Vodafone Unit Scraps Neotel Deal After Two-Year Regulatory Fight

  • Vodacom calls off purchase of Internet provider from Tata
  • Deal originally valued at $446 million first agreed in 2014

Vodacom Group Ltd., the South African unit of Vodafone Group Plc, abandoned a 7 billion rand ($446 million) proposal to buy Internet provider Neotel Pty Ltd. after almost two years of regulatory battles and legal opposition to the deal by competitors.

“There were numerous complexities, including those of a regulatory nature, and we simply couldn’t find a solution to these to progress,” Vodacom spokesman Byron Kennedy said by phone on Tuesday. “Vodacom will continue to explore other options for gaining access to additional spectrum.”

Vodacom originally agreed to buy Neotel from Tata Communications Ltd. of India in May 2014 to boost its high-speed Internet offering amid tougher pricing competition and regulatory constraints on the mobile-phone business. Vodacom has the most customers in South Africa with 34.1 million at the end of 2015, and crosstown rivals including MTN Group Ltd., Cell C Pty Ltd. and Telkom SA SOC Ltd. argued the tie-up would give the company a dominant position in the market.

In December, the two companies said they amended the terms of the deal to exclude Neotel’s spectrum licenses, with Neotel instead offering a roaming arrangement to all mobile-network operators including Vodacom. That cast doubt over the deal value, as Vodacom would only be purchasing fixed-line assets.

“As it became clear that Vodacom would not be able to get the licences and spectrum, that price had to be negotiated down big time,” Wayne McCurrie, a money-manager at Momentum Asset Management in Johannesburg, whose portfolios include Vodacom shares, said by phone. “It can be safely assumed that an agreement between the parties could not be reached. Without the licences and spectrum the deal would have been much more unattractive for Vodacom.”

Vodacom shares gained 0.4 percent to 150.95 rand as of 1:11 p.m. in Johannesburg, valuing the company at 225 billion rand ($14.3 billion). The phone company is 65 percent owned by Newbury, England-based Vodafone.

Vodacom will continue to invest in its own high-speed Internet network and explore other options for gaining access to new spectrum, the company said.

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