Out-Law News 2 min. read

South African telecoms network set for expansion after acquisition


Pan-African telecoms operator Liquid Telecom has announced plans to provide fibre network access across sub-Saharan Africa after acquiring South African communications network operator, Neotel, in a 6.55 billion rand (ZAR) ($487m) deal.

Liquid Telecom said it plans “to make extensive upgrades and expansions to Neotel’s network, delivering greater levels of high-speed connectivity to more customers across South Africa”.

According to Liquid Telecom, a subsidiary of the privately-held diversified telecommunications group Econet Global, “substantial new capital” will see “a revitalised Neotel emerge on the South African market with significantly enhanced service offerings for enterprises and consumers”.

Liquid Telecom said on 10 February it plans “to make extensive upgrades and expansions to Neotel’s network, delivering greater levels of high-speed connectivity”. Liquid Telecom also plans “substantial investment in Neotel’s data centre capabilities, which currently include two tier 3 designed state-of-the-art data centres in Johannesburg and Cape Town”.

Neotel’s operations and focus will “for the first time also become pan-African”, Liquid Telecom said. Neotel’s network in South Africa “will link together with Liquid Telecom’s extensive fibre footprint to offer access via a single connection to over 40,000 kilometres of cross border, national and metro fibre networks… giving Liquid Telecom unrivalled reach across Eastern, Central and Southern Africa”.

Group CEO of Liquid Telecom Nic Rudnick said: “The refinancing of the company’s balance sheet will see a revitalised Neotel enter the market with the ability to offer consumers and businesses greater quality services and products delivered through world-class networks.”

Liquid Telecom and 30% equity partner Royal Bafokeng Holdings (RBH), a community-based South African investment group, said they have been preparing for the integration of Neotel since receiving regulatory approval for the acquisition in December 2016.

Telecoms expert Diane Mullenex of Pinsent Masons, the law firm behidn Out-Law.com, said: “The consolidation of Liquid Telecom and Neotel will combine the resources and expertise of both providers to deliver a faster and more reliable connection across Africa. This is also likely to transform the market by increasing competition in the region, improving the services to businesses and customers alike, who will both benefit from the suite of opportunities this creates.”

Earlier this year, Liquid Telecom completed the acquisition of a leading Tanzanian internet service provider Raha, which the company said would see further investment in both Raha’s network and services across Tanzania. Liquid Telecom said the deal would also enhance its East Africa Fibre Ring, which connects Kenya, Uganda, Rwanda and Tanzania “with direct connectivity to international subsea cables”. “It is the region’s first fully redundant fibre ring with multiple routing options, ensuring that customers are not affected by fibre cuts and network outages,” Liquid Telecom said.

Technology research and consulting services firm the International Data Corporation (IDC) said last year spending on information and communications technology (ICT) in South Africa was projected to exceed $26bn in 2016, as organisations “increasingly embrace digital transformation initiatives in a bid to streamline their costs and bolster their flexibility”.

According to the World Bank’s 'private participation in infrastructure database', the telecoms sector in sub-Saharan Africa was the sector with the largest investment share (68%) between 1990 and 2015. Total telecoms investment in the region over the period amounted to more than $114bn, with 208 telecoms projects reaching financial close, the database showed.

Last December, the African Development Bank (AfDB) said it had approved funding for a major infrastructure project designed to boost access to broadband internet across Niger, Nigeria and Burkina Faso.

The AfDB gave the green light to issue a loan of €31.4m and a grant of €12.5m to finance Niger’s component of the overall 1,510km trans-Saharan dorsal fibre optic broadband project.

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