HomeBusiness DigestEconet agrees to pay US$428 million for Neotel with investors

Econet agrees to pay US$428 million for Neotel with investors

ECONET Wireless Global affiliate Liquid Telecom agreed to pay 6,55 billion rand (US$428 million) for South African Internet-service provider Neotel Pty Ltd., creating the continent’s largest broadband network and business-to-business phone carrier. Shares of Tata Communications Ltd., which is selling the stake, surged.

The buyer is partnering with Royal Bafokeng Holdings, a South African empowerment investment group, which has committed to taking a 30% stake in Neotel, according to a statement from Mumbai-based Tata Communications, which acquired control of Neotel in 2009.

The deal gives Econet wireless spectrum and broadband access to South African businesses and homes and gives businesses across the continent access to 40 000 kilometers (25 000 miles) of cross-border fiber networks, according to an e-mailed statement from Liquid Telecom. Econet, founded and run by Strive Masiyiwa, controls Liquid Telecom and mobile-phone company Econet Wireless Zimbabwe Ltd.

“We’ll also be increasing investments into Neotel to cater for rapidly accelerating mobile and enterprise traffic,” Nic Rudnick, Liquid Telecom chief executive officer, said in the statement.

For Tata, a transaction would advance an asset-sale push the coffee-to-cars conglomerate has been pursuing as Chairman Cyrus Mistry seeks to pare debt and boost profit. Tata Steel Ltd., Tata Power Co. and Indian Hotels Co., which wants to sell its Taj Boston hotel, are among group firms looking to dispose of non-core assets.

Tata Communications rose as much as 8 percent as of 1 p.m. in Mumbai following the announcement. The shares have gained 6,3% this year, compared with a 1,7% increase in the benchmark S&P BSE Sensex index.

Four months ago, Johannesburg-based Vodacom Group Ltd. abandoned a 7 billion-rand proposal to buy Neotel after almost two years of regulatory battles and legal opposition to the deal by competitors.-Bloomberg

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