Neotel would offer a buyer an immediate footprint in the South African market, including an extensive network infrastructure and customer base.
This is according to Ovum senior analyst Richard Hurst, commenting on the possibility that Neotel could be looking for a new suitor, after a long-awaited Vodacom buyout deal fell through earlier this year.
Rumours surfaced this week that Neotel could be in acquisition talks with undersea cable operator Seacom and pan-African mobile operator Econet Wireless.
For now, none of the parties are prepared to confirm or deny discussions are happening.
Seacom told ITWeb the company "remains focused on growing its enterprise and wholesale business, and bringing Internet access solutions to a wider customer base" but gave no indication as to whether a Neotel buyout could play into this.
"We do not comment on market rumours and speculation," Seacom added.
Neotel also told ITWeb it "has no comment at this time" and Econet failed to respond to questions from ITWeb by the time of publication.
Hurst says Seacom and Econet could prove to be a very good fit with Neotel.
"I think both companies have their merit and both would be good suitors for the proposed deal. I think this is a matter of assessing who will be the best fit, what do they bring to the table and the local market, and of course what price?" Hurst explains.
IDC senior research manager for telecoms and media in Africa, George Kalebaila, agrees that at the moment Neotel "remains an acquisition target". Kalebaila says Econet and Seacom are enterprises that understand the African environment and have a pan-African outlook, and Neotel could fit in nicely with either of their expansion plans.
Enterprise goals
Hurst says Seacom has been expanding into the enterprise market across the African region and a potential Neotel acquisition would see the company being able to extend this service offering to the South Africa enterprise segment.
"We note Neotel has had an extensive focus on targeting enterprise customers, which would again play into Seacom's potential acquisition."
Seacom launched Africa's first broadband submarine cable system along the eastern and southern coastlines in 2009, but since then has moved beyond being a cable operator to become a major pan-African service provider, with extensive investments in East and Southern Africa.
"I think one of the key elements missing from Econet's Africa strategy has been a presence in the South African market. An acquisition in the local market would see the company being able to fully develop a local presence," says Hurst.
Econet was founded in 1993 by Strive Masiyiwa, Zimbabwe's richest man, and has operations and investments in Africa, Europe, South America, North America and the East Asia Pacific Rim. The company has products and services ranging from mobile and fixed telephony services to broadband, Internet, satellite and fibre-optic networks.
One of Econet's subsidiaries is Liquid Telecom, which has an independent fibre network that runs from the north of Uganda to Cape Town and spans 20 000km. It operates throughout Africa and the UK under a number of different wholesale, enterprise and retail brands, and has been pushing more into SA recently.
"Econet, via its Liquid Telecoms subsidiary, has developed an extensive enterprise service offering; again something that would fit with the current Neotel enterprise services and customer base," says Hurst.
"In terms of fit, this acquisition would make sense because Liquid is looking to become even more pan-African in its investments. Acquiring Neotel would complete that link from East Africa to Southern Africa, and provide more capabilities to their portfolio," adds Kalebaila.
Better fit than Vodacom
One of the key issues that brought down the deal with Vodacom was struggles with regulatory approvals and legal battles linked to competition worries, something Kalebaila says will likely not be an issue should either Econet or Seacom wish to acquire Neotel.
"These are not dominant players within the SA environment, so the competition issues will likely not be a problem. Their acquisition would likely add to competition and not harm it," he says.
The drawn-out Vodacom-Neotel deal came up against strong opposition from rival telco operators and other industry players, mostly because of the potential competitive consequences of the transfer of Neotel's much sought-after radio frequency spectrum. The companies first tried to rework the R7 billion deal and remove the spectrum option, but ultimately called it quits in March.
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