Didata deal opens doors to the world

2010-07-17 07:20

This week’s announcement that Japan’s Nippon Telegraph and

Telephone Corporation (NTT) is to acquire Dimension Data for R24.4 billion could

enable Didata’s Africa ­division to expand rapidly into the rest of the


Didata Africa chief executive Allan Cawood said: “The deal will

give us access to NTT’s large balance sheet and we could ­pursue our expansion

quicker and have more products as a result of the link-up.”

He said Didata’s black shareholders, led by Andile Ngcaba, would

not get a cash payout from the transaction because their ownership level was

below that of qualifying owners. About half of the purchase amount could find

its way into the domestic market through a payout to local shareholders.

“The real benefit from this transaction will come from strategic

alliance. We have access to NTT’s $1.3 billion (about R9.8 billion) a year

spend, networks and data centre which will allow us to offer better services to

our clients,” said Cawood.

One of Didata’s local subsidiaries, Merchants, for example, could

run call centres for some NTT clients locally and offer its ­existing North

American and European ­customers improved services.

Cawood said the R380 million BEE deal that was concluded in 2004

could be fully paid up by the end of next year should the business continue to

perform well.

The deal was also an indication of a trend where telecommunication

firms would strive to be end-to-end IT providers, said ­analysts.

ICT industry analyst Spiwe Chireka said: “NTT is traditionally a

telecoms company and is now moving into providing other ­services.”

The trend was also evident with firms such as MTN and Vodacom,

which were moving into new areas with their respective MTN Business and Vodacom

Business divisions.

“Instead of building a separate entity, NTT is acquiring an

existing service provider,” said Chireka.

She said that MTN, for example, was 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.

Kaplin Equity Analysts’ Irnest Kaplin said it would be sad to see

Dimension Data delist, which would 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.

“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.

Cawood said Didata would be run as a ­separate entity with its own

board and ­executive management team.

Kaplin 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


Cawood saw this as a possibility that was still a long way into the


“There will be a tremendous amount of work that will need to be

undertaken before we can enter the mobile telecommunications space,” he said.

“There are number of regulatory requirements we would have to meet. Our entry

into that space is a possibility but not at this stage.”

Chief executive of NTT Satoshi Miura said the firm was keen on

embracing Dimension ­Data’s entrepreneurial spirit and retaining its skills. He

said NTT had not managed to develop IT solutions for the global market and also

lacked geographic reach.

“This is where the strength of Dimension Data lies,” he said. “This

is a company which has a strong presence in rapidly growing ­regions like

Africa, South America and the Middle East.”

Didata chief executive Brett Dawson said NTT had a clear

understanding that operations in IT were different from the telecommunications

layer. “This is not about efficiency or cost reduction, it’s about growth.”

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.

- Fin24.com

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