Mergers, Acquisitions and Financial Results

Neotel has received additional funding of R484 million to add to the R2 billion loan granted last month to the second national fixed-line telephone operator. The new loan was secured by empowerment shareholder Nexus, which holds a 19 percent stake in Telkom's only competitor, from the Development Bank of Southern Africa (DBSA).

The money will be used to build infrastructure to enable Neotel to launch full-scale services to compete with Telkom. Neotel won the second network operator licence three years ago and officially launched last August.

The DBSA, Industrial Development Corporation, Nedbank and Investec granted Neotel a R2 billion loan facility last year. The same financiers will arrange an additional long-term loan of R4 billion after 12 months.

Neotel said it would need a total of R8.5 billion, made up of 60 percent debt and 40 percent equity, to build its network over the next five years. Its shareholders, which include Eskom, Transtel, Tata, Two Consortium and Communitel, are expected to pump cash into Neotel.

Neotel spokesperson Mala Suriah said the finance was "currently being organised". She did not comment on how much its shareholders had contributed so far. Nexus chairman Kennedy Memani said yesterday that the R484 million loan would be repaid partly from dividends when Neotel started making profit in the next three to five years.

Suriah said Neotel was "on track to launch services in a phased approach to the enterprise and corporate markets. The first of these services will be available later this quarter." Neotel's roll-out plans include implementing wireless services for the residential market, as there is no clarification on whether it will get access to Telkom's last mile, the telephone cable linking homes and offices to the network.

The allocation of the 800 megahertz spectrum by the Independent Communications Authority of SA (Icasa) will make it possible for Neotel to roll out services without having to invest in underground cables. Icasa has indicated that it would allocate the spectrum, which is used for broadcasting, to telecommunications operators. Suriah said Neotel was in the process of providing Icasa with additional information the regulator had requested. She expected the spectrum to be allocated shortly.

Business Report