Vodacom Buys Tata Communications’ Neotel Stake For $680 Million

Tata Communications has signed a deal to sell its 67% stake in South African telecommunications unit Neotel to Vodacom – an arm of the Vodafone Group – for about $680 million (Rs 3,978 crore), as per sources.

Tata Communications confirmed the development, saying that Vodacom has agreed to buy its total stake in Neotel.

Tata Communications owns 67% of Neotel, which provides wholesale telecommunications and data services to African companies. Following the development, Tata Communications’ share rose 2.6% to Rs 301.55.

“It is in line with our financial objectives while paving the way for Neotel to improve its value proposition in the South African market,” said Vinod Kumar, managing director and chief executive at Tata Communications.

The Tata Group-owned undersea cable company was under a net debt of $1.4 billion and had not been able to raise funds to meet capital expenditure requirements.

The Vodacom Group will now get the rights to use 15,000 km of Neotel’s fibre optic cable, including 8,000 km in Johannesburg and Cape Town, a source told The Economic Times. Moreover, Vodacom will also get airwaves in the 1.8 GHz, 800 MHz and 3.5 GHz bands.
Tata Communications had first invested in Neotel in 2006 by paying around $250 million for 26% stake. Later, it increased its stake to 67%.