Vodacom Said to Discuss Final Details With Tata for Neotel

Vodacom Group Ltd. (VOD), South Africa’s largest wireless carrier, is negotiating final details for a deal to buy local Web-access provider Neotel Pty Ltd. from Tata Communications Ltd. (TCOM), two people familiar with the matter said.

An agreement has yet to be approved by Neotel’s lenders and board, said one of the people, who asked not to be identified because the talks are private. The companies expect to complete the transaction in the first half pending regulatory approvals, the other person said.

Vodacom, which said in September it had started exclusive talks to buy Neotel, is expanding in data services to offset declining revenue from its domestic voice division. Buying Neotel would help Vodacom add Internet users as it competes against Telkom SA SOC Ltd. (TKG) and MTN Group Ltd.

The transaction could be worth more than 5 billion rand ($473 million), a person familiar with the discussions said in September. Vodacom would assume about $500 million of debt, people familiar with the talks said in October.

Richard Boorman, a spokesman for Johannesburg-based Vodacom, and Tracy Cohen, Neotel’s chief corporate services officer, declined to comment. Rozzyn Boy, a spokeswoman for India’s Tata Communications in London, said the talks between the companies are continuing, declining to comment further.

Once Vodacom has reached a deal, it will seek approval from South Africa’s communications regulator and competition commission, one of the people said.

Court Ruling

Shares of Vodacom jumped as much as 1.9 percent and added 1.8 percent to 131.65 rand at 11:11 a.m. in Johannesburg. Tata Communications rose 0.5 percent in Mumbai.

Vodacom, which is 65 percent owned by Vodafone Group Plc (VOD), is seeking new sources of sales growth as competition and regulatory changes weigh on revenue. Vodacom said today a reduction in the rate South Africa’s mobile-phone companies are required to pay to connect to other carriers’ network will lower its earnings before interest, taxes, depreciation and amortization by about 500 million rand over six months.

The Independent Communications Authority of South Africa is cutting the rates by 50 percent, starting today. A court called the reduction “invalid and unlawful,” yet allowed the lower fees to be in place for six months, after which the rates will be evaluated again.

“We are busy reviewing how the financial impact from the rate cuts will translate in terms of our investment plans, and how to minimize the impact on our customers,” Vodacom said in a statement.

Vodacom is increasingly focused on small- to medium-sized business customers and adding data services, planning to spend more than 9 billion rand on domestic infrastructure this year compared with about 7 billion rand last year. Mobile operators are turning to fixed-line assets that allow them to sell a wider range of services and carry data traffic more efficiently.

To contact the reporters on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

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

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