Vodacom Walks Away From Neotel Spectrum

Vodacom South Africa announced on Tuesday that it has revised its deal with Neotel after reviewing the R7 billion merger and giving up on getting its hands on the lucrative spectrum owned by the fixed-line telephone group. By Gugu Lourie

Last month, Vodacom informed investors that it was in discussions with Neotel and its shareholders Tata Communications to explore a revised transaction structure.

The move by Vodacom to push for a revised transaction structure comes after Neotel placed its CEO Sunil Joshi and chief financial officer Steven Whiley on special leave in July amid an investigation into bribery.

Under the new deal structure, Vodacom will buy the majority of Neotel’s assets related to its fixed line business as a going concern, excluding, Neotel’s licenses (spectrum, ECN, ECNS).

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.

The initial proposed transaction was 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.

Furthermore, Vodacom and Neotel annopunced on Tuesday that Neotel will offer a roaming arrangement to all the mobile network operators including Vodacom South Africa.

The parties have submitted to the Competition Tribunal the signed revised transaction documentation. A pre-hearing has been set down for the 10th December 2015 to consider the revised terms of the deal.

In the meantime, Joshi has resigned as the boss of Neotel after an investigation by the board of the company cleared him of bribery. Whiley also stepped down late last month after the Neotel board’s investigation also found him to have “acted with integrity”.

Neotel stands accused of making illicit payments of R91m in fees to a ‘letterbox company’ company called ‘Homix’, according to a report from newspaper The Mail & Guardian earlier this year.

Neotel is accused of making these payments to win a R1.8bn telecoms services contract from transport parastatal Transnet. Homix is accused of receiving the payments while not producing any work and it has untraceable directors and no clear office space.