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Tata Communications has sold its South African telecom arm Neotel to Liquid Telecom and Royal Bafokeng Holdings for an enterprise value of 6.55 billion rand ($428 million or ₹2,904 crore).
Tata Communications holds a 68 per cent stake in the company, while Nexus Connexion and Communitel are the other investors.
After the deal, Bafokeng Holdings will hold a 30 per cent stake in Neotel, while Liquid Telecom, a subsidiary of South Africa’s Econet Wireless Global, has agreed to buy the remainder of the Tata company’s holding.
The move is part of Tata Communications’ game plan to reduce its debt of nearly $1.5 billion and fits in with Tata Sons Chairman Cyrus Mistry’s strategy to exit non-core businesses.
In June, Tata Communications sold its 74 per cent stake in a data centre business to Singapore Technologies Telemedia, in a deal estimated to be around $650 million.
Success, at last The company had been trying to sell its holding in Neotel since 2013. It had earlier initiated discussions with a Vodafone subsidiary in Africa, but the talks were called off earlier this year.
The transaction with Liquid Telecom, when concluded, will create the largest pan-African broadband network and business-to-business telecom provider.
The transaction, which is subject to South African regulatory approvals, is expected to be completed later this financial year. FirstRand Bank advised Tata Communications on the deal.
The agreement will require government approval as the Centre holds a 26 per cent stake in Tata Communications, formerly Videsh Sanchar Nigam Ltd (VSNL).
Tata Communications had acquired the Neotel stake in 2006, following the South African government’s initiatives to deregulate the telecom market, for $250 million. The company later raised its stake to about 68 per cent.
On Tuesday, Tata Comm shares rose 2.44 per cent to close at ₹460.55 on the BSE.
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