Proceeds may be utilised to pare Tata Communication’s debt

Tata Communications Ltd. (formerly VSNL), on Monday, announced that Vodafone’s subsidiary Vodacom SA has agreed to acquire 100 per cent shares of Neotel, its South African unit, for 7 billion Rand or $676 million (Rs.3,958 crore).

Tata Communications holds 68.5 per cent stake in Neotel, South Africa’s second largest fixed-line telecom service provider.

The other shareholders include Nexus Connexion (19 per cent) and Communitel (12.5 per cent)

“The structure of the deal and its commercial terms remain subject to regulatory and competition authority approvals, and the parties will be immediately commencing the necessary processes in that regard,” Tata Communications said in a statement

It is believed that the proceeds from the sale will be utilised to pare Tata Communication’s debt. The company has a debt of nearly Rs.12.000 crore.

“It (the deal) is in line with our financial objectives while paving the way for Neotel to improve its value proposition in the South African market,” Vinod Kumar, MD and CEO, Tata Communications, said.

“We are encouraged at the progress made to date, and will focus now on ensuring compliance with the regulatory approval processes and the engagement with the competition authorities. Neotel continues to grow in the South African market. This, when approved, will enable a greater choice of products and services for our customers and increased competition, ” said Sunil Joshi, MD & CEO of Neotel.

“This transaction will impact the landscape of the telecommunications industry in South Africa. We believe it will enhance the customer experience and benefit the South African public,” Kennedy Memani of Nexus Connexion, said.

After the announcement Tata Communications’ share price surged 6 per cent in the stock market, and the stock finally closed with a gain of 3.74 per cent

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