VODACOM changes tack on Neotel tie-up

South Africa -  After more than two years of pursuing fixed-line phone provider Neotel, Vodacom has asked for more time to restructure the R7bn deal.

The parties now have two weeks to agree on a new structure before presenting it to the Competition Tribunal on December 7. This will be followed by a closed pre-hearing three days later.

"The outcome of these discussions will directly impact the extent of the approval being sought from the Competition Tribunal and the scope of the Competition Tribunal hearing," said Vodacom in a statement on Monday. A hearing was to have been held in Pretoria.
Although Vodacom did not specify what in the proposed takeover needed changing, a source close to the process vaguely referred to possible price changes. "Basically, this is a moving target, and as you know things do change.
"They’re trying to reduce the price to reflect the current circumstances," said the person, who cannot be named because of confidentiality stipulations. The person would not disclose the desired acquisition price.

 

Early this month, Vodacom CE Shameel Joosub said the company would seek certain guarantees and securities to cover any potential liabilities that might arise as a result of fraud and corruption allegations being made against Neotel.
This followed the forced suspension of Neotel CEO Sunil Joshi and chief financial officer Steven Whiley after the Mail & Guardian newspaper published claims that the company had paid bribes to secure business with Transnet.
Both denied the allegations.

The Independent Communications Authority of SA (Icasa) has already approved the Neotel transaction with conditions, while the Competition Commission has recommended to the Competition Tribunal that the deal be approved with conditions. The merging companies’ rivals, however, are opposing the transaction.
Telkom, Cell C, MTN and Dimension Data argued in the High Court in Pretoria that Vodacom’s takeover of Neotel — which is majority-owned by Tata Communications — would give it access to much sought-after radio spectrum, enabling the company to provide superfast 4G data downloads.
They also argue this would "irreparably harm" competition in the mobile market.
Both Vodacom and Neotel’s shareholders have invested more than two years in the proposed merger, and are still committed to it, said the person who cannot be named. "The best outcome for both parties is the deal going ahead."

The initial application to postpone yesterday’s hearing was submitted to the tribunal on Friday, and executives from both sides were in constant communication at the weekend.

by Sikonathi Mantshantsha,