Neotel secures R7.5bn for expansion

11 December 2008

South African telecommunications operator Neotel has secured R4.4-billion from leading financial institutions and development agencies to fund the roll-out of its infrastructure roll-out beyond the country's major metropolitan areas, where its services are currently limited to.

The fixed-line operator has secured the debt facility, with terms ranging between seven and 10 years, arranged by Nedbank Capital, Investec Bank and the Development Bank of Southern Africa.

The funding is being provided by consortium of institutions, including Nedbank Capital, Investec Bank, the Development Bank of Southern Africa, the Industrial Development Corporation and the Infrastructure Finance Corporation.

"We launched our customer services during the course of 2008, and finally the South African consumer not only has a choice, but they are seeing real value," Neotel MD Ajay Pandey said in a statement this week.

"We continue to grow our network aggressively, to ensure that customers have access to the value adds that we bring to the telecommunications market."

Meaningful competition

Investec Project & Infrastructure Finance consultant Robert Gecelter said his company was "proud" to be supporting Neotel, which was the first true competitor for Telkom.

He added that the bank would continue to do more to both lower the price of broadband communications, as well as to build the much-needed capacity in the South African market.

The Development Bank of Southern Africa added that the project was in line with their objective to support economic growth and development, through reducing telecommunications backlogs.

"The Industrial Development Corporation views the provision of affordable telecommunication services as a key enabler of economic development," added Industrial Development Corporation public-private partnership unit head Lindi Toyi. "We are therefore proud to continue playing a role in the on-going development of Neotel and its provisioning of telecom infrastructure."

Project confidence

Neotel chief financial officer Arun Gupta said that for a deal of this size to go through despite the current global economic crisis showed the confidence that lenders had in the company.

The deal is also double the size of the company's previous non-recourse loan, a R2-billion bridging finance facility secured in 2006.

"This in undoubtedly one of the most significant project financings of the year, and the ability to pull off a financing of R4.4-billion under current financial market conditions is a testament to both the belief in the offering, which will change the shape of telecommunications in South Africa, and in the strength of the shareholder grouping, led by Tata Communications of India," said Nedbank Capital Infrastructure Project Finance head Mike Peo, who has led the financing process over the past two years.

In addition to the debt facility that has been secured from the lenders, Neotel will also be receiving a R3.1-billion cash injection from its shareholders, which include Tata Communications, Eskom, Transnet, and black empowerment partner groups.

SAinfo reporter