The buyout of Tata-led South African telecom company Neotel by Vodacom, if it goes through, will lead to job cuts, and do little to reduce the digital divide, country's Wireless industry body WAPA has said.
Last week, British major Vodafone's South African subsidiary Vodacom had said that it has entered into exclusive discussions regarding a potential acquisition of Neotel, controlled by Tata Communications.
Subodh Bhargava, Chairman of Tata Communications that holds 68.5 percent stake in Neotel- South Africa's second-biggest fixed-line phone operator- confirmed that the companies are in talks.
In a statement, Wireless Access Providers' Association (WAPA), the self-regulatory body for the industry, said the takeover would stifle competition, lead to job cuts, and do little to reduce the digital divide that it believes should be South Africa's top priority with regard to broadband.
WAPA said it had seen an increase in membership exceeding 25 percent per year, as smaller operators seize the gap created in the broadband market, particularly with respect to last-mile access.
"The growth in smaller operators is good for the customer and good for the country," WAPA Chairperson Christopher Geerdts said.
"It increases competition, creates jobs and drives rural broadband penetration. Larger operators tend to cut jobs and cherry-pick customers in the most lucrative suburbs and business parks."
WAPA believes that South Africa needs to build up a complementary strategy where large and small players coexist and play to their strengths, the statement said.
In addition, operators with a national backbone need to provide truly neutral and open wholesale services so as to open the market to competition, it added.
WAPA said many of its members enjoyed an excellent relationship with Neotel, which has proven that strong, wholesale providers with a commitment to rural rollout can complement smaller operators with existing presence and experience in those areas.
"WAPA's concern is that Vodacom's influence will dampen these gains achieved, severely limit open wholesale access and set back rather than increase competition and consumer choice," concluded Geerdts.
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.