March 26, 2008 | The Economic Times

Neotel buys Transtel for Rs120 crore

The Tatas push for a dominant place in South Africa's telecom industry has got a fresh boost. South Africa's second fixed-line operator, Neotel, in which Tatas have a majority stake, has acquired Transtel Telecoms for Rs 120 crore. The deal is estimated to increase Neotel's annual revenues by an additional Rs 300 crore.

Transtel is the commercial telecommunications division of Transnet which owns all port and rail infrastructure in South Africa. It operates the country's railways, ports, and pipelines and is a major player in the transport sector.

The deal will be a major boost to Neotel as it aims to compete with Telkom, South Africa's leading telcom operator which has both fixed and mobile operations. This is because, Transtel, whose annual revenues are over Rs 350 crore, has an established telecommunications infrastructure that spans across South Africa, connecting every railway line, pipeline, harbour and airport.

Speaking to ET, sources in Tata Communications said that Transtel, with over 100 locations nationwide, would enable Neotel to deliver and support telecommunications services in South Africa. In a written reply, Ajay Pandey, the MD and CEO of Neotel said, "We are committed to exploring various options to ensure a faster entry into the market. This acquisition provides us a platform for introducing our next-generation services for businesses, providing us a nation-wide presence instantaneously, and therefore the ability to serve the diverse and geographically dispersed needs of our customers."

Importantly, Tata Communications sources here also added that since Transtel was among the few employers of voice and data telecommunication skills in South Africa, the deal would allow Neotel to gain from a pool of staff of more than 500 people, most with scarce competencies in these fields. On the revenue front, Transtel would bring to Neotel a revenue base of around Rs 300 crore from large enterprise customers, including Transnet, they added.

For Transnet, the sale is part of its transformation process. Over the last couple of years, the company has transformed into a pure freight transport and logistics services provider with assets in ports, rail and pipelines to service its customers in the bulk and manufacturing sectors.