Vodacom likely to take over Neotel

Job cuts will be seen if Tata Communications Ltd-led South Africa telecom company is acquired by Vodacom. It will also reduce the digital device, country’s Wireless Access Provider’s Association (WAPA) said.

During last week the famous British company Vodafone’s South African subsidiary Vodacom said that it is undergoing discussions regarding the acquiring of Neotel, controlled by Tata Communications.

Subodh Bhargava, the chairman of Tata Communications holds 68.5% stake in Neotel, SA’s second biggest fixed line phone operators, confirmed that the companies are in talks.

WAPA, the self regulatory body for the industry said in a statement that the acquisition would prevent competition and led to job cuts and also reduction in digital device that it believes should be South Africa’s top priority along with the broadband.

WAPA said that it had seen an increase in the membership by 25% per year as the smaller operators took the gap created in the broadband market with respect to the last mile access.

WAPA chairperson Christopher Geerdts said that “Growth in smaller operators is good for the customer as well as for the country. It increases competition, will create jobs and drives rural broadband inclusion. While the larger operators are likely to cut jobs and include customers in the most productive area and business parks.”  

They believe that South Africa needs to build up a complete strategy consisting of both large and small players and they play according to their strength. Also the operators with a national strength are needed to provide truly neutral and wholesale services so as to enter into the competitive market.

WAPA said that many of its members enjoyed an excellent relationship with Neotel which shows that strong wholesale providers with an assurity to rural rollout can accompany smaller operators with their presence and experience in those areas.

In conclusion Geerdts said that “Their concern is that Vodacom’s influence will affect these gains achieved, severely limit open wholesale access and set back rather than increase competition and consumer choice.”

The deal is expected to be done at $500 million but the company have not yet mentioned the exact amount.

The finalisation of the deal will result in successful conclusion of commercial negotiations and receiving the requirements regularly and corporate approvals. “We are aiming to develop entire new services such as  fibre to the home and business by further building the capabilities within Neotel. Neotel has access to over 15,000 km fibre-optic cable including 8000 km of metro fibre in Johannesburg, Cape Town and Durban - said by CEO of Vodacom group.”