Tata Communications is in talks with Vodafone’s South African subsidiary Vodacom to exit from Neotel in a deal valued at around $500 million.
“If the deal is implemented, Vodacom intends to put significant investment into the combined entity to provide high-speed fixed connectivity to many more businesses and consumers,” said Vodacom Group CEO Shameel Joosub.
Earlier, Tata Communications and Vodafone pitched for buying UK’s Cable & Wireless.
Tata Communications has 68.5 percent stake in Neotel, South Africa’s second-biggest fixed-line phone operator. The company competes with former state-owned service provider Telkom. Neotel reported a revenue growth of 12 percent in FY 2013.
“Spectrum is an important consideration as the combined entity could use this resource more efficiently, and in doing this we can keep pace with South Africa’s rapidly growing demand for mobile data,” said Neotel CEO Sunil Joshi.
Tata Communications on 26 July said the Start-up Business, primarily Neotel, posted 4 percent revenue increase in Q1 FY 2014 to Rs 4791 million. Neotel’s Q1 FY14 revenues were up by 17.7 percent. Neotel’s performance benefitted from market-share gains, an evolving business mix in favour of recurring revenues and sustained cost optimisation efforts. Tata Communications’ consolidated gross revenues grew 10 percent to $806 million during the period.
“By building on the capabilities within Neotel, we would also aim to develop entirely new services such as fibre to the home and business. Neotel has access to over 15,000 km of fibre-optic cable, including 8,000 km of metro fibre in Johannesburg, Cape Town and Durban,” Joosub said.