Vodacom in talks to buy Tata Comm-controlled Neotel

British major Vodafone's South African subsidiary Vodacom today said it has entered into exclusive discussions regarding a potential acquisition of Neotel, controlled by Tata Communications.

"There are a number of important steps that we still need to complete in order to conclude the transaction. 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," Vodacom Group CEO Shameel Joosub said in a joint-statement.

Neotel, South Africa's second-biggest fixed-line phone operator, is 68.5 per cent owned by Tata Communications.

The company, which was established as South Africa's second fixed-line operator, competes with former state-owned service provider Telkom.

Neotel reported a revenue growth of 12 per cent in FY13. Tata Communications Chairman Subodh Bhargava too has confirmed that the companies are in talks.

"We have engaged in dialogue with Vodafone in South Africa...the process is just initiated so at this point I don't think there is anything more one can say," Tata Communications Chairman Subodh Bhargava told PTI on the sidelines of a CII event.

The deal is reportedly valued at USD 500 million (Rs about Rs 3,130 crore) but the companies have not mentioned an amount so far.

"By further 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.

The finalisation of the transaction is subject to the successful conclusion of commercial negotiations and receiving the requisite regulatory and corporate approvals, the statement added.

"Spectrum is also 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," Neotel CEO Sunil Joshi said.