Vodacom Said to Seek 50% Business Boost From Neotel

Vodacom Group Ltd.’s (VOD) proposed takeover of Tata Communications Ltd. (TCOM)’s South African unit will boost its revenue from business customers by about 50 percent, according to a person involved in the talks.

The acquisition of Neotel Pty Ltd. will accelerate a push for Vodacom Business, the corporate unit of the biggest provider of mobile phone services in South Africa, to contribute as much as 25 percent of the carrier’s South Africa service revenue by 2018, according to the person, who asked not to be identified because the talks are private.

In the year ended March 30 the unit accounted for 8 billion rand ($800 million), or 16 percent, of Vodacom’s total revenue. Acquiring Neotel from Mumbai-based Tata Communications will add 4 billion rand to sales, the person said.

Vodacom is in talks to buy Neotel for more than 5 billion rand, a person familiar with the discussions said on Sept. 27, declining to be identified because an announcement had not been made. The Johannesburg-based company confirmed the talks on Sept. 30 and two people familiar with the discussions said on Oct. 1 the acquisition will involve the assumption of about $500 million in debt.

Vodacom shares were down 1.1 percent at 125.81 rand as of 1:27 p.m. in Johannesburg, giving it a market value of 187.1 billion rand.

Neotel is valued at 5.6 billion rand to 9.9 billion rand because of its spectrum and market share of the small- to medium-business market, according to HSBC Global Research analyst Rajiv Sharma.

Deal Opposition

The proposed deal has been opposed by South Africa’s Wireless Access Providers’ Association, which said the acquisition would curb competition and lead to job cuts.

The takeover would “severely limit open wholesale access and set back rather than increase competition and consumer choice,” Christopher Geerdts, chairman of the association, said in a statement.

Vodacom, which is 65 percent owned by Newbury, England-based Vodafone Group Plc (VOD), said in a Sept. 30 statement that the proposal would create greater competition in the country’s fixed-line market. The company is increasingly focused on small-to medium-sized business customers and expanding data services to offset declining revenue from its South African voice division.

Vodacom declined to comment.

To contact the reporter on this story: Chris Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.