Tata Communications (formerly VSNL) is expected to get regulatory approval soon to acquire 30% in South Africa’s second-biggest fixed-line phone operator Neotel.
JOHANNESBURG: Tata Communications (formerly VSNL) is expected to get regulatory approval soon to acquire 30% in South Africa’s second-biggest fixed-line phone operator Neotel.
The stake will be bought from Telkom and state-owned electricity firm Eskom.
The Tata group already has a 26% stake in the company. The company has also secured 7.5 billion rands ($741 million) in funding through debt instruments for expansion.
Clearly buoyed by the aggressive rollout that has seen Neotel tear up footpaths across the entire city in recent months to install wireless communications cables, a consortium of financiers on Wednesday inked funding agreements with Neotel following two years of discussion.
Neotel, the second-biggest fixed-line phone operator in South Africa, has promised to install a telephone within 48 hours of application.
The funding consists of new equity and debt. The 4.4 billion rands ($435 million) in debt facilities were arranged by Nedbank Capital, Investec and Development Bank of Southern Africa.
Neotel shareholders, including Tata, will contribute the 3.1 billion rands ($305 million) in equity, proportional to their interests in the group.
Ajay Panday, chief executive of Neotel, said at the signing the company plans to invest between $148-$198 million (1.5-2 billion rands) within the next two years on its network.
Provisional finance of two billion rands had already been deployed in infrastructure provision since 2006. Panday said Neotel had been aggressively rolling out its new generation converged network across the country to provide business services.
“We have also launched our consumer services this year to finally give South African consumers not only a choice, (but also an opportunity) to see real value,” Panday said.
Mukul Sharma, head of Neotel’s business consumer unit, said there had been more than 25,000 requests since the service was launched but these could not all be provided “because we are still rolling out our networks”.
“When we started operations in March, we only had 25 base stations. We now have about 100 and by March 2009, we should have 200,” Sharma added.
Neotel expects to have the four main cities of South Africa —- Johannesburg, Pretoria, Cape Town and Durban - fully covered by the end of next year. In a faltering economic climate, the huge confidence by lenders in Neotel was seen by analysts here as a very encouraging move.
Mike Peo, head of infrastructure project financing at Nedbank Capital, said confidence in Neotel’s offering and the strength of its shareholders had allowed the company to secure so much funding under current market conditions.
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