Vodacom remains hopeful on Neotel deal

Mergers, Acquisitions and Financial Results

Vodacom its still confident that its R7bn acquisition of Neotel will go ahead, despite a protracted investigation by the Competition Tribunal and allegations of impropriety by Neotel executives over the awarding of a lucrative telecommunications contract by Transnet.

Vuyani Jarana, chief officer of Vodacom Business, said on Wednesday that he expects the Competition Tribunal to wrap up its probe of the deal in November. The Competition Commission has recommended that the deal be approved, but imposed a number of conditions, including that Vodacom not be allowed to make use of Neotel’s spectrum for a period of about two years.

Jarana said the suspension of Neotel CEO Sunil Joshi and chief financial officer Steven Whiley over a potential bribery scandal involving what may have been corrupt payments to a third party to secure a multibillion-rand contract at Transnet should be and is being dealt with by Neotel’s board of directors.

He said Vodacom parent, the UK-based Vodafone, has not communicated anything formal to its subsidiary about what to do regarding the allegations.

According to a recent report in the Mail & Guardian, Neotel may have made dodgy payments to a company called Homix in order to secure a telecoms contract worth R1,8bn from Transnet.

Quoting correspondence from Neotel’s auditors, Deloitte, which the M&G said it has seen, Neotel paid a 2% “success fee” to Homix of R36m to secure the Transnet deal. In addition, Homix was promised a further R25m to secure the related sale of Neotel assets to Transnet, though this money hasn’t been paid, the newspaper said.

The report raised questions about the role of Transnet finance chief Anoj Singh as well as Neotel’s Joshi in ensuring the payments to Homix. Joshi allegedly ordered his staff to pay the R36m to Homix after meeting with Singh and securing payment from Transnet to Neotel. The M&G said Transnet has denied that Singh was party to any discussions about a payment to Homix.

Jarana said anyone, “regardless of who they are”, would be concerned about allegations such as the ones levelled against Neotel. “But they are there for Neotel and its board to deal with. It’s not for us to be involved in it. We have a programme we are running with to do the acquisition.”

He said Vodacom is participating fully in the Competition Tribunal process with the expectation of a successful outcome.

But what if the deal is blocked, or what if Vodacom has to walk away because of the corruption allegations?

“If the deal doesn’t come through, we have always maintained we are investing in the business in any case in terms of the access network, and so on,” Jarana said.

“Neotel is important to us, but we are continuing to invest in fibre to the home and fibre to the business in any case. Our programme will not be derailed, but it will slow down our pace [if the acquisition doesn’t happen].”
Source: Techcentral  9 September 2015