Vodacom follows Vodafone example by buying Neotel

South Africa-based mobile operator Vodacom has agreed to buy 100 per cent of Neotel for 7 billion rand (€493 million/$676 million) from India's Tata Communications in a deal that will see the company gain fixed network assets as well as some additional spectrum.

The move, which confirms reports that first emerged last year, reflects the strategy of parent company Vodafone, which has also been building up its fixed assets in Europe to add new streams of revenue and be able to offer bundles of fixed and mobile services. Vodacom is 65 per cent owned by the UK-based operator.

Vodacom said it will benefit from Neotel's extensive fibre assets and enterprise capabilities, which it said will allow it to accelerate its fixed enterprise strategy and stimulate greater competition in the South African fixed telecoms sector. The transaction is expected to close before the end of the current financial year, although this will be dependent on the deal receiving regulatory approval.

Neotel is the second-largest fixed operator in the country, which continues to be dominated by market leader Telkom. Vodacom in turn is seeking ways to better compete with the market's largest mobile operator, MTN.

Vodacom added that Neotel also has access to 2 x 12 MHz of 1800 MHz spectrum, 2 x 5 MHz of 800 MHz spectrum and 2 x 28 MHz of 3.5 GHz spectrum. The company said it will fund the acquisition through available cash resources and existing credit facilities.

Vodacom announced the deal just after revealing that its full-year earnings per share increased by 2.8 per cent to 894.4 cents after it gained more subscribers across its African operations. The company also has operations in Tanzania, Democratic Republic of Congo, Lesotho and Mozambique. EBITDA rose by 8.2 per cent to 27.3 billion rand while group revenue was up by 8.3 per cent at 75.7 billion rand. The company said it added 7 million customers in the year, taking its total active customer base to 57.5 million.

The company also said it planned to increase capital investment by around 20 per cent to about 13 billion rand in the new financial year as part of its "massive investment programme".

For more:
- see this Vodacom announcement
- see Vodacom's full-year results

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