Vodacom in Talks With Neotel to Revise Structure of Purchase

Updated on
  • Has until Dec. 7 to tell Competition Tribunal if deal proceeds
  • Acquisition opposed by South African competitors such as MTN

A Vodacom logo stands outside the headquarters of Vodacom Group Ltd., in Johannesburg.

Photographer: Nadine Hutton/Bloomberg

Vodacom Group Ltd., the South African unit of Vodafone Group Plc, said it’s talking to Neotel Pty Ltd. about restructuring a proposed 7 billion-rand ($499 million) takeover of the Internet provider and will have two weeks to tell the Competition Tribunal whether the deal will go ahead.

The acquisition is opposed by competitors MTN Group Ltd., Cell C Pty Ltd. and Telkom SA SOC Ltd., who argue the tie-up would give Johannesburg-based Vodacom dominance of South Africa’s high-speed Internet market. The purchase was granted provisional approval by the country’s antitrust and communications regulators earlier this year and the tribunal was scheduled to begin a hearing on Monday.

“The outcome of these discussions will directly impact the extent of the approval being sought from the Competition Tribunal and the scope” of the hearing, Vodacom said in a statement. The tribunal granted the delay and set a deadline of Dec. 7, with a potential new hearing arranged for three days later, the phone company said in a separate statement.

Vodacom shares fell 0.8 percent to 148.41 rand at the close in Johannesburg, valuing the company at 221 billion rand. The stock has advanced 16 percent this year, compared with a 6.7 percent increase on the FTSE/JSE Africa Top40 Index.

“There’s some opposition at the Competition Commission level from Telkom and Cell C, so they might be looking at getting around those hurdles,” BPI Capital Africa analyst Kate Turner-Smith said by phone. The suspension earlier this year of Neotel Chief Executive Officer Sunil Joshi and Chief Financial Officer Steven Whiley for irregularities related to winning a contract with state-owned ports and rail utility Transnet SOC Ltd. may also have complicated the deal, she said.

Vodacom agreed to buy Neotel from Tata Communications Ltd. of India more than 18 months ago to expand its Internet offering amid pressure from South African regulators and competitors on mobile-phone revenue. Conditions included the extension of broadband to rural areas and a pledge not to cut Neotel jobs.