Vodacom clearly isn’t taking their own recent acquisition efforts light-heartedly; it just announced plans to buy Neotel in a deal worth about R7.0 billion. The communications giant sees a takeover as an opportunity to expand how it delivers fixed telecoms beyond just the bundles it has today. Once officials approve the merger, this would see Neotel become a subsidiary of Vodacom South Africa and the combination with Vodacom’s South African fixed enterprise business will create a national service provider with annual revenues of more than R5bn.
The telecom is making a lot of promises to assuage regulators that will no doubt look at the proposed mega-buyout very closely — Vodacom clearly wants to avoid this resulting in a failed attempt. It hopes to bring high-speed internet access to somehwat 1,5 million additional customers, primarily in rural areas where a mix of fixed wireless and fiber-to-the-home could get people online.
Vodacom estimates that the purchase will start adding value within five years of closing. Whether or not it closes is another matter. Service priver, Cell C already has concerns about the possible anti-competitive effects of Vodacom’s proposed buyout of Neotel; it’s likely that the Competition Comission will see this merger similar approach to. If Comcast runs into regulatory trouble, it won’t be surprising if AT&T ends up in the same boat.