Tata Communications eyes African markets with Neotel expansion
December, 14th 2011
Tata Communications plans to turn its South African arm Neotel into a $1-billion enterprise by expanding its footprint.
The company aims to deliver a gamut of enterprise data services in countries near South Africa, and eventually expand into other markets across the continent, a top executive with direct knowledge of the matter told ET.
The Tatas are weighing the options before Neotel, the executive said, adding that the telecom network operator may either seek licences in Namibia, Botswana, Zimbabwe, Swaziland, Lesotho and Mozambique or extend its existing fibre optic network into these markets.
"Africa is a huge emerging market and Neotel will leverage its presence in South Africa for growth across the continent," said Ajay Pandey, president (corporate affairs & business opportunities) at Tata Communications.
"Decisions, like applying for licences to deliver enterprise connectivity in the B2B space in new African markets or extending Neotel's fibre network into neighbouring countries, will be taken in consultation with our partners."
The Tatas own 69.5% in Neotel through Tata Communications and Tata Africa Holdings, while the remaining is held by local partners Nexus Communications and Communitel.
Nexus, which represents South Africa's Black Economic Empowerment group, is the second largest stakeholder in Neotel with 19% ownership, while Communitel holds 12.5%. Pandey, who was managing director of Neotel until July, sees strong growth potential in Africa.
"Neotel already generates $450 million in annual revenues and has a compounded annual growth rate of 25-30%," he said. "This growth comes from South Africa alone. There is huge revenue potential and the shareholders like the BEE partner group will shortly take a call on expanding operations beyond South Africa," he said.
Neotel is a converged communications network operator and provides both domestic and global connectivity in South Africa. As a key facilitator of the SEACOM undersea fibre optic cable system, it harnesses its international bandwidth capacity to deliver value-added voice and data services for businesses and wholesale network operators.
"Neotel will explore opportunities to grow its data centre, security solutions and internet leased lines business across Africa," Pandey said.