South Africa's Vodacom has reached an agreement to acquire 100 percent of the issued share capital in Neotel and shareholder loans against it, for a total cash consideration equivalent to an enterprise value of ZAR 7.0 billion. Under the deal, Neotel will become a subsidiary of Vodacom South Africa and the combination with Vodacom's South African fixed enterprise business will create a national service provider with annual revenues of more than ZAR 5 billion.
In a statement, Vodacom said it sees a significant opportunity to accelerate growth in unified communications products and services by integrating its extensive distribution and marketing capabilities with Neotel's fixed network and product capabilities. The combined entity will be able to offer an expanded and enhanced range of converged services such as hosted PBX and OneNet to enterprise customers.
Vodacom estimates revenue synergies with a total net present value of approximately ZAR 0.9 billion after integration costs. It will enable Vodacom to take a leading position in the fibre-to-the-home and fibre-to-the-enterprise segments. It will also be able to use the radio spectrum currently assigned to Neotel more effectively. This will enable Vodacom to accelerate the roll-out of LTE services, brining fast wireless connectivity to a greater proportion of the South African population.
Vodacom expects to achieve substantial cost and capex synergies with an annual run-rate of approximately ZAR 300 million before integration costs in the full fifth year post completion, equivalent to a net present value of approximately ZAR 1.5 billion after integration costs. These savings will primarily be derived from the joint utilisation of Neotel's extensive fibre network and the elimination of overlapping elements, joint procurement and the combination of overlapping administrative functions. Vodacom looks forward to welcoming Neotel's employees.
