Tata Communications? plans to sell off its South-Africa-based telecom unit Neotel to Vodafone-owned Vodacom is likely to be held up owing to regulatory hurdles, say news reports.
The Independent Communications Authority of South Africa (Icasa) is considering whether or not to allow the transfer of spectrum held by Neotel as part of the deal. Icasa is considering cancelling the spectrum held by Neotel in case the company is sold to Vodacom.
In such a scenario, the planned $450-500 million deal could fall through as Vodacom is eyeing acquisition of spectrum through the deal to strengthen its presence in the region. Neotel, which offers fixed-and leased-line services as well as internet services, holds 10 MHz of spectrum in the 800 MHz. Post the acquisition, Vodacom plans to offer high-speed data services using spectrum in the 800 MHz band. At present, Vodacom offers data services using spectrum in the 1800 MHz band.
The deal is crucial for the Tata Group-owned undersea cable company which is looking to raise money to pare accumulated net debt of $1.4 billion. The company hasn?t been able to raise funds to meet capital expenditure requirements because the Indian government, a stake holder in the company, has not allowed any share sale. Tata Communications first invested in Neotel in 2006, when it paid about $250 million for a 26 per cent stake. Subsequently, it raised the stake to 67 per cent in Neotel, which has about 1,52,000 subscribers and 1,000 employees.
