Tata Telecom to sell S African arm Neotel to Liquid Telecom

Tata Telecommunications today struck a deal to sell its South African communications network operator Neotel to Liquid Telecom for ZAR 6.55 billion (Rs2,875 crore or $423.42) .

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

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

Tata Communications had initially acquired a stake in 2006, after South African government's initiatives to deregulate the telecom market, by paying $250 million. The Indian company later raised its holdings to about 68 per cent.

Other stakeholder in Neotel is Nexus Connection.

Neotel is South Africa's second-biggest fixed-line phone operator and competes with former state-owned service provider Telkom.

In 2015, Tata Communications had entered into an agreement with Vodacom South Africa, a subsidiary of British telecom major Vodafone Group, to sell Neotel for ZAR 7 billion (nearly $500 million).

But the deal was abandoned after the proposed acquisition was opposed by competitors MTN Group, Cell C and Telkom SA, who argued that the tie-up would give Johannesburg-based Vodacom dominance over South Africa's high-speed Internet market. (See: Tata Communications begins to renegotiate 7-bn rand Neotel deal)

The Neotel - Liquid Telecom transaction will create the largest pan-African broadband network and B2B telecoms provider.

Through a single access point, businesses across Africa will be able to access Liquid Africa's 24,000 kms of cross-border, metro and access fibre networks. These currently span 12 countries from South Africa to Kenya, with further expansion planned.

The transaction is subject to approval by South African regulatory authorities and is expected to be completed later this financial year, Tata Communications said.

''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,'' said Vinod Kumar, managing director and CEO of Tata Communications.

"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,'' he added.

On consolidated basis, Tata Communications reported a net loss of Rs205.89 crore in Q4 March 2016, higher than net loss of Rs178.25 crore in Q4 March 2015. Net sales rose 6.9 per cent to Rs5145.41 crore in Q4 March 2016 over Q4 March 2015.

Tata Communications along with its subsidiaries is a leading global provider of communications.