Vodacom targets more fixed line business with Neotel acquisition

Vodacom, South Africa’s biggest mobile operator, has acquired fixed line operator Neotel at a cost of $675.6 million.

The company said in a statement that after eight months of negotiations, an agreement has been reached in which Vodacom will acquire 100 per cent shareholding in Neotel for a total cash consideration equivalent to an enterprise value of R7 billion ($675.6 million).

With the acquisition, Neotel will now become a subsidiary of Vodacom, something that should result in the creation of a national service provider with annual revenues of more than $482.5 million when combined with Vodacom’s South African fixed enterprise business.

“Through the combination of these two businesses, the provision of a wider range of business services and much needed consumer services like fibre-to-the-business and fibre-to-the-home becomes a concrete reality,” said Vodacom Group CEO Shameel Joosub.

He added the transaction fits perfectly within the priorities of Vodacom’s growth strategy focused on continuing its investment in data and enterprise business.

Neotel, which started operations in 2007, is the second largest provider of fixed telecommunications services for both businesses and consumers in South Africa.

The company has access to over 15,000 km of fibre-optic cable, including 8,000 km of metro fibre in Johannesburg, Cape Town and Durban. Neotel also has access to 12 MHz of space in the 1 800 MHz spectrum range, two units – each of five MHz – in the 800 MHz range, and two blocks of frequency in 3.5 GHz.

According to the statement, the combination of the two networks will improve overall network availability and reduce the cost to serve customers.

The combined business will also be ideally positioned to accelerate broadband connectivity in line with the South African government’s broadband targets, enabling Vodacom to take a leading position in the fibre to the home and fibre to the enterprise segments of the market.

The acquisition is bound to tighten Vodacom’s grip on South Africa’s telecoms market and will definitely intensify competition for fix line business. In effect, this could ignite counter strategies from competitors as they seek to protect their market.

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