After about seven years of making very little difference to the South African telecoms consumer, the country’s so-called second national operator is set to disappear into the folds of Vodacom, where it will cease to exist as a standalone entity.

At the beginning of this month, it was revealed that South Africa’s biggest mobile operator is negotiating to buy 100% of Neotel from global conglomerate Tata Communications. Current estimates are that Vodacom could pay anywhere between R5 billion and R15 billion for Neotel, depending on the latter’s debt levels, should the deal ultimately receive all the required regulatory approvals.

It is hardly a shocker that Vodacom would want to snap up Neotel. After all, the company does have some nifty assets and Vodacom is looking to bulk up its corporate unit, Vodacom Business. Neotel has access to more than 15 000km of high-speed fibre-optic cable, as well as holding scarce spectrum in the 800MHz
range.

When all is said and done, the acquisition is expected to boost Vodacom Business’ revenue by some 50%, and allow it to go head-to-head with Telkom in the enterprise space.

It is also not a huge surprise that Neotel can no longer stand alone as an entity in the local fixed-line market, which is still controlled by Telkom, which – in turn – is still controlled by government, for all intents and purposes.

While the highly-anticipated (and much-delayed) launch of the second national operator gave South Africans hope that they would finally be free from Telkom’s tight, monopolistic grip, Neotel was quickly forced to change its tune.

With the market’s dwindling appetite for fixed-lines, no access to the local loop and a rapid uptake of mobile telephony in South Africa, the newcomer had to concede that taking on Telkom – especially in the consumer space – could only end badly.

Instead, Neotel sensibly decided that discretion is the better part of valour and started focusing on niche areas of the enterprise market. Even there, it hardly gave Telkom a run for its money and its impact on the local market can be described as underwhelming – indeed a far cry from the telecoms revolution that was promised with its arrival.

But even in 2006 – in light of its difficult birth (much delayed by licensing issues) – some visionary (or cynical, as they were called then) observers speculated the arrival of the second national operator may have been too late to make a difference.

I guess they were right and we’ve come full circle, and Neotel’s demise will be as unremarkable and irrelevant as its arrival. They say Africa is a tough place.

Happy reading!

Martin Czernowalow