By Gugu Lourie (techfinancials)
VODACOM GROUP, South Africa’s biggest mobile phone operator, confirmed on Monday it was in exclusive talks with Neotel.
“Shareholders of the company are advised that the company has entered into exclusive discussions with the shareholders of Neotel to consider the possible acquisition of 100 percent of the issued share capital in and shareholder loan claims against Neotel,” the company said.
Vodacom, which has a market value in excess of R188 billion, said the transaction remains subject to, inter alia, finalising definitive transaction agreements and board and regulatory approvals.
“Shareholders will be advised of further developments.”
Neotel is owned by India’s Tata Communications and also held by CommuniTel and Nexus Connection.
In the past few months, market talk has been rife that big local operators including Vodacom, MTN and Dimension Data has been in talks to buy Neotel.
Why would Vodacom be interested in buying Neotel?
To be successful in the telecom market of the future, according to global management consulting firm Booz & Company operators will have to create new business models that offer customers attractive bundles of integrated services.
“Virtually every incumbent operator has launched simple fixed and mobile bundles to shore up its market share and prevent the loss of revenue to challengers. This trend will put stand-alone mobile operators in particular at a distinct disadvantage. Any strategy will have to involve investing in fixed assets – either by leasing or buying installed cable, copper, or fiber networks or by building them – and mobile operators are likely to have to pay premium prices for those assets,” said Booz & Company.
The consulting firm said the premiums to be paid for fixed assets by mobile operators are justified. “The risk of not making such a move is simple too great. Ultimately , however, devising a successful convergence strategy will enable mobile operators to preserve the value of their current assets, while improving their competitive position in all their markets.”
This piece was first published in techfinancials.co.za whose publishers can be reached at firstname.lastname@example.org