Tata Communications Ltd's proposed deal to sell fixed-line assets of its South Africa-based telecom arm Neotel Pty Ltd to Vodacom SA, a subsidiary of British telecommunication giant Vodafone Plc, under a revised deal, has come unstuck.

The two companies had entered into exclusive talks for due diligence pertaining to the deal in 2013. The structure of the deal, worth $675 million when originally announced, and its commercial terms were subject to regulatory and competition authority approvals.

At the time of the acquisition announcement in May 2014, Vodacom had clarified that it will not assume Neotel’s debt of about ZAR 4.815 billion as of end-March 2014.

Last November, Tata Communications said the proposed deal to sell South African communication venture Neotel, in which it owns 67.32 per cent, for an enterprise value of ZAR 7 billion (just under $500 million) is being renegotiated.

Neotel is South Africa’s second-largest fixed-line phone operator

A month later, it said the revised terms have been finalised. Under the revised deal structure, Neotel's wireless spectrum and licences were excluded from the deal. Instead, Neotel was to offer mobile roaming services to all local mobile network operators, including Vodacom.

Vodacom and Neotel had submitted documents seeking approval for the revised transaction to the Competition Tribunal in South Africa.

Tata Communications said on Tuesday that due to complexities in regulatory approval besides non-fulfilment of certain conditions for the transaction, it can no longer proceed.

Neotel, which started operations in 2007, is the second-largest provider of fixed telecommunications services for both businesses (commonly referred to as enterprise services) and consumers in South Africa.

It is one of South Africa’s leading converged communications network operators. It provides value-added voice, internet and data services for businesses, wholesale network operators and providers and retail customers using its IP Next Generation Network, powered by Neotel’s fibre optic backbone.

It connects the major centres in South Africa to each other and to the world, directly linking its infrastructure into Tata Communications’ global tier I network.

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