South Africa telecommunications company Telkom has revived efforts to acquire IT firm Business Connexion (BCX) after a first attempt eight years ago was scattered by competition authorities.
Telkom CEO Sipho Maseko revealed the company has initiated the process to acquire BCX at a cost of $256 million, something that will enable it diversify its services beyond fixed and mobile phone lines and data to create an integrated ICT giant.
“We want to create an ICT company that will address the technology and communications needs of South African businesses nationally,” he said.
He added the proposed acquisition forms part of the Telkom’s diversification strategy to improve performance and restore profitability.
More critically, the acquisition will cement Telkom’s grip on the market considering it is the biggest telecommunications company in the country.
The company, whose core business is providing fixed and mobile telephony and data services, is hoping the competition authorities in South Africa thwart the deal like it did in 2007 when Telkom first attempted to acquire the firm.
Back then the Competition Commission and competitors opposed the bid on grounds it would hamper fair pricing in a country with high telecoms tariffs.
BCX, which is listed on the Johannesburg Stock Exchange, is a fully integrated IT services provider with a wide footprint across Africa.
If the deal goes through, BCX would become a Telkom subsidiary and delist from the stock market.
“Telkom believes that its offer represents substantial value to BCX shareholders,” said Maseko, adding that Telkom intends to strengthen and seek growth opportunities for its South African operations and to support the expansion of BCX’s current footprint on the African continent.
According to the company, the proposed acquisition is in line with the global trend of IT and telecoms convergence that has seen many traditional IT companies merge with telecoms companies.
The fact that the acquisition comes just days after Vodacom said it is acquiring Neotel is bound to change the dynamics of the telecoms industry in South Africa. Notably, Telkom owns a 50 per cent stake in Vodacom, the leading mobile services provider. This acquisitions will have significant impacts in Telkoms dominance.