Tata Communications’ talks to sell a majority stake in its subsidiary Neotel, South Africa’s second-biggest fixed-line phone operator, to Vodacom SA has lapsed due to regulatory complexities. The negotiations were also affected by certain conditions not being fulfilled.
“Accordingly, the parties have agreed that the proposed restructured transaction can no longer be progressed,” Tata Communications said in a BSE statement.
The Indian company, however, did not state what the regulatory complexities where nor the conditions that were not fulfilled.
“The company remains committed to its investment in Neotel and its commitment to focus on customers, partners and employees in South Africa and providing the highest levels of customer service,” it added.
Tata Communications and Vodacom have been in negotiations since September 2013, following the Tata group company’s decision to exit Neotel, which was one of the major divestments planned as part of Tata group Chairman Cyrus Mistry’s strategy to exit non-core business. The talks, however, excluded spectrum and licences.
In May 2015, Tata Communications had agreed to sell its entire 68 per cent stake in Neotel to Vodacom SA, under a 7-billion-rand agreement. Later on November 23, Tata Communications said it was renegotiating the deal, which was expected to close by the end of this fiscal year,
The Competition Tribunal in South Africa, which looks into anti-trust issues, had earlier granted provisional approval for the deal. But with the renegotiation, the Tribunal was to look into the anti-trust issues from December 10, 2015.
The deal would also have required Indian 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, by paying $250 million.
The company later raised it to about 68 per cent. Nexus Connection and Communitel are the other investors in Neotel.
Tata Communications shares closed up 0.95 per cent at Rs. 333.10 on the BSE on Tuesday, while the benchmark Sensex ended up 3.38 per cent.