What happens to Vodacom if its bid to buy Neotel is blocked?

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If South Africa’s Competition Tribunal does not give the go-ahead for Vodacom to buy Neotel, the country’s biggest mobile phone operator still has an ace up its sleeve. By Gugu Lourie


The tribunal is set to hear Vodacom’s application for the acquisition of Neotel between 23 November 2015 and 11 December 2015.

The proposed R7 billion transaction has already been approved by the country’s communications watchdog, ICASA.

However, the deal is being opposed by rivals Telkom, MTN and Cell C.

ICASA’s decision to approve the proposed transaction has also been taken on review in the High Court by Telkom, MTN, Cell C and Dimension Data.

Vodacom, which is owned by British mobile phone giant Vodafone, is keen to see the deal being finalised by 11 December so that it can aggressively roll out its fibre-to-the-home (FTTH) and fibre-to-the-business (FTTB) services.

But what happens if the deal is blocked by the Competition Tribunal or the courts.

Shameel Joosub, Vodacom CEO
Shameel Joosub, Vodacom CEO

Unfazed Vodacom Group CEO Shameel Joosub tells TechFinancials.co.za there is another option.

“Effectively, the money we will spend on Neotel we would then spend it on building a credible fibre business.”

Vodacom is ready to pay R7 billion to acquire Neotel and that’s the amount of cash that Vodacom would use to build a credible fibre business if the deal is blocked.

When asked if Vodacom is banking too much on Neotel, Joosub said: “We have put a lot into it (Neotel) to be fair, but we are hopeful that people will see what the Neotel deal will bring to South Africa.”

Joosub is on record as saying that combining the two companies would enable Vodacom to focus on getting fibre connections to more homes and businesses.

The end result will be an acceleration of the roll-out of “fibre to the home” and “fibre to the business” solutions.

That said what happens to Neotel if Vodacom deal is scrapped?

Market talk suggested as early as 18 December 2014 that Neotel was in the process of preparing to build its own mobile arm if the Vodacom deal collapsed.

Launched in 2006 to compete with Telkom, Neotel owns a lucrative 800MHz spectrum, which is at the heart of concerns raised about the pending Vodacom-Neotel deal.

In the meantime, Joosub told Business Day newspaper that Vodacom will seek certain guarantees and securities from Tata Communications to cover any potential liabilities that may arise from its acquisition of Neotel following fraud allegations at the fixed-line company.

The Mail & Guardian reported in July that Neotel paid R66m — allegedly in kickbacks — from April last year to February this year to a company called Homix to secure a R1.8bn contract to provide network-related services to Transnet.

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