Plans flow as Liquid takes over at Neotel

Nic Rudnick, Liquid's CEO, said this included a plan to take advantage of spectrum from Neotel, the only telecoms operator in South Africa with valuable "digital dividend" spectrum below 900MHz. He hinted Liquid had big plans to exploit this frequency band in urban and also underserviced areas.

Under the new management, Neotel would shed its image as South Africa's "second network operator" - it was originally licensed to break Telkom's monopoly - and become a leader in telecoms, Rudnick said.

On Friday, Liquid, which operates in 15 markets in Africa, completed the R6.5-billion acquisition of Neotel from India's Tata Communications and other shareholders, giving the Econet Group subsidiary its first significant presence in the South African market. Liquid swooped after Vodacom, under regulatory pressure, failed to strike a deal with Neotel.

Liquid is taking a 70% stake in Neotel and Royal Bafokeng Holdings is buying the remaining 30%, ensuring the firm is empowered at an equity level.

Already, Liquid has moved to change Neotel's branding, dropping its trademark orange colour in favour of a blue and pink motif that emphasises the Liquid Telecom name. The Neotel name stays for now, although the firm goes to market as "Neotel Liquid Telecom".

An early priority will be merging networks to create a single infrastructure across its 15 African territories. "That will provide the ability for enterprises to connect across the continent where we have a footprint on a completely seamless basis," Rudnick said.

"It will be as easy to connect from South Africa to any of the other countries as it will to connect from one side of South Africa to the other."

Operations would also be integrated quickly. A new CEO had been found, and would be named soon. The new CEO was not South African, but had extensive experience in African and international telecoms, Rudnick said.

The new shareholders had recapitalised Neotel, wiping out debt and giving it a robust balance sheet that would enable it to begin upgrading its network.

"Neotel tomorrow moves from being hamstrung with an unsustainable burden of debt to having substantial cash reserves. We have already raised meaningful capital and refinanced existing debt, which has further improved the position. Neotel starts in a very healthy financial position."

Liquid plans to upgrade Neotel's network, including its fibre footprint. It will pump money into new data centres to take advantage of the explosive growth in demand for cloud computing and invest in wireless broadband.

"We will be making use of Neotel's spectrum assets to provide a whole new generation of services," Rudnick said, pointing out that those assets - in the 850MHz, 1.8GHz and 3.5GHz bands - were well suited to building both 4G/LTE and future 5G networks.

"We will make very good use of 850MHz. We are very happy to have it because it allows us to do some very clever things that are not currently happening in the market. It will give us very good in-building coverage, particularly once 5G is launched."

With Royal Bafokeng Holdings, access in underserviced areas will be tackled. "We will look at increasing coverage in some of the outlying areas, not only rural, but outlying towns that tend to be overlooked."

Although Liquid Telecom's principal focus has been on the business and enterprise segments, the recapitalised Neotel would continue to serve the retail consumer market, where it had more than 100,000 clients. However, its legacy CDMA network would be discontinued in favour of newer technology.

It would also deploy fibre to the home, but would be careful not to duplicate infrastructure, to ensure a return on investment. "We won't be rushing into Parkhurst" - a reference to the intense competition in upmarket suburbs.

Rudnick declined to comment on the scandal that engulfed Neotel in 2015, when the company was accused of making illicit payments to a letterbox company called Homix - believed to have links with the Gupta family - to secure a multibillion-rand deal with Transnet. Liquid adhered to "the highest ethical standards" in all markets in which it operated, he said. "Neotel will be operated according to those same high standards."

Meanwhile, Liquid Telecom is still mulling the option of listing, either in Europe or Africa. Econet founder Masiyiwa first raised the prospect of an initial public offering in 2015, and Rudnick said this week that his statement "remains valid".

"We're not rushing towards a listing, but it's something we will continue to explore."

duncan@techcentral.co.za