Vodacom Walks Away From A R7bn Neotel Deal

Vodacom officially dropped its R7 billion bid for Neotel on Tuesday following the Pretoria High Court’s ruling that Icasa’s approval of the transfer of Neotel’s operating and spectrum licences to Vodacom be set aside in its entirety. By Gugu Lourie

Techcentral reported on Monday that Icasa met secretly and unlawfully with Vodacom to discuss the operator’s proposed R7bn acquisition of Neotel, leading to a “reasonable suspicion of bias” against the communications regulator, the high court in Pretoria has found.

The end to the 22-month quest to combine South Africa’s biggest mobile phone operator with the country’s second biggest fixed-line telephone operator came after the high court pronouncement that signaled the end of the deal.

On Tuesday, Vodacom informed investors that the agreement with Neotel to buy fixed line business has lapsed due to regulatory complexities in concluding the transaction as well as ceratin conditions not being fulfilled.

“The parties have agreed that the proposed restructured transaction can no longer be progressed,” Vodacom said in a statement.

In May 2014, Vodacom first announced its bid to combine its assets and skills with Neotel to accelerate the rollout of fibre-based services to customers and acquire, inter alia, Neotel’s licences and spectrum

The mobile phone operator, which is majority owned by British mobile giant Vodafone, advised investors that the telco will continue to invest in the development of its own high-speed communications infrastructure to stimulate greater competition in the fixed telecommunications and support both its business services and its consumer business.

“It is disappointing that we have reached this conclusion despite all our efforts to find a way to deal with the complexities of the restructured transaction. Our ambition to increase the rollout of fibre-based broadband services to customers remains. We will continue to look for spectrum opportunities, as well as opportunities to accelerate our fixed line business,” says Shameel Joosub, Group CEO of Vodacom.

In December, Vodacom revised its deal with Neotel after reviewing the merger and giving up on getting its hands on the lucrative spectrum owned by the fixed-line telephone group.

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.

Vodacom was keen to see the deal being finalised so that it can aggressively roll out its fibre-to-the-home (FTTH) and fibre-to-the-business (FTTB) services.