Vodacom acquires Neotel for R7 billion
Vodacom says it has reached an agreement to acquire 100% of the issued share capital in, and shareholder loans against Neotel for a total cash consideration of R7 billion.
Vodacom said it sees a significant opportunity to accelerate growth in unified communications products and services by integrating its extensive distribution and marketing capabilities with Neotel’s fixed network and product capabilities.
Vodacom estimates revenue synergies with a total net present value of approximately R900 million, after integration costs.
“The combination of Neotel’s and Vodacom’s networks will improve overall network availability and reduce the cost to serve customers,” Vodacom said.
“The combined business will also be ideally positioned to accelerate broadband connectivity in line with the South African Government’s broadband targets, enabling Vodacom to take a leading position in the fibre-to-the-home and fibre-to-the-enterprise segments of the market,” it added.
The combined entity will also be able to use the radio spectrum currently assigned to Neotel more effectively.
“This spectrum will enable Vodacom to accelerate the roll-out of LTE (4G) services, providing high speed, high quality wireless connectivity to a greater proportion of the South African population,” Vodacom said.
Vodacom said it expects to achieve substantial cost and capex synergies with an annual run-rate of approximately R300 million before integration costs in the full fifth year, post completion, equivalent to a net present value of approximately R1.5 billion after integration costs.
These savings will primarily be derived from the joint utilisation of Neotel’s extensive fibre network and the elimination of overlapping elements, joint procurement and the combination of overlapping administrative functions, the operator said.
“Vodacom looks forward to welcoming Neotel’s employees. Their fixed and enterprise skills will enable the combined entity to deliver enhanced and extended service offers,” the group said.
Vodacom will fund the acquisition through available cash resources and existing credit facilities.
The transaction remains subject to the fulfilment of a number of conditions precedent including applicable regulatory approvals and is expected to close before the end of the financial year.
Speaking about the transaction, Vodacom Group CEO Shameel Joosub said: “Through the combination of these two businesses, the provision of a wider range of business services and much needed consumer services like fibre-to-the-business and fibre-to-the-home becomes a concrete reality – it will be good for the consumer, good for business and good for the country.
“And for our investors, the transaction fits perfectly within the priorities of Vodacom’s growth strategy focused on continuing our investment in data and our Enterprise business.”
More on Neotel and Vodacom
Vodacom Neotel deal valued at $460 million
Vodacom-Neotel details “weeks away”
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