BT Communications Services SA (BTSA), part of the global London Stock Exchange-listed BT Group, believes its broad-based black economic empowerment deal with Sekunjalo Investments will give it access to multinational clients.
The telecommunications provider sold a 30% stake to the black-controlled investment holding company for more than R27 million.
“When we started looking for a BEE partner two years ago, we wanted someone who could complement our business strategy,” says Stephan Grant, BTSA's business manager for IT services and finance in SA.
Grant explains Sekunjalo has access to a number of multinational corporations and government contracts which are BTSA's target markets. He notes that the deal will also provide Sekunjalo with a new skills set.
BTSA sees SA as an integral part of its Brazil, Russia, India, China and SA strategy, which seeks to harness the growth in the telecoms industries in those countries.“SA is a fast growing telecoms market and we saw it as imperative that we get a BEE partner to expand our reach and also to meet government regulations,” adds Grant.
Sekunjalo was established in May 1996 as a black-controlled economic empowerment group to benefit previously-disadvantaged individuals through job creation.
Grant says Sekunjalo's credentials as a BEE partner are impeccable and he believes there will be strong synergy between the two in the months to come.
The terms of the deal will allow Sekunjalo to appoint the chairman of its board, Dr Iqbal Survé, and its CEO, Mohammed Kajee, as representatives on BT's seven-man board of directors. BT will choose the other five members.
The deal with Sekunjalo will see the investment company gain a stake in a telecoms company. This is the investment group's second foray into the telecoms space, having taken a 26% stake in network services group Nokia Siemens Networks Holdings RSA last year.
Sekunjalo also wholly-owns Fios, a value-added software reseller; Synergy Computing, another value-added software reseller; and Health Systems Technologies. The investment group also has a 50.1% share in Saratoga, a software development firm.
The investment group is the second in the world to acquire local equity in BT. In 1989, BT went into a joint venture with HRH Prince Abdulaziz bin Sattam bin Abdulaziz Al-Saud, to form BT Al Saudia.
BMI-TechKnowledge analyst Denis Smit says the deal will be good for BT, because – with a 30% empowerment partner – it will allow the company to bid for government deals.
BT is only one of the many telecoms providers that will feel the pressure in the current global economic situation. Smit says many global telecoms businesses are desperately looking to lower their costs. “Growth in the managed networks space, where companies are outsourcing more and more, is an indication of this. Telkom tried to do this, but was stopped by the unions.”
IDC analyst Richard Hurst says the sale of 30% of BT may well be a perception move. “They may not want to be perceived as a foreign company eating up local business.”
He says that, in times of trouble, companies like BT need to start putting more focus on looking after their business at home. Global trends show that more international businesses are starting to concentrate on core operations. “However, BT's foreign traffic is quite a serious aspect of its business.”
For Sekunjalo, the purchase has come at the perfect time. “With the softening of the market, now is the ideal time to get into telecommunications,” he notes.