Cape Town, 22 Nov 2006
Second national operator Neotel is in discussions with its shareholders over a restructuring, as it seeks to raise capital to finance its estimated R11 billion expenditure plans for the next 10 years.
Neotel will not comment directly, but a spokesman says the negotiations are "at a very delicate stage and a statement will be issued later this week".
However, Neotel has acknowledged it is examining capital-raising options that include debt and equity funding, but it seems to have ruled out a bond issue for the time being.
"Neotel projects a cumulative capex of approximately R 11 billion over the 10-year period. In the early years, the larger proportion of this capex will be used for the transmission (physical connectivity) and core (switching and services) elements of the network, while in the later years, with these elements having stabilised and their upgrade and scaling costs being relatively controlled, access equipment will take up the greater proportion of the capex," Neotel says in a statement.
The network operator says over the 10-year period, access infrastructure will form over 40% of Neotel's capex.
Neotel's financial advisors, Kagiso Financial Services and NM Rothschild & Sons, have circulated a document in the financial sector that contemplates the raising of R8.8 billion over a five-year period. The first tranche of R1.9 billion will be in the form of a bridging financing facility.
"The need for funds and the shareholder restructuring talks are a result of some of the shareholders either not willing or unable to meet a cash call [on 18 November]," says a source close to Neotel.
State power utility Eskom has already indicated it plans to exit its 15% stake. Eskom and another state-owned enterprise, Transtel, have also said they will not put any more money into Neotel.
As part of the original shareholders' agreement, Eskom and Transtel would each receive 15% of Neotel's shares in exchange for selling their national and long-distance infrastructure to it. However, public enterprises minister Alec Erwin stopped the Eskom sale and wants it to be included in Infraco, a new national broadband supplier.
Apart from Transtel and Eskom, the original shareholders' agreement allocates 26% to Indian conglomerate Tata, black economic empowerment group Nexus Connexion has 19%, and CommuniTel and Two Consortium have 12.5% each.
Related story:
Eskom plans to exit Neotel