Africa's largest fibre network will be formed as Liquid Telecom buys South African converged network operator Neotel.
The deal, valued at ZAR 6.55 billion (USD466m), has received unconditional approval from the Independent Communications Authority of South Africa (ICASA). This follows approval from South Africa’s Competition Commission in October 2016; the transaction will create the largest pan-African fibre network and B2B communications services provider. Liquid Telecom’s partner, South African investment group Royal Bafokeng Holdings (RBH), will own a 30% stake in Neotel.
The combined network assets and service platforms will give Liquid Telecom reach across Eastern, Central and Southern Africa, enabling it to offer access via a single connection to over 40,000km of cross border, national and metro fibre networks in 12 countries: Botswana, DRC, Kenya, Rwanda, South Africa, Tanzania, Uganda, Zambia and Zimbabwe, with onwards connectivity to Lesotho, Somalia and Mozambique.
Commenting on the approval, Nic Rudnick, Group CEO of Liquid Telecom, said: “We are delighted to have received regulatory approval to complete this transaction. The combined companies will create an unparalleled footprint covering key markets across the continent.... We will be able to offer African companies the highest quality and most extensive connectivity on the continent.”
Albertinah Kekana, CEO of RBH, said: “Our decision to partner with Liquid Telecom and Neotel is in-line with our diversification strategy which seeks to invest in high growth sectors. Together, we are well positioned to expand through telecommunications infrastructure and services sector in other key markets beyond South Africa.”
Speaking on behalf of Neotel, Non-Executive Director in Charge, Kennedy Memani, said: “We welcome ICASA’s approval of this transaction. Leveraging the strengths of Liquid Telecom, Neotel’s staff and customers will benefit from the stability, planned expansion and increased investments into the business. This will enable Neotel to reach its full potential in South Africa and across the African continent.”
Liquid Telecom will invest in Neotel’s products and services in order to support the rising demand for network services in South Africa and other African countries. Neotel will also benefit from Liquid Telecom’s pan-African experience and technology leadership, helping to enhance systems and processes across its operations as well as drive profitability. The transaction will transform Liquid Telecom’s presence in South Africa, where Liquid Telecom’s growing base of corporate and enterprise customers will benefit from Neotel’s extended services portfolio and advanced network reach.
The Neotel deal continues a period of accelerated growth for Liquid Telecom, which has combined strategic acquisitions, such as the recent joint venture in Botswana and the acquisition of Tanzania’s leading ISP Raha, with ongoing investment in the rollout of fibre. Since its launch in 2006, Neotel has invested over ZAR 7 billion (USD477m) in infrastructure, deploying a nation-wide backbone fibre connecting the top 40 cities and towns in South Africa.
The transaction, which is expected to close in the first quarter of 2017, includes two of Neotel’s Tier 3 designed state-of-the-art data centres in Johannesburg and Cape Town, which offer a combined 1700 square metres of rack space. The facilities serve major carriers, ISPs, enterprises and international service providers, and will complement the East Africa Data Centre, which Liquid Telecom operates in Nairobi, Kenya.
Neotel has fully redundant backhaul fibre to landing stations with access to all five of the international subsea cables serving South Africa (SAT-3, SAFE, SEACOM, EASSy and WACS). It is either an owner or landing partner on all these cable systems. Liquid Telecom also owns significant international subsea capacity, and is building its own subsea cable linking the east coast of Africa, Liquid Sea.