Vodacom, Neotel deal hits a snag: report

A decision on whether to allocate Vodacom with Neotel’s valuable spectrum is holding up a R5 billion merger deal between the two telecoms companies.

This is according to a report in the Economic Times, which reported that the spectrum is critical to the deal proceeding, citing three people familiar with developments.

The India-based paper said that the Independent Communications Authority of South Africa (Icasa) may strip Neotel of its spectrum should the deal proceed, citing one of the people with knowledge of the deal.

Mobile operator, Vodacom and fixed-line business, Neotel entered into exclusive discussions regarding a potential acquisition of 100% of the shares of Neotel by Vodacom, in September last year.

In October, Bloomberg reported that Vodacom’s proposed takeover of Tata Communications’ South Africa unit would include up to $500 million (R5.3 billion) of debt, citing two people familiar with the negotiations.

“The deal could be valued as high as 10 billion rand ($994 million),” a source told Bloomberg.

The Economic Times said that spectrum is the last remaining hurdle preventing a deal from going through, with other elements tied up in December already.

Neotel has access to 10 MHz of spectrum in the 800 MHz band, which is coveted by other operators as it is suited to the provision of Long Term Evolution (LTE) services.

The Indian paper said that a top executive at one of South Africa’s large operators voiced concern over whether Neotel will be able to transfer spectrum under current rules.

In March, Sifiso Dabengwa, group chief executive and president of MTN, objected to the idea of a transfer of spectrum between the two firms. “Its not acceptable as far as we understand,” Dabengwa said, speaking at the company’s results presentation.

“What is the rule or law that must be followed,” Dabengwa asked, adding: “For us to get in the way to block it is not the right way to do it. “

He said, however, that there should be a law around the transfer of spectrum.

The Economic Times reported that the law around the transfer of spectrum is ambiguous. Icasa is said to be “concerned” and “wary” of any consolidation.

In February, Neotel CEO Sunil Joshi said that information on whether the planned deal between Vodacom and Neotel will happen would be forthcoming within weeks.

According to The Economic Times, Tata Group, which has a 67% stake in Neotel, and Icasa didn’t respond to emails seeking comment. Vodafone also declined to comment.

More on Neotel and Vodacom

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Vodacom-Neotel details “weeks away”

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Vodacom, Neotel deal hits a snag: report