Tata-led Neotel in South Africa gets $741 mn funding support

December 11th, 2008 - 3:41 pm ICT by IANS  

Johannesburg, Dec 11 (IANS) Neotel, a Tata Group-led telecommunications consortium in South Africa, has secured 7.5 billion rands ($741 million) in funding and debt instruments as it seeks to take on the state-owned fixed line operator Telkom.Clearly buoyed by the aggressive rollout that has seen Neotel tear up footpaths across the entire city in recent months to install wireless communications cables, a consortium of financiers Wednesday inked funding agreements with Neotel following two years of discussion.

Neotel, the second-biggest fixed-line phone operator in South Africa, has promised to install a telephone within 48 hours of application.

The funding consists of new equity and debt. The 4.4 billion rands ($435 million) in debt facilities were arranged by Nedbank Capital, Investec and Development Bank of Southern Africa. Neotel shareholders, including Tata, will contribute the 3.1 billion rands ($305 million) in equity, proportional to their interests in the group.

Tata is on the verge of owning 56 percent of Neotel through its affiliates Tata Communications and Tata Africa. This new shareholding will come into effect as soon as regulatory approval is received for Tata Communications to acquire 30 percent of Neotel from Telkom and state-run electricity firm Eskom.

Ajay Panday, chief executive of Neotel, said at the signing that his company plans to invest between 1.5 and 2 billion rands ($148-$198 million) within the next two years on its network. Provisional finance of two billion rands had already been deployed in infrastructure provision since 2006.

Panday said Neotel had been aggressively rolling out its new generation converged network across the country to provide business services.

“We have also launched our consumer services this year to finally give South African consumers not only a choice, (but also an opportunity) to see real value,” Panday added.

According to Mukul Sharma, head of Neotel’s business consumer unit, there had been more than 25,000 requests since the service was launched but these could not all be provided “because we are still rolling out our networks”.

“When we started operations in March, we only had 25 base stations. We now have about 100 and by March 2009, we should have 200,” Sharma added.

Neotel expects to have the four main cities of South Africa - Johannesburg, Pretoria, Cape Town and Durban - fully covered by the end of next year.

In a faltering economic climate, the huge confidence by lenders in Neotel was seen by analysts here as a very encouraging move.

Mike Peo, head of infrastructure project financing at Nedbank Capital, said confidence in Neotel’s offering and the strength of its shareholders had allowed the company to secure so much funding under current market conditions.

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