Tata Communications to sell subsidiary Neotel

Tata Communications has entered into agreement with Liquid Telecom Group to sell its South African telecom unit Neotel for 6.55 billion South African rand (around Rs 2,900 crore) as the Tata group company looks to reduce its debt.

Tata Communications has struck a Rs 2,900 crore (6.55 billion South African rand) deal with Liquid Telecom Group to sell off its South African telecom unit, Neotel to reduce its debt. Tata Communications has an accumulated net debt of Rs 10,000 crore.

Tata Communications has entered into agreement with Liquid Telecom Group to sell its South African telecom unit Neotel for 6.55 billion South African rand (around Rs 2,900 crore) as the Tata group company looks to reduce its debt. (Livemint)

The Indian telecom company holds 67% in Neotel, the second largest provider of fixed telecommunication services in South Africa. Minority shareholders led by Nexus Connection are also selling their stake in Neotel.

Liquid Telecom, the African firm, majority owned by Econet Wireless Global has partnered with Johannesburg-based investment entity, Royal Bafokeng Holdings, which has agreed to pick up 30% stake in Neotel.

The deal will need regulatory and corporate approvals.

“Liquid Telecom is the right partner for the next phase of Neotel’s evolution. Convergence of technologies and services will be the key driver of growth across the globe and this transaction will encourage inclusion and support the growth aspirations of the African continent,” said Vinod Kumar, MD and CEO of Tata Communications.

In 2014, Tata Communications had entered into an agreement to sell Neotel to Vodacom, a Vodafone Group Plc unit. Despite renegotiations last year it fell apart due to complexities in regulatory approvals.

The deal will help Liquid Telecom create the largest African broadband network and telecom provider for enterprises. Businesses across Africa will be able to access Liquid Africa’s 24,000 km of cross-border, metro and access fibre networks. These currently spans across 12 countries from South Africa to Kenya, with further expansion planned, Liquid Telecom said.

“Leveraging the strengths of Royal Bafokeng Holdings, Neotel and Liquid Telecom will offer an unprecedented fibre network with a unique set of services and international connectivity for telecom operators and enterprises across sub-Saharan Africa,” said Nic Rudnick, CEO, Liquid Telecom.

This is not the Tata Communications’first attempt to reduce its debt. In May, it had agreed to sell 74% stake in its data centre business to a unit of Singapore’s Temasek Holdings for about Rs 4,200 crore.

Tata Communications’ shares soared 8% on the back of the news.