Vodacom-Neotel deal facing big challenges

Vodacom’s planned acquisition of Neotel is facing headwinds, including a prolonged Competition Commission probe.

Vodacom and Neotel

Vodacom’s planned acquisition of Neotel is facing significant challenges, including a prolonged investigation by the Competition Commission which may not support the deal.

Vodacom announced on 30 September 2013 that it was in discussions regarding a potential acquisition of 100 percent of the shares of Neotel.

Vodacom then said on 19 May 2014 it had reached an agreement to acquire Neotel for R7 billion.

The transaction was subject to applicable regulatory approvals, and these approvals are now threatening the transaction.

MyBroadband has received information that the Competition Commission investigation, which has been dragging on for months, may not be in favour of the deal.

While the Competition Commission cannot stop the deal – it merely makes a recommendation to the Competition Tribunal – it can put a hurdle in the way.

The fact that the investigation has been ongoing for some time is also a challenge for Vodacom and Neotel.

Vodafone CEO Vittorio Colao said in March 2015 that the time taken to deliberate regulatory approval was “bordering the limit” of what they can support.

“We are a little bit bordering the limit here because it’s more than nine months, almost a year, and we don’t see the end of it,” Colao told Bloomberg.

Vodacom CEO Shameel Joosub said the delay in regulatory approval was frustrating.

Joosub told Business Day that “every day that went by without any pronouncement on the deal was a day lost for the group”.

He also told CNBC the delay is particularly damaging considering what Vodacom is trying to achieve. “We are stepping up and taking the role of being the second network operator.”

Joosub is referring to bringing true competition to Telkom through its acquisition of Neotel, and then using its deep pockets to fund the company.

At the time of publication, Vodacom said it had not received official feedback from Competition Tribunal.

Neotel said it has no comment at this stage.

   – MyBroadBand

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