{"id":44644,"date":"2013-08-22T23:12:10","date_gmt":"2013-08-22T21:12:10","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=44644"},"modified":"2013-08-23T08:14:55","modified_gmt":"2013-08-23T06:14:55","slug":"analysts-weigh-in-on-neotel-vodacom-deal","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/telecommunications\/44644\/analysts-weigh-in-on-neotel-vodacom-deal\/","title":{"rendered":"Analysts weigh up Neotel Vodacom deal"},"content":{"rendered":"

With\u00a0Vodacom<\/a>\u00a0rumoured to be in advanced discussions to acquire\u00a0Neotel<\/a>, analyst Dobek Pater weighs up the merits of such deal.<\/p>\n

Earlier in August,\u00a0MTN<\/a>, which said it was part of a discussion\u00a0process\u00a0with Neotel,\u00a0appeared to withdraw from a\u00a0potential\u00a0bid\u00a0after its president and CEO,\u00a0Sifiso Dabengwa<\/a>,\u00a0said the group was not currently in acquisition talks.<\/p>\n

And while rumours of\u00a0Dimension Data’s involvement in discussions with Neotel have also quietened down, sources close to Vodacom’s\u00a0negotiating process claim that the group is currently performing due diligence on the fixed line operator.<\/p>\n

According to Pater, director and analyst at Africa Analysis, the\u00a0potential sale of Neotel appears rather odd.<\/p>\n

“If it is Tata intending to sell its majority stake, the only reason I can think of would be to cut their losses, based on the initial acquisition price and subsequent investment in the network, as it does not believe that Neotel will be a net profitable operation for them any time soon and it is not as critical to them as they may have initially thought.”<\/p>\n

Tata Communications Group, which has a\u00a067.32% shareholding in Neotel, recently noted that, at\u00a0the end of June 2013, Neotel’s net debt amounted to\u00a0R4.91 billion.<\/p>\n

The India based operator said in its most recent results\u00a0presentation: “Neotel continues to show very strong performance in a tough South African market.” It cited a 17.7% lift in revenue, adding that Neotel had been ebitda positive since Q2 2012, and had turned earnings before interest and taxes positive in its most recent results.<\/p>\n

When questioned about a potential sale of Neotel, Tata said: “It is not our company policy to comment on market rumour and speculation.”<\/p>\n

“I would have thought that if Tata has ‘an Africa strategy’, wanting to compete in Africa with other major global carriers and pan-African service provider to provide services to multi-national corporations, it would want to use Neotel as a vehicle to achieve that,” Pater said.<\/p>\n

“But perhaps it does not see Neotel as being \u2018useful\u2019 beyond SA and neighbouring countries, and it would rather engage with a variety of service providers to develop partnerships, rather than continue investing in infrastructure in Africa,” the analyst opined.<\/p>\n

Ian Duvenage<\/a>, ICT consulting manager at\u00a0Frost & Sullivan<\/a>, pointed out that the\u00a0upside to Vodacom is that it would be able to offer the full range of fixed\/mobile converged services, where it is currently reliant on\u00a0Telkom<\/a>\u00a0for the fixed portion in most cases.<\/p>\n

\u201cThe business and corporate offerings available to their client base would, therefore, be strengthened,\u201d he said.<\/p>\n

\u201cThe connection between Neotel and\u00a0Tata Communications<\/a>\u00a0could also be leveraged and cost efficiencies explored through the undersea cables,\u201d Duvenage said.<\/p>\n

Earlier this week,\u00a0Neotel announced the launch of its uncapped and unshaped Long Term Evolution (LTE) service, while the group also has access to valuable spectrum.<\/p>\n

Vodacom<\/strong><\/p>\n

Vodacom CEO\u00a0Shameel Joosub <\/a>recently\u00a0shed light on why\u00a0he may be looking to buy Neotel.<\/p>\n

Speaking on CNBC Africa, he said that he sees enterprise services as one of the biggest growth opportunities in South Africa.<\/p>\n

\u201cThere is a big opportunity [for Vodacom] to capture more of the fixed [telecoms] space,\u201d said Joosub.<\/p>\n

Neotel performance<\/h3>\n

In May, Neotel CEO,\u00a0Sunil\u00a0Joshi<\/a>\u00a0said that the group had trenched 8,000 kilometres of its own metro fibre, reaching 4,200 companies, having invested R500 million in capex in FY2013 – adding to its total of R5 billion in infrastructure since inception.<\/p>\n

Joshi said that the group had achieved its first operating profit since it launched in the country in 2006.<\/p>\n

More on Neotel and Vodacom<\/h3>\n

Vodacom CEO\u2019s strategy explains Neotel acquisition plans<\/strong><\/a><\/p>\n

Why buy Neotel?<\/strong><\/a><\/p>\n

Vodacom last man standing in Neotel acquisition?<\/strong><\/a><\/p>\n

Why buy Neotel?<\/strong><\/a><\/p>\n

Vodacom tight-lipped over Neotel rumour<\/strong><\/a><\/p>\n

Vodacom, MTN courting Neotel purchase<\/strong><\/a><\/p>\n

Vodacom closer to Neotel purchase: sources<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

With Vodacom rumoured to be in advanced discussions to acquire Neotel, analyst, Dobek Pater weighs up the merits of such deal.<\/p>\n","protected":false},"author":10,"featured_media":43700,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[6520,94,26,28,261,3403,1890,2051,27],"class_list":["post-44644","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-telecommunications","tag-africa-analysis","tag-dimension-data","tag-headline","tag-mtn","tag-neotel","tag-shameel-joosub","tag-sifiso-dabengwa","tag-tata","tag-vodacom"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/44644","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=44644"}],"version-history":[{"count":15,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/44644\/revisions"}],"predecessor-version":[{"id":44659,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/44644\/revisions\/44659"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/43700"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=44644"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=44644"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=44644"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}