South African mobile giant Vodacom wants guarantees and securities from Tata Communications as protection from any liabilities that may arise from its acquisition of the Tata-led Neotel fixed line consortium.
The demand follows investigations into allegations of impropriety at Neotel which has seen its chief executive Sunil Joshi and chief financial officer Steven Whiley on special leave while the claims are investigated.
The claims of fraud at Neotel are centred around a payment of 66 million rand allegedly paid by Neotel to a company to secure a contract worth almost 2 billion rand from parastatal company Transnet.
Vodacom, a subsidiary of international mobile company Vodafone, has been granted permission from regulatory bodies to buy out Neotel, with certain conditions attached.
The 7 billion rand deal would effectively end plans by Neotel to become the second fixed-line network operator in South Africa after the state-owned Telkom.
Announcing the financial results for Vodacom, chief executive officer Shameel Joosub said that while the fundamental elements of the deal would not be affected, the group was “looking for certain guarantees and securities to cover potential liabilities’’.
The deal is still facing opposition from Vodacom competitors, including Telkom and the country’s second and third largest mobile operators, MTN and Cell C, who have argued that the acquisition would give Vodacom an unfair competitive advantage.
The Independent Communications Authority of South Africa (ICASA), which regulates spectrum, has granted permission for the deal despite the objections, as has the Competition Commission, albeit that both regulators set conditions to the deal.
It is, however, still to be ratified by the Competition Tribunal.
ICASA wants the new merged company to invest heavily in rural areas, where telecom access remains a challenge; while the Commission has called for Vodacom to defer its use of the radio frequency spectrum licensed to Neotel and invest half of its capital investment in fixed-line value-added services.
Although the Competition Tribunal is still to finalise its hearings, Joosub remained confident that the deal would be finalised by the end of this year.
He said Vodacom plans to speed up its fibre network deployment with the Neotel deal to provide connections to millions of houses and business parks.