According to Vodacom, the combination of both networks will improve overall network availability and reduce the cost to service customers.
After months of negotiations, Vodacom agreed to acquire 100 percent of the issued share capital in and shareholder loans against Neotel, which will result in the company becoming a subsidiary of Vodacom.
The R7 billion transaction will be funded through cash and existing credit facilities, Vodacom said in a statement.
The deal is subject to regulatory approval and the companies will start working on that process immediately. The deal is expected to be finalised by the end of the financial year.
Neotel, is the country’s second largest provider of fixed telecommunications with access to more than 15 000km of fibre-optic cable, including 8 000km of metro fibre in Johannesburg, Cape Town and Durban.
Vodacom is the wireless operator with the most South African customers and Neotel’s spectrum will help the operator to grow its Internet users as it competes against South Africa’s biggest fixed-line operator, Telkom, and Africa’s biggest mobile-phone company, MTN.
“Through the combination of these two businesses, the provision of a wider range of business services and much needed consumer services such as fibre-to-the-business and fibre-to-the-home becomes a concrete reality – it will be good for the consumer, good for business and good for the country,” Vodacom Group CEO Shameel Joosub said.
Earlier this month, Vodacom gifted all of its subscribers with 1GB of free data to use only on 11 May as part of its 20th birthday celebration.
However, as subscribers began capitalising on the freebie, Vodacom’s capacity started to fail the operator and users complained that Internet speeds were reduced to a crawl.
