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A new Neotel under Liquid Telecom leadership

By , ITWeb
Africa , 10 Feb 2017

A new Neotel under Liquid Telecom leadership

The highly-anticipated acquisition of Neotel by Liquid Telecom has officially gone through.

Group CEO Nic Rudnick says today marks a "completely new start for the company in virtually every way".

"We are very pleased that after a competitive process, we have been able to succeed in the acquisition of what we think is an important asset and which extends the Liquid Telecom footprint down through Africa and gives us a substantial presence in SA for the first time," Rudnick told ITWeb in an interview.

The deal has been on the cards since June 2016, when Liquid announced it planned to buy Neotel for R6.55 billion. The agreement includes a partnership with Royal Bafokeng Holdings (RBH), a South African investment group, which has committed to take a 30% equity stake in Neotel, and came after a long-awaited R7 billion acquisition of Neotel by Vodacom was called off in March 2016.

"It's been an unbelievably difficult transaction, an enormous amount of moving parts and lots of funders to speak to and a whole variety of shareholders – but we are very pleased to be able to complete the transaction now.

"The company needs it and we think that it couldn't have happened at a better time to enable Neotel to re-enter the market in a refreshed way," he says.

Neotel now completely changes hands from former majority shareholder Tata Communications of India and minority shareholder Nexus Connexion, to now be 100% owned by Liquid and RBH. This also means a complete overhaul of the Neotel board and plans to announce a new executive team in the coming weeks.

Rudnick says there will be "an enormous amount of changes to Neotel to move it forward" including a new CEO and CFO, changes to the company's branding, modifications to how the network is built and maintained, and to business practices.

Post-acquisition, Liquid's pan-African broadband network will span 15 countries, with more acquisitions in its future.

Financial strength

The new branding takes Neotel from its traditional orange to Liquid's blue and magenta branding.

"We have completely recapitalised the company so what was dragging Neotel down in the past was an overload of debt and interest repayments – that is now gone," Rudnick explains.

He says that as a consequence, Neotel is now a lot stronger financially and his team plans to focus on what the company does well and expand on that.

"We will be investing in the network; we will be upgrading the network and increasing the maintenance of it, and really providing a whole range of new digital products and services that will now be carried on this revitalised network."

In terms of investment targets, he was coy to give an exact number but says Neotel has significant cash reserves and the investment over the next few years "will be in the billions".

Rudnick believes the strength of the Liquid group is that it operates as a single African network, and now for the first time, SA is part of that footprint. This means local enterprises are able to connect to the rest of Africa, and vice versa, in a seamless, cost-effective way − all on one single network with "no middle parties or chains of contracts between telecoms companies".

"In the coming months, the target is that the market will perceive Neotel in a completely different way. The objective really is for us to become the first-choice business network for enterprises in SA and across the continent."

Rudnick says revamping the Neotel brand is important, but only because it is indicative of what is happening elsewhere in the organisation and is not just an exercise in flag-changing.

"The new brand needs to be reflective of the investment we are making in the network, of the increased service availability that we will be bringing into the market, that we think will really transform the way enterprises communicate with each other and with themselves."

New blood

Neotel has effectively been without a permanent chief executive or chief financial officer since August 2015, when then CEO Sunil Joshi and CFO Steven Whiley were placed on "special leave" pending an investigation into alleged bribery and corruption in connection with a Transnet deal worth R1.8 billion. Both later resigned.

Rudnick says the search for a new CEO is over but it will be a few weeks until the as yet unnamed person takes up the role. He divulged that the new leader will come from outside of SA, saying the person "has been chosen to bring in new ideas and new ways of doing things and not to replicate the same things that we have seen in the South African market in the past".

A new CFO, who has been appointed from within the group, will be announced in the next couple of weeks.

"He is just fantastically skilled and he will make an enormous difference in making sure the investments we are going to be making are done in a very cost-effective way."

Rudnick says the new blood will bring fresh ideas and be able to implement international best practices. He is confident the new leadership vision will be able to build up the new company going forward.

Liquid's staff now becomes around 2 000 with the addition of Neotel's 1 000 employees. The group integration begins today at a staff function in Johannesburg, with employees from all of Liquid's operations in attendance. Rudnick says staff have been positive about the acquisition and changes at the company.

"I think the staff have been waiting for a revitalisation of Neotel. The staff is extraordinarily dedicated, skilled and focused, but at the same time have been frustrated in that they don't feel like they have been able to really achieve what they are capable of. There is excitement now that they can start building again as part of an African-wide network."

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