Vodacom in talks to buy Tata’s stake in South Africa’s Neotel for $500 mn

South Africa's largest wireless carrier, Vodacom Group, is in talks to buy Tata Communications' controlling stake in Neotel for more than 5 billion rands ($500 million), Bloomberg today reported, citing a person familiar with the matter.

Johannesburg-based Vodacom, a subsidiary of Vodafone Group is set to enter exclusive negotiations to acquire Neotel, the report added.

Located in Woodmead, the business suburb of Johannesburg, Neotel is South Africa's second-largest fixed line operator providing a range of value-added services for businesses, wholesale network operators and consumers using its next generation network powered by high performance fibre optic cables.

Neotel connects all major centres in South Africa and links the country into Tata Communication's global network.

The company started its business operation by the end of 2007 and consumer services in 2008.

Neotel was the combined telecom initiative of the Tata Group through Tata Africa and its subsidiary VSNL holding a 36-per cent stake, Telecom Namibia through Communitel, two consortium comprising various South African companies involved in the telecom and ICT sector, the Black Economic Empowerment shareholder Nexus Connexion, and the telecommunications arms of state-owned enterprises Transnet and Eskom, held the rest.

In 2009, Tata Communications became a controlling shareholder in Neotel when it acquired the 30-per cent stake previously held by Eskom and Transnet, taking its shareholding in the company to 66 per cent

It purchased an additional 2.5 per cent in Neotel, in 2011 for $14.9 million, taking its total shareholding in the company to 68.5 per cent. Other stakeholders in the company are Nexus Connection with 19 per cent and Communitel with 12.5 per cent.