Vodacom addresses R7bn Neotel purchase, mobile termination rates

2014-07-17 17:56

Vodacom’s acquisition of Neotel and mobile termination rates are the two main concerns for the telecommunications giant’s shareholders, it emerged at the annual general meeting in Midrand today.

One shareholder wanted to know why Vodacom was acquiring fixed-line operator Neotel in a R7 billion deal that is currently going through the regulatory process, and how it would benefit the company.

Responding to the issue, Vodacom CEO Shameel Joosub said: “One of the big opportunities in South Africa is the fixed-line space where our fixed-line infrastructure is underdeveloped, especially in the fibre to the home, fibre to the business space.”

He said businesses need more bandwidth and consumers need it too for entertainment. Vodacom was positioning itself to take advantage of the need for fast broadband.

Currently, Vodacom’s fixed-line business is worth R1.4 billion, which is about 2% market share.

“But combining ourselves with Neotel, now we have a R5 billion business that we can grow quite nicely,” said Joosub.

“There are a number of [other] benefits with the Neotel deal. You are acquiring 22 000 kms of fibre, and when you overlay that onto the Vodacom network, it brings you closer to the customers.

“That helps you when you see an opportunity to connect the business through fibre to the business and fibre to the home.

“It [also] gives us the right people ... there are just over 900 people in Neotel and there are some good skills there, because fixed is a different skill to mobile,” he said.

“We see data traffic growing and we struggle with the spectrum. While Neotel will not solve our problem, it will give us breathing room while the regulator is still allocating spectrum and the digital migration policy is being finalised.”

Vodacom chairperson Peter Moyo said it would not be fair to comment on what the regulator would do regarding the deal. Vodacom had put in its submission and was hoping for the best.

Another shareholder raised a concern about the uncertainty regarding mobile termination rates.

In reply, Moyo said the company was hoping that the reviewed mobile termination rates would be finalised by September.

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