10:01 am - Thursday November 5, 2015

Tata Communications sell Neotel stake to Vodacom for $680mn cash

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NEW DELHI: Tata Communications LtdBSE 2.54 %. has sealed an all-cash deal to sell its 67 per cent stake in South African telecommunications unit, Neotel Pty., to an arm of Vodafone Group for about $680 million (Rs3978 crore), people familiar with the matter said Monday.

Tata Communications confirmed the broad agreement in a release Monday, saying that Vodacom SA has agreed to buy 100 per cent in Neotel for an enterprise value of ZAR 7.0 billion.

Tata Communications sell Neotel stake to Vodacom for $680mn cash Tata Communications owns 67 per cent of Neotel which has around 152,000 customers and 1,000 employees. The company provides wholesale telecommunications and Internet services to companies in Africa. Shares in Tata Com rose 2.6 per cent to Rs 301.55 on the Bombay Stock Exchange, outpacing broader market gains.

“It is in line with our financial objectives while paving the way for Neotel to improve its value proposition in the South African market”, Vinod Kumar, managing director and chief executive officer at Tata Communications, said in the statement.

The deal is crucial to the Tata Group-owned undersea cable company which needed the money to pare accumulated net debt of $1.4 billion. It hasn’t been able to raise funds to meet capital expenditure requirements because the Indian government, a stake holder in the company, has not allowed any share sale.

On its part, Vodacom Group Ltd.will get access to 15,000 kilometres of Neotel’s fibre optic cable, including 8,000 kms in Johannesburg and Cape Town, the person told ET. In addition, Vodacom will also get airwaves in the 1.8 Ghz, 800 Mhz and 3.5 Ghz bands.

Tata Communications first invested in Neotel in 2006, when it paid around $250 million for a 26 per cent stake. With that, it owned the highest share of the second fixed-line telecom operator in South Africa. Subsequently, it raised the stake to 67 per cent in Neotel.

Tata Communications and Vodacom entered into exclusive discussions for the Neotel acquisition last September.

Standard Chartered was the advisor to Tata Communications for the deal.

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