Report: Vodafone's Vodacom to start talks to buy Tata's Neotol in South Africa

Vodafone's South African unit Vodacom is reportedly to enter exclusive negotiations over the acquisition of ISP Neotel from Tata Communication for more than 5 billion rand ($496 million) or €370 million, Bloomberg reported, citing unnamed sources close to the matter.

The move by South Africa's largest mobile operator, which is 65-per cent owned by Vodafone, reflects similar moves by its parent company to seek to offset declining revenue from traditional mobile services by offering bundles including mobile and fixed offerings. Vodafone itself has been picking up fixed assets in Europe, and recently won European Union approval for its planned €7.7 billion purchase of German cable operator Kabel Deutschland.

Both Bloomberg and Reuters said the companies involved declined to comment.

Africa is also of increasing importance for Vodafone as it looks for new growth markets outside of Europe. In April, Bloomberg noted that profit from its stake in Vodacom surpassed that from the UK unit in 2010 and outpaced the Spanish division the following year.

In July, Vodafone said it is establishing two new regional hubs in Africa to improve customer support to multinational clients, as revenue from its enterprise customers on the continent exceeded €1 billion in the financial year to March 2013.

Vodacom is also looking to data services and the small and medium-sized enterprise segment for more growth opportunities in future. According to Bloomberg, Neotel said in May that its corporate customer base rose 29 per cent for the full year, driven by growth in managed and network services.

Reuters noted that reports of discussions to sell Neotel have been circling for most of this year and Vodacom's bigger rival, MTN, confirmed in August that it was no longer in talks for a stake in Neotel.

For more:
- see this Bloomberg article
- see this Reuters article

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