Vodacom Group Ltd., the African unit of Vodafone Group Plc, was granted provisional approval by South Africa’s Competition Commission to buy Internet provider Neotel Pty Ltd. for 7 billion rand ($576 million).
The deal was recommended on the condition that the Johannesburg-based mobile-phone company doesn’t cut Neotel jobs and invests 10 billion rand in the company within five years, the regulator said in an e-mailed statement after the market closed on Tuesday. Vodacom also won’t be able to use Neotel’s spectrum to offer mobile services for two years, the Competition Commission said.
“This merger will change the South African mobile network and fixed-line industry significantly,” Tembinkosi Bonakele, the regulator’s commissioner, said in the statement.
The acquisition, which has already been approved by the country’s communications regulator ICASA, will now go before the competition tribunal for a final decision. Competitors including MTN Group Ltd., Africa’s biggest wireless operator, and Cell C Pty Ltd. have previously said they oppose the purchase because they say Vodacom would become too dominant.
Vodacom, 65 percent owned by Newbury, England-based Vodafone, agreed to buy Neotel from Tata Communications Ltd. of India in May 2014. The deal would enable Vodacom to extend Internet services for small-to-medium sized businesses. The company has the most mobile-phone subscribers in Africa’s most industrialized economy.
The decision will ultimately result in “increased investment in communications infrastructure and the accelerated rollout of broadband,” according to an e-mailed release from Vodacom.
Vodacom shares gained 1.5 percent to 138.70 rand by the market close in Johannesburg on Tuesday, valuing the company at 206 billion rand.
At least half of Vodacom’s investment in Neotel must be allocated to improving South Africa’s fixed-line network, the regulator said. The company must also ensure that equity held by shareholders who comply with black ownership laws should increase by 1.4 billion rand in value within two years of the approval date.