Tata Communications to look for new buyer for Neotel unit after failed Vodacom deal

Tata Communications Ltd is looking for another buyer for its South African fixed-line subsidiary Neotel after a deal with Vodacom Group Ltd fell through, Chief Executive Vinod Kumar said on Wednesday.

Tata Communications has been looking to cut debt, and the Neotel deal would have helped it reduce some of the $1.5 billion in borrowings on its books.

On Tuesday, Vodacom, a unit of Vodafone, dropped the planned acquisition of local fixed line operator Neotel, citing regulatory complexities.

“We have been in discussions with Vodacom so there is no other potential buyer we are engaged with … however, people in the market have expressed interest and now the time has come for us to explore those options,” Kumar told Reuters in an interview.

“Our resolve is to still exit Neotel from a Tata Communication perspective but it has to be done in the right manner and making sure best financial structure emerges from the exit.”

Neotel has some $350 million of debt of its own and is not able to service the debt by itself. Kumar said, Tata Communications would not need to help with more than $10 million for the unit’s debt servicing.

“It’s bit of a period when we need to restock, but frankly looking at the financials of the business, the shareholders are going to back Neotel till we find an alternative solution,” he said.

Tata Communications provides telecom and data services infrastructure through its network of undersea and terrestrial cables, and the Neotel deal was part of the company’s plan to shed non-core assets.

Tata Communications also expects to sell a stake in its data centre unit in the next few months, Kumar said, adding that the company would use proceeds to cut debt. It is currently in talks with potential partners.

“We expect that to conclude sometime in the next few months at which point we will use the proceeds to retire debt,” he said.