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Wheelings & Dealings: Vodacom-Neotel Deal Expands IP Service in South Africa

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Wheelings & Dealings: Vodacom-Neotel Deal Expands IP Service in South Africa

 
May 21, 2014

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  By Alisen Downey, TMCnet Web Editor

Around the world, IP communications technology is changing the way we exchange information and do business. Providers are constantly forming new deals and alliances to better serve companies and offer them the highest quality communications services available. As things increasingly shift toward IP, this type of service is meeting new and heavier demands.


In South Africa, the latest agreement has been announced between Vodafone’s African arm, Vodacom (News - Alert), and communication venture Neotel, South Africa's second-biggest fixed-line phone operator. Under the terms of the deal, Vodacom will buy Neotel for an enterprise value of $675 million. Tata Communications Limited -- which holds 67.32 percent of Neotel (News - Alert) for ZAR 7 billion (or roughly $675 million US) -- CommuniTel and Nexus Connection are all Neotel shareholders.

Neotel began operations in 2007, providing fixed telecommunications services for businesses and enterprise services, as well as consumers in South Africa. As one of the country’s first converged communications network operators, it provides a range of value-added voice, Internet and data services for businesses, wholesale network operators and providers and retail customers using its IP Next Generation Network, powered by Neotel’s fiber optic backbone.

The deal between Vodacom and Neotel makes a lot of sense from a strategic standpoint, considering that Neotel’s services connect all the major centers in South Africa to each other and to the world, and directly linking its infrastructure into Tata Communications’ (News - Alert) global Tier 1 network.

"[The deal] 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 (News - Alert), MD and CEO of Tata Communications.

Those “financial objectives” would refer to the fact that Vodacom’s South African fixed enterprise business will create a national service provider with annual revenues of more than ZAR 5 billion ($482 million), according to VCCircle. Vodacom Group CEO Shameel Aziz Joosub added that the transaction is in line with the priorities of Vodacom’s growth strategy—continuing its investment in data and enterprise business.

Expanding its reach in South Africa will allow Vodacom to grow as a company, and will possibly even help Neotel climb the ranks from the second-biggest IP communications provider in the country to the biggest.




Edited by Rory J. Thompson
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