{"id":47085,"date":"2013-10-03T22:57:06","date_gmt":"2013-10-03T20:57:06","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=47085"},"modified":"2013-10-04T09:15:02","modified_gmt":"2013-10-04T07:15:02","slug":"why-regulators-should-approve-the-vodacomneotel-deal","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/telecommunications\/47085\/why-regulators-should-approve-the-vodacomneotel-deal\/","title":{"rendered":"Why regulators should approve the Vodacom\/Neotel deal"},"content":{"rendered":"

Regulators would be likely to approve a 10\u00a0billion\u00a0rand\u00a0deal between Vodacom<\/a> and Neotel<\/a>, according analyst who says that it would foster competition for Telkom<\/a> in the fixed space.<\/p>\n

The\u00a0operators confirmed on Monday (30 September)\u00a0that they have entered into exclusive discussions regarding a potential acquisition of 100% of the shares of Neotel by Vodacom SA.<\/p>\n

Bloomberg reported that\u00a0Vodacom\u2019s proposed\u00a0takeover of Tata Communications<\/a>\u2019 South Africa unit would\u00a0include up to $500 million (R5 billion) of debt, citing\u00a0two people familiar with the negotiations.<\/p>\n

\u201cThe\u00a0deal\u00a0could\u00a0be\u00a0valued\u00a0as\u00a0high\u00a0as\u00a010\u00a0billion\u00a0rand\u00a0($994\u00a0million),\u201d Bloomberg said, citing a source.<\/p>\n

An analyst at PSG Konsult<\/a> said the proposed deal is an exciting one, and depending on the price of the deal, he recommends it a buy for clients. He said that quite a large premium would be justified given Neotel’s infrastructure and access to spectrum.<\/p>\n

“Its strange, Vodacom unbundled from Telkom only a few years ago, and if this deal goes through, it will be in direct competition.”<\/p>\n

Regulatory approval<\/strong><\/p>\n

He said that regulators should approve the deal as it brings more competition into the fixed line space. “If anything, regulators should encourage the deal,” the analyst said.<\/p>\n

“The purchase could result in innovative new solutions available in the market and Vodacom could benefit in a number of ways,” said\u00a0Ian Duvenage<\/a>, ICT Business Unit Leader at Frost & Sullivan<\/a>.<\/p>\n

“Firstly, Neotel already has fixed infrastructure in the ground, fibre to various business locations, as well as routes between Johannesburg, Durban and Cape Town.<\/p>\n

“Secondly, the call rate interconnect charges, and a potential focus on rates between the two, could be an interesting space to watch as they have the ability to do more with the shared infrastructure.”<\/p>\n

“And lastly, Neotel already have a Fixed-Mobile-Converged solution in place, which Vodacom could look to build and improve on,”\u00a0Duvenage said.<\/p>\n

Opposition to the deal<\/strong><\/p>\n

The Wireless Access Providers\u2019 Association (WAPA<\/a>) however, registered strong opposition to Vodacom\u2019s planned acquisition of Neotel and said it was watching developments carefully before formulating a formal response.<\/p>\n

WAPA said that the acquisition would stifle competition, lead to job cuts, and do little to reduce the digital divide that it believes should be the country\u2019s top priority with regard to broadband.<\/p>\n

WAPA said it was seeing an increase in membership exceeding 25% per year, as smaller operators seize the gap created in the broadband market, particularly with respect to last-mile access. This is in line with international trends, where considerably more data is now carried on so-called WiFi-based technologies than on 3G and LTE.<\/p>\n

\u201cWAPA\u2019s concern is that Vodacom\u2019s influence will dampen these gains achieved, severely limit open wholesale access and set back \u00a0rather than increase competition and consumer choice,\u201d said\u00a0Christopher Geerdts<\/a>, Chairperson of WAPA.<\/p>\n

Fibre the the home<\/strong><\/p>\n

Vodacom Group CEO\u00a0Shameel Joosub<\/a>\u00a0said:\u00a0\u201cIf the deal is implemented, Vodacom intends to put significant investment into the combined entity to provide high-speed fixed connectivity to many more businesses and consumers.\u201d<\/p>\n

\u201cBy further building on the capabilities within Neotel, we would also aim to develop entirely new services such as fibre to the home and business. Neotel has access to over 15,000km of fibre-optic cable, including 8,000km of metro fibre in Johannesburg, Cape Town and Durban,\u201d he said.<\/p>\n

\u201cSpectrum is also an important consideration as the combined entity could use this resource more efficiently, and in doing this we can keep pace with South Africa\u2019s rapidly growing demand for mobile data. This transaction is all about providing greater choice and better infrastructure for South Africa\u2019s businesses and consumers,\u201d the CEO said.<\/p>\n

Shares in Vodacom have climbed from an intraday worst level of\u00a0R123.11\u00a0on the JSE on Monday, to R127.71 in the afternoon session on Thursday (3 October), giving it a market valuation of R190.03 billion.<\/p>\n

Shares in Tata Communications meanwhile, climbed more than 4% on Thursday, adding to Wednesday’s gains of\u00a07.65%.<\/p>\n

Neotel\u2019s current shareholders are\u00a0Tata Communications\u00a0(68.5%), Nexus Connection (19%) and Communitel (12.5%).<\/p>\n

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

Neotel, Vodacom a R10 billion deal?<\/strong><\/a><\/p>\n

Vodacom, Neotel confirm talks<\/strong><\/a><\/p>\n

Neotel reaches earnings milestone<\/strong><\/a><\/p>\n

Vodacom, Neotel deal pegged at R5 billion: report<\/strong><\/a><\/p>\n

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

Why buy Neotel?<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Regulators would be likely to approve a deal between Vodacom and Neotel, according analyst who says that it would foster competition for Telkom in the fixed space.<\/p>\n","protected":false},"author":9,"featured_media":43700,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[59,26,3631,261,1310,3403,2570,27,1846],"class_list":["post-47085","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-telecommunications","tag-frost-sullivan","tag-headline","tag-ian-duvenage","tag-neotel","tag-psg-konsult","tag-shameel-joosub","tag-tata-communications","tag-vodacom","tag-wapa"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/47085","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\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=47085"}],"version-history":[{"count":10,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/47085\/revisions"}],"predecessor-version":[{"id":47138,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/47085\/revisions\/47138"}],"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=47085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=47085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=47085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}