberg, told Bloomberg that the price hinges on regulators approving the deal.
“Would Vodacom be able to keep/use Neotel’s spectrum, particularly under the Vodacom brand?” Grundberg said in a note to clients.
“What would be the regulatory/competition commission view of Vodacom buying a supplier to both MTN Group and Cell C?”
Shares in Vodacom climbed 1.6% to R126.40 rand at close of play on the JSE, giving the company a market cap of R188.1 billion.
More on Neotel and Vodacom
Neotel reaches earnings milestone
Vodacom, Neotel deal pegged at R5 billion: report
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