MUMBAI: India's largest private sector conglomerate Tata Group is selling South Africa'sNeotel seven years after it acquired a controlling stake in that country's second largest fixed line telecom operator to Vodafone's SA unit Vodacom. The deal is expected to value Neotel, in which Tata Communications holds 68.5%, at about $550 million.
The transaction will mark the group's biggest and first overseas asset sale under chairman Cyrus Mistry. Interestingly, not too long ago, the two companies, Tata and Vodafone, were locked in a battle for UK's Cable & Wireless but the latter walked away with the trophy.
The Tatas decided to explore an exit from Neotel late last year, since the company required long-term commitment and significant cash deployment in an intensely competitive market. Tata Communications, which is delisting from the New York Stock Exchange, has been exploring options to deleverage the balance sheet.
Nexus Connection holds a 19% stake with Communitel owning the rest12.5% in Neotel. On Monday, Vodacom said that it has entered into exclusive negotiations to buy Neotel from its shareholders. NM Rothschild is advising Vodacom, while Standard Chartered is the banker to Tata Communications.
The Neotel sale puts Tata Communications in reverse gear in its efforts to transform itself into a global player in telecom. The $100-billion group, which has been the face of India Inc's globalization image, has been reviewing its global asset portfolio as a weakening global economyimpacts its businesses. And the Neotel sale is in that direction. The Mumbai-based Tata Communications' debt stood at Rs 12,362 crore as on March 31.
Mistry is believed to be working on plans to pare the group's significant debts on the books of the steel and telecom businesses. It could also look at cutting stakes in entities like Tata Teleservicesand Viom Networks where it owns majority shares currently. The exit of Tata Global Beveragesfrom US consumer products company Glaceau for $1.2 billion remains its biggest divestment till date.
Neotel was founded in 2006 after the South African government deregulated the telecoms market. Tata Communications became the controlling shareholder of Neotel in 2009 after buying out other financial investors. Neotel has been going through financial turbulence for many years and it recorded a net loss of $45.9 million in fiscal 2013. However, for the first time the Johannesburg-based company's operating profit turned positive in the same period.
The transaction will mark the group's biggest and first overseas asset sale under chairman Cyrus Mistry. Interestingly, not too long ago, the two companies, Tata and Vodafone, were locked in a battle for UK's Cable & Wireless but the latter walked away with the trophy.
The Tatas decided to explore an exit from Neotel late last year, since the company required long-term commitment and significant cash deployment in an intensely competitive market. Tata Communications, which is delisting from the New York Stock Exchange, has been exploring options to deleverage the balance sheet.
Nexus Connection holds a 19% stake with Communitel owning the rest12.5% in Neotel. On Monday, Vodacom said that it has entered into exclusive negotiations to buy Neotel from its shareholders. NM Rothschild is advising Vodacom, while Standard Chartered is the banker to Tata Communications.
The Neotel sale puts Tata Communications in reverse gear in its efforts to transform itself into a global player in telecom. The $100-billion group, which has been the face of India Inc's globalization image, has been reviewing its global asset portfolio as a weakening global economyimpacts its businesses. And the Neotel sale is in that direction. The Mumbai-based Tata Communications' debt stood at Rs 12,362 crore as on March 31.
Mistry is believed to be working on plans to pare the group's significant debts on the books of the steel and telecom businesses. It could also look at cutting stakes in entities like Tata Teleservicesand Viom Networks where it owns majority shares currently. The exit of Tata Global Beveragesfrom US consumer products company Glaceau for $1.2 billion remains its biggest divestment till date.
Neotel was founded in 2006 after the South African government deregulated the telecoms market. Tata Communications became the controlling shareholder of Neotel in 2009 after buying out other financial investors. Neotel has been going through financial turbulence for many years and it recorded a net loss of $45.9 million in fiscal 2013. However, for the first time the Johannesburg-based company's operating profit turned positive in the same period.
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