Neotel scuttles arivia rumours

By Nicola Mawson for Neotel
Johannesburg, 07 Dec 2006

SA's second national operator, Neotel, says it has far too much on its plate to even consider looking at buying arivia.kom, as was suggested by several market observers recently.

MD Ajay Pandey says there is "enough on Neotel's plate", and more than enough to do with rolling out before the company can even consider buying an IT services company.

He was responding to market speculation that Neotel could be a good match for the IT service outsourcing parastatal.

However, Pandey did not completely scuttle the idea the company may buy an IT services firm in the future. He says the future of telecommunications is in companies that offer both telecoms and IT.

"I'm not saying that we'll shy away," says Pandey. He adds that the company may look at working closely with an IT firm. "An acquisition is just one way of doing it."

For sale

Arivia was put up for sale by state-owned utilities Eskom and Transnet, in October, when the companies indicated they would sell their entire shareholding of arivia on the open market.

"The boards of Eskom Holdings and Transnet have approved the sale in the open market of their entire shareholding in arivia," Transnet communications GM John Dludlu said at the time.

Arivia - formed through a merger of the IT businesses of Eskom, Transnet and Denel in 2000 - has for the past year been held by Eskom (with a 58.5% shareholding) and Transnet (41.5%). Denel disinvested from arivia early this year.

Arivia acting CEO Kiruben Pillay has previously said he anticipates the sale of equity stakes held by Eskom and Transnet would be concluded by March.

Market speculation

Some analysts have said likely buyers for arivia could include Dimension Data and Telkom-BCX, as well as some multinationals. Others have been adamant listed companies would shy away from the group and its parastatal culture.

Growing market speculation also had it that Neotel would likely put in a bid for arivia, whose exact value is being determined.

Neotel and arivia already have a working relationship, indicated in a statement released by the parastatal in September, when the companies said they would collaborate on various ICT-related projects as strategic alliance partners.

"This will enable the two companies to jointly develop converged electronic communications services and products leveraging off their complementary areas of expertise and core services," noted the statement.

Arivia has historically been a significant user of bandwidth provided by Eskom telecommunications and Transtel. The entire arivia network operates over this bandwidth and, as a natural progression with both entities being shareholders of Neotel, arivia can expand commercial services over the core network that Neotel will own and manage, said the statement.

Eskom has since said it is looking at exiting Neotel as a shareholder in line with its focus on its core competency of providing power.