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Johannesburg - Thursday's announcement that Japan's Nippon Telegraph and Telephone Corporation (NTT) is to acquire South Africa's Dimension Data Holdings [JSE:DDT] for R24.4bn is an indication of a trend where telecommunication firms will strive to be end-to-end IT providers, say analysts.
"NTT is traditionally a telecoms company and is now moving into providing other services," said ICT industry analyst Spiwe Chireka.
The trend is also evident with firms such as the MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD], which are moving into new areas with their respective MTN Business and Vodacom Business divisions.
"Instead of building out a separate entity, NTT is acquiring an existing service provider," said Chireka. "Given the size of Dimension Data, only a company the size of NTT could afford it and know what to do with it."
She said that MTN, for example, is expected to purchase smaller companies in the rest of Africa as it pursues its IT strategy.
"Looking at it purely from an IT perspective, Dimension Data has a customer base in the enterprise segment and NTT wants to get into the enterprise space internationally. Didata has carved a nice little niche for itself in emerging regions, providing NTT with a base for its geographic expansion plan," said Chireka.
Didata to delist
Kaplin Equity Analysts' Irnest Kaplin said it will be sad to see Dimension Data delist, which will be part of the takeover process.
"It will give shareholders a slight premium of 20% on the last traded price, so they'll get a bit of cash, but they can't take part in Didata going forward," he said.
"The company was on a good wicket. The last five years have been spent fixing up Dimension Data and it has produced good results. It'll be sad to see the company leave the exchange.
"On the other hand, this is an exciting development. Dimension Data is a people company. It is strongly entrepreneurial and the biggest thing NTT will gain is the existing expertise and good people that Dimension Data has. If it keeps these intact, this will be a great play for NTT," said Kaplin.
He added that there was also an interesting opportunity for NTT to break into the local telecommunications space, leveraging Dimension Data's position in the local market and the existing operations of subsidiary Internet Solutions.
Into the cloud
CEO of NTT Satoshi Miura said the firm is keen on embracing Dimension Data's entrepreneurial spirit and retaining its skills.
"We are delighted that the board of directors of Dimension Data has unanimously agreed to support our offer," he said, via a translator.
"By leveraging the complementary strengths of both companies we are confident that we will provide end-to-end, global and high quality ICT services. Dimension Data and NTT share the common vision to create new services and values to succeed in the coming age of cloud computing."
Miura said NTT has not managed to develop IT solutions for the global market and has also lacked geographic reach.
"This is where the strength of Dimension Data lies," he said.
"It (Didata) has a very well balanced profit structure and strong client base. It enjoys a very strong global brand. This is a company which has a strong presence in rapidly growing regions like Africa, South America and the Middle East."
Didata CEO Brett Dawson said: "NTT has a clear understanding that operations in IT are different from the telecommunications layer. The system integration and managed service model requires expertise and ability to execute, which Dimension Data brings.
"This is not about efficiency or cost reduction, it's about growth," said Dawson.
NTT has received undertakings to accept and recommend the offer from the Dimension Data directors, Venfin Holdings Limited and Allan Gray in respect of about 52% of Dimension Data's issued shares.
Didata shareholders will receive 120 pence in cash for each share, which relates to 1 380c at the rate used by Dimension Data in preparing estimates.
The company stressed, however, that this would not be the same rate that will be used for the settlement of the shares on the branch register, which will happen later in the year.
- Fin24.com
"NTT is traditionally a telecoms company and is now moving into providing other services," said ICT industry analyst Spiwe Chireka.
The trend is also evident with firms such as the MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD], which are moving into new areas with their respective MTN Business and Vodacom Business divisions.
"Instead of building out a separate entity, NTT is acquiring an existing service provider," said Chireka. "Given the size of Dimension Data, only a company the size of NTT could afford it and know what to do with it."
She said that MTN, for example, is expected to purchase smaller companies in the rest of Africa as it pursues its IT strategy.
"Looking at it purely from an IT perspective, Dimension Data has a customer base in the enterprise segment and NTT wants to get into the enterprise space internationally. Didata has carved a nice little niche for itself in emerging regions, providing NTT with a base for its geographic expansion plan," said Chireka.
Didata to delist
Kaplin Equity Analysts' Irnest Kaplin said it will be sad to see Dimension Data delist, which will be part of the takeover process.
"It will give shareholders a slight premium of 20% on the last traded price, so they'll get a bit of cash, but they can't take part in Didata going forward," he said.
"The company was on a good wicket. The last five years have been spent fixing up Dimension Data and it has produced good results. It'll be sad to see the company leave the exchange.
"On the other hand, this is an exciting development. Dimension Data is a people company. It is strongly entrepreneurial and the biggest thing NTT will gain is the existing expertise and good people that Dimension Data has. If it keeps these intact, this will be a great play for NTT," said Kaplin.
He added that there was also an interesting opportunity for NTT to break into the local telecommunications space, leveraging Dimension Data's position in the local market and the existing operations of subsidiary Internet Solutions.
Into the cloud
CEO of NTT Satoshi Miura said the firm is keen on embracing Dimension Data's entrepreneurial spirit and retaining its skills.
"We are delighted that the board of directors of Dimension Data has unanimously agreed to support our offer," he said, via a translator.
"By leveraging the complementary strengths of both companies we are confident that we will provide end-to-end, global and high quality ICT services. Dimension Data and NTT share the common vision to create new services and values to succeed in the coming age of cloud computing."
Miura said NTT has not managed to develop IT solutions for the global market and has also lacked geographic reach.
"This is where the strength of Dimension Data lies," he said.
"It (Didata) has a very well balanced profit structure and strong client base. It enjoys a very strong global brand. This is a company which has a strong presence in rapidly growing regions like Africa, South America and the Middle East."
Didata CEO Brett Dawson said: "NTT has a clear understanding that operations in IT are different from the telecommunications layer. The system integration and managed service model requires expertise and ability to execute, which Dimension Data brings.
"This is not about efficiency or cost reduction, it's about growth," said Dawson.
NTT has received undertakings to accept and recommend the offer from the Dimension Data directors, Venfin Holdings Limited and Allan Gray in respect of about 52% of Dimension Data's issued shares.
Didata shareholders will receive 120 pence in cash for each share, which relates to 1 380c at the rate used by Dimension Data in preparing estimates.
The company stressed, however, that this would not be the same rate that will be used for the settlement of the shares on the branch register, which will happen later in the year.
- Fin24.com
