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Liquid Telecom, Royal Bafokeng to buy Neotel for R6.5bn

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 28 Jun 2016
The acquisition deal is still subject to approval by South African regulatory authorities.
The acquisition deal is still subject to approval by South African regulatory authorities.

Liquid Telecom has announced that it has entered into an agreement to acquire Neotel for R6.55 billion. Neotel's major shareholder Tata Communications of India and minority shareholders led by Nexus Connexion have agreed to the deal, which is still subject to regulatory approvals.

Liquid Telecom is also partnering with Royal Bafokeng Holdings (RBH), a South African investment group, which has committed to take a 30% equity stake in Neotel.

The deal comes after a long-awaited R7 billion acquisition of Neotel by Vodacom was called off in March.

Liquid Telecom says the transaction will create the largest pan-African broadband network and through a single access point, businesses will be able to access 40 000km of cross-border, metro and access fibre networks. These currently span 12 countries from South Africa to Kenya, with further expansion planned.

Liquid Telecom is a privately owned pan-African telecoms group and is majority owned by Econet Global.

"For the first time, African companies will be able to connect with each other in a cost effective and reliable way, all on a single fibre network. We will also be increasing investments into Neotel to cater for rapidly accelerating mobile and enterprise traffic, enabling us to launch exciting new products and services," says Liquid Telecom CEO, Nic Rudnick.

Tata Communications MD and CEO, Vinod Kumar, says he believes Liquid Telecom is the right partner for the next phase of Neotel's evolution.

"Convergence of technologies and services will be the key driver of growth across the globe and this transaction will encourage inclusion and support the growth aspirations of the African continent. We believe that Liquid Telecom will deliver on the vision of a well-connected Africa, which will augur well for the South African telecom industry and Neotel's customers," according to Kumar.

Royal Bafokeng Holdings CEO, Albertinah Kekana, says its involvement in the deal is part of RBH's diversification strategy and in line with its objective to invest in high growth sectors.

Speaking on behalf of minority shareholder Nexus, Kennedy Memani, says he is confident that customers and employees will benefit from the transaction and from the resulting stability and business expansion.

"It will see the sale of Neotel to new shareholders who have the vision, expertise and funding to continue to grow the company and to allow it to reach its full potential in South Africa and across the African Continent," says Memani - who is a non-executive director at Neotel and who has been providing interim executive oversight in the absence of a CEO at the company.

Neotel CEO Sunil Joshi resigned in early December 2015 after spending many months on "special leave" pending an investigation into his and CFO Steven Whiley's alleged involvement in bribery and corruption in connection with a Transnet deal worth R1.8 billion. At the time of his resignation the Neotel board said it had found nothing to date that implicated Joshi personally in any bribery or corruption activities. Whiley also resigned in late November last year and at the time the board said it was satisfied that he had "at all times acted with integrity".

The acquisition deal is still subject to approval by South African regulatory authorities and is expected to be completed later this year.

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