South Africa's largest mobile operator Vodacom announced on Monday that it has reached an agreement with shareholders of Neotel to acquire 100% of the company for R7 billion.

Vodacom's announcement follows reports from last year that it had entered into exclusive talks regarding the potential buyout of 100% of the shares of Neotel.

Fixed line telco, Neotel, is South Africa’s second provider of fixed telecoms services for both businesses and consumers in the country. Neotel’s main competitor in the fixed line market is Telkom.

According to a statement Neotel will become a subsidiary of Vodacom South Africa and the combination with Vodacom’s fixed enterprise business is expected to create a national service provider with annual revenues of more than R5 billion.

Such a deal gives Vodacom access to Neotel’s 15,000 km fibre-optic cable network, including 8,000 km of metro fibre in Johannesburg, Cape Town and Durban, a statement reads.

The telco is also expected to gain access to Neotel’s 2 x 12 MHz of 1800 MHz spectrum, 2 x 5 MHz of 800 MHz spectrum and 2 x 28 MHz of 3.5 GHz spectrum.

Commenting about the transaction Vodacom group chief executive officer Shameel Joosub said in a statement, "Through the combination of these two businesses, the provision of a wider range of business services and much needed consumer services like fibre-to-the-business and fibre-to-the-home becomes a concrete reality – it will be good for the consumer, good for business and good for the country.

“And for our investors, the transaction fits perfectly within the priorities of Vodacom’s growth strategy focused on continuing our investment in data and our Enterprise business."

The telco also revealed that it plans to fund the acquisition through available cash resources and existing credit facilities.

The South African telco has noted that the transaction remains subject to the fulfilment of a number of conditions precedent including applicable regulatory approvals.

Vodacom expects to close the deal before the end of the financial year.