Telkom's R2.67 billion bid for Business Connexion (BCX) will give both companies an edge against competitors in the enterprise space.
The telco's offer to buy BCX - which will see the IT company continue to operate as a standalone entity - has only one more hurdle after it emerged the Independent Communications Authority of SA's approval is not required.
The bid now needs the sanction of the competition authorities, an approval that neither parties have seen as a stumbling block given the global trend towards IT companies merging with telcos, such as NTT's R24 billion buyout of Dimension Data towards the end of 2010.
Yet, Telkom's bid is reportedly set to face opposition from competitors at the Competition Tribunal when it hears the matter at a date yet to be determined. Business Day this morning reported the bid has been opposed by some of BCX's competitors, although ITWeb was unable to confirm this with the Competition Tribunal.
The tribunal caused the unravelling of Telkom's first R2.4 billion offer for BCX nine years ago, when it determined the merger would adversely affect downstream competition. This time around, analysts expect the offer to be approved based on international precedents.
Getting an edge
Should Telkom be successful, says ICT commentator Adrian Schofield, it will give both companies a bigger slice of the available market in the enterprise space. "I don't see either one reducing their influence in their existing fields of operation; I expect them to increase."
Telkom wants to buy BCX to provide it with end-to-end IT skills in the business space, and enable it to get its digital home and office strategies - which rely on cloud and Internet of things technology - off the ground faster.
Access to Telkom's network would also give BCX an advantage over competitors such as EOH, Gijima - which is being delisted - and Datacentrix, among others. Schofield notes EOH is strong competition, but Gijima's internal focus has weakened it recently.
BCX could become a much bigger challenger and a "power house", says Schofield, noting it has been quiet in the enterprise space lately. He adds, however, this depends on whether both companies' leadership can implement the vision, and the cultural fit between the entities. "They have the potential to become a force to be reckoned with."
Independent analyst Paul Booth anticipates the deal offering more benefit to Telkom than to BCX, as it will give the telco a much stronger IT arm and "substantially" increase its telecoms capacity. BCX will also benefit, he says, because it can offer an end-to-end integrated solution, including telecoms.
However, says Booth, for this to happen, BCX will have to achieve reasonable pricing from Telkom, and Telkom will also need to deal with its lacklustre service reputation. He adds the end product would be a local version of the capabilities Dimension Data has now through its parent company, NTT.
Booth adds: "The objections, to me, smell more of envy that they didn't get there first."
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