VSNL starts operations in S Africa
The Economic Times — September 2, 2006

Tatas-owned Videsh Sanchar Nigam's South African telecom venture, Neotel, kicked off operations on Thursday. Neotel, formerly known as the Second National Operator (SNO), will invest Rs 7,100 crore (11 billion rand) over the next ten years for expanding its reach and offerings. VSNL is the largest stakeholder in Neotel and has 26 per cent holding in this fixed line service provider. When contacted by ET, officials at the Tata-owned telco refused to divulge their share of investment. In Neotel, the managing director, Ajay Pandey, and its chief financial officer are VSNL's nominees.

To begin with, Neotel has rolled out international wholesale services. Later on, the telecom company is likely to launch enterprise services - national private leased circuits, international private leased circuits, IP virtual private networks, internet connectivity, fixed and wireless telephony. It is also slated to introduce retail fixed-line services, both national and international by March '07. Until now, Telkom was the monopoly player in fixed line business in South Africa. Market watchers share the view that entry of Neotel will pose competition for Telkom and will bring down tariff rates in the country.

"Neotel aims to reduce the cost of doing business in the country... we anticipate accumulative capital expenditure of more than 11 billion rand in the first 10 years of our operation," Neotel MD Ajay Pandey, told the media in South Africa on Friday. The company has also set an ambitious target of taking 15 per cent of its rival Telkom's revenues in the next three to four years. Neotel apart, the Tatas are also eyeing to be a major player in the South African telecom market.

The group has already finalised plans to pick up 26 per cent stake in the South African government's new telecom venture. The upcoming JV company, 74 per cent owned by the South African government, is being called "InfraCo" and will be the third network operator in South Africa.