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Tata Takes Bigger Stake in South Africa's Neotel

Light Reading
News Analysis
Light Reading
6/24/2008
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In sunny South Africa, the deal market is as hot as ever...

Indian global services giant Tata Communications Ltd. is taking a majority stake in Neotel (Pty) Ltd. , South Africa's second national operator created to provide competition to incumbent Telkom SA Ltd. (NYSE/Johannesburg: TKG).

Tata Communications is acquiring a 30 percent stake from electricity provider Eskom and transport and logistics company Transnet, both government-owned firms. The deal will bring the total ownership of Tata Communications and Tata Africa Holdings in Neotel to 56 percent. VSNL, which is now part of Tata Communications, was an original shareholder in the consortium that acquired South Africa’s second fixed-line telecom license.

Tata Communications recently extended its services in South Africa with a new point of presence in Johannesburg that integrates Neotel’s IP/MPLS infrastructure with its global network. (See Tata Extends African Services.)

Formed in 2006 to bring down the cost of wholesale telecom services, Neotel launched its corporate high-speed Internet, VPN, network management, and hosting services last year and consumer services last month. (See Neotel Unveils Enterprise Suite.)

South African carriers are hot property right now -- Telkom SA and mobile operator Mobile Telephone Networks (MTN) are both in talks to be acquired. (See Telkom SA Fields Another Takeover Bid, MTN M&A Latest, and Reliance Family Feud Messes With MTN Merger.)

United Arab Emirates-based Oger Telecom , which has been rebuffed by Telkom before, is reportedly trying to get in on Mvelaphanda Holdings Ltd.’s negotiations with the carrier. Oger is keen to merge its South African mobile operator, Cell C , with Telkom's fixed-line operations to create a fixed/mobile convergence offering. (See Telkom SA Spurns Oger.)

Tata Communications is actively extending its network in emerging markets to offer data connectivity and managed services to multinational corporations along with domestic enterprises. It has set aside $1 billion for network expansion over the next three years. (See VSNL Rebrands as Tata Communications.)

Last week it signed a joint venture deal with telecom and IT services provider China Enterprise Communications Ltd. Tata will acquire a 50 percent stake in CEC, which was recently awarded a nationwide IP-VPN service license by the Chinese government. (See Tata Takes Chinese Stake.)

In February, Tata signed network-to-network interface (NNI) agreement with China Enterprise Netcom Corp. Ltd. (China Entercom), another telecom and IT provider. In May, it signed an agreement with Etisalat to offer Ethernet and other connectivity services to enterprises in the United Arab Emirates. (See Etisalat, Tata Hook Up.)

— Nicole Willing, Reporter, Light Reading

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