Review of 2019: ICT industry alive and kicking
2019 has seen the emergence of numerous start-ups, IPOs and heavy private equity activity.
2019 was yet another vibrant year for the technology industry, although, according to Gartner, worldwide growth this year is only expected to reach 0.4%, despite most of the major stock markets showing healthy growth.
The international market has been dominated by investigations and fines for the big tech boys in both Europe and the US; the African market by significant upheaval in the telecommunications field; and the local market by Naspers’ acquisition and investment activities and the revelations involving 4Sight Holdings, Ayo Technology Solutions, Cell C, EOH and SAP SA.
As has been the norm over the past few years, 2019 has seen the emergence of numerous start-ups again; a significant number of IPOs globally; heavy private equity activity that was not limited to the US alone; and a feverish mergers and acquisitions scene.
From a business and technology perspective, artificial intelligence, analytics, the continued move towards the digital world, the Internet of things and robotics were the key opportunities.
In addition, consolidation continues apace, particularly in the AI and analytics, cyber security, semiconductor and telecommunications and communications fields. And many of the ‘bigger’ companies continue to streamline their operations by either splitting-off, listing or selling-off non-strategic elements of their businesses, while also trying to discover and bring onboard new initiatives.
Unfortunately, Ingram Micro closed its SA operation and Vast Networks went into liquidation.
New market entrants
There were a handful of new entrants appearing in the local market, although some indirectly, including:
- Helios Towers
New office openings
- DataManagement Professionals
- StorTech changed its name to Nexio
- EOH’s ICT services business became iOCO
- Hetzner has rebranded as Xneelo;
Apple remained the number one technology company by revenue and became the number one most valuable company by market capitalisation.
M&A and investment activity
As usual, there was healthy merger and acquisition and investment activity including multiple ones by Naspers.
Other deals included:
- The acquisition by Acast of Pippa, a podcast technology firm founded by South Africans based in the USA;
- Adapt IT buying the Wisenet Group;
- Alviva buying the Synergy Group;
- The Argility Technology Group investing in Ashanti AI, an AI solutions business;
- Berkshire Partners, a US-based investment firm, taking a majority stake in Teraco Data Environments;
- Blue Label Telecoms making a 50% investment in Hyve Mobile;
- the Buffet Consortium taking a minority stake in Blue Label Telecom;
- Carlyle Africa absorbing IsoMetrix;
- Crossfin Technology, an African fintech holding company, investing in Retail Capital;
- Datatec’s Logicalis acquiring SA-based Mars Technology and a 70% interest in Cilnet;
- DNI 4PL Contracts buying Blue Label’s interests in Blue Label Mobile Group;
- Dynamic Technologies taking over IndigoCube and a 51% stake in DotModus;
- Entelect purchasing a majority stake in Fixx IT;
- Frogfoot Networks purchasing the network assets and customer base of Blitz Fibre;
- HeroTel snapping up BreedeNet;
- Huge buying Otel and investing in Pansmart;
- IQbusiness acquiring Genex Insights;
- Karoo investing in Cartrack Holdings;
- RIB buying 70% of EOH’s Construction Computer Software;
- Reatile Group, an investment holding company, taking a 37.45% stake in Pragma;
- A 30% investment by Sabvest in Revix;
- Sasfin taking a significant minority stake in fintech lender Payabill;
- SBA Communications buying Atlas Tower’s South African tower portfolio for R2 billion;
- Skyblu Technologies buying Altech UEC;
- STOA Infra & Energy investing in Metro Fibre Networx;
- SureStart buying CompareGuru;
- SystemLogic buying Knowledge Factory;
- Thebe Investment buying a 51% controlling stake in Discover Digital South Africa and 50.1% in Discover Digital International, an end-to-end digital media, content and fintech solutions provider;
- Terra Analytics acquiring EOH Mthombo’s Data World Group;
- The Thesele Group investing in Knowledge Integration Dynamics;
- Vodacom taking a 51% stake in IoT.nxt.
Other key events included:
- Minister Stella Ndabeni-Abrahams withdrawing the Electronic Communications Amendment Bill;
- Dimension Data selling off The Campus;
- EOH suspending officials implicated in corruption and taking steps to prosecute those responsible, selling off its stake in Twenty Third Century Systems, and losing its contract with Qlik, a US-based software company;
- the Gauteng High Court in Pretoria setting aside the City of Tshwane’s Municipal Broadband Network Project contract, which was awarded to Thobela Telecoms;
- Huawei announcing it will build two data centres in SA as part of plans to expand cloud services across Africa;
- Nihilent opening a user experience lab in SA, the first outside India; Ireland-based Openet, which provides digital business support systems to telcos, setting up a local office in Johannesburg;
- Shaw Academy opening an SA office in Cape Town;
- Bridging Technologies SA and T-Systems South Africa becoming B-BBEE level one contributors;
- Bluekey Seidor changing its name to the Seidor Africa Group of Companies;
- TechSoft International, formerly TIBCO South Africa, becoming the exclusive distributor of TIBCO Software products in sub-Saharan Africa.
Key appointments during the year included new country managers/GMs/CEOs/MDs at many companies, including 4Sight Holdings, Cell C, Cisco, Commvault Systems, FuseForward, Gabsten Technologies, HP, HPE, Huge Telecom, Incubeta South Africa, Microsoft, Naspers SA, Openet, PaySpace, Puleng Technologies, SAS Institute, SITA, Sizwe Africa IT Group, Teraco and TymeBank.
In addition, Asher Bohbot, a founder and the non-executive chairman of EOH, resigned from that company.
From an awards viewpoint, the key winners included Tiyani Nghonyama, COO of Geekulcha, as the IT Personality of the Year; and Alexander Forbes Group CIO Sandra La Bella winning the award for Visionary CIO for 2019.
The African scene was again dominated by activities involving the telecommunications players on the continent, particularly with individual countries trying to enforce foreign owners to locally list their shares in the relevant markets, as, for example, MTN in Nigeria.
However, unlike many of the previous years, the acquisition/investment activity in Africa was more buoyant and included:
- The listing of Airtel Africa in London;
- Bharti Airtel handing over part of its stake in wireless operator Airtel Tanzania to the local government, in order to settle a dispute in ownership, and merging its Kenyan unit with Telkom Kenya, thus creating the second-largest telecommunications operator in the East African nation after Safaricom;
- BRCK, a Kenyan Internet provider, buying its rival Surf, thus becoming one of the biggest public WiFi networks in sub-Saharan Africa;
- The investment by Capricorn Investment Group (CIG), owner of Bank Windhoek in Namibia, in pan-African telecoms group Paratus Africa Group;
- The CDC Group investing in Liquid Telecom;
- Kenyan-based DPO Group, the largest pan-African payment service provider, taking over PayFast, an SA payments company, in the biggest deal of its kind to date in Africa;
- Econet Wireless Zimbabwe taking MTN’s 53% stake in Botswana’s Mascom;
- Internet Technologies Angola (ITA) acquiring Vodacom’s business unit operations in Angola;
- Maroc Telecom absorbing Millicom’s subsidiary Tigo Chad;
- Germany-based ND SATCOM, the premier supplier of and integrator for innovative satellite communication systems and solutions, buying TECNA Suarl, a satellite transmission and radio telecommunications solutions provider based in Senegal;
- OneFi, a Nigerian finance company, buying Amplify, a payments solutions start-up;
- Synergy Communications taking over Vodacom Group’s business unit operations in Cote d’Ivoire, Nigeria and Zambia;
- Vodafone Ghana acquiring Vodacom’s business unit in Ghana.
Other activities in Africa included:
- Ireland-based Anam Technologies opening its Anam Africa headquarters in Nairobi, Kenya;
- The $1.85 billion acquisition by American Tower of Eaton Towers, which owns and operates approximately 5 500 communications sites across five African markets;
- Airtel Africa listing in London;
- Epson Europe setting up an office in Zimbabwe;
- The delisting of Global Telecom Holdings, which operates Djezzy in Algeria, from the Egyptian Stock Exchange;
- Google opening an AI centre in Accra, Ghana;
- Helios Towers listing on the London Stock Exchange;
- African e-commerce ‘unicorn’ Jumia listing in the USA;
- Microsoft planning to invest $100 million to open an Africa technology development centre with sites in Kenya and Nigeria over the next five years;
- Rwanda’s Mara Group launching two smartphones, described as the first ‘Made in Africa’;
- The announcement that SAP has been accused of “improper conduct” related to dealings by a services partner to win state contracts in Kenya and Tanzania, a claim that plunged the German software giant into a second African corruption scandal in as many years;
- The launch of a Nigerian business and technology solutions firm called Verraki Partners;
- Workz Group opening an office in Senegal;
- Xiaomi setting up a business headquarters in Africa;
- The launch of Uzi Zambia, Zambia’s fourth mobile operator.
Furthermore, barely two months after Teleology Holdings received approval to take over the operations of 9mobile as the preferred bidder, Teleology Holdings expressed its dissatisfaction with the business relationship with its local partner, 9mobile Nigeria, and decided to pull out of the 9mobile project.
In addition, many new EMEA/regional/African appointments were made during the year, particularly in the telecommunications sector: and, unfortunately, Bob Collymore, CEO of Safaricom, passed away.
The international scene has been dominated by the ‘big tech boys’, ie, Alphabet, Amazon, Apple and Facebook, and their skirmishes with antitrust regulators and the escalating investigations that are continuing to take place across the US and elsewhere.
In addition, the ongoing ‘trade wars’ disrupting the semiconductor industry are also having a negative effect on the market.
However, despite the above, this year has epitomised a healthy, thriving and growing ICT industry with significant consolidations in many sectors, although the most significant happenings included:
- Fiserv’s acquisition of First Data ($22 billion);
- The take-over by Digital Colony Partners and EQT Partners of Zayo Group Holdings ($14.3 billion);
- Broadcom’s purchase of Symantec’s enterprise business ($10.7 billion);
- The $15.7 billion acquisition by Salesforce.com of Tableau Software;
- Liberty Global’s sale of its operations in Czechia, Germany, Hungary and Romania to the Vodafone Group (€19 billion).
At least a dozen or so technology or technology-oriented private equity companies have each been involved with at least four or five agreed acquisition deals and/or major investments in 2019. These include Accenture, Alibaba, Alphabet/Google, Amazon, Apple, Cisco, Facebook, KKR, Microsoft, Softbank, Tencent Holdings, Thoma Bravo and VMware.
In addition, there were several other significant agreed deals, including:
- Digital Reality’s $8.4 billion acquisition of Interxion, one of Europe’s biggest data centre operators; Dassault Systemes taking over Medidata ($5.8 billion);
- Dish Network’s $5 billion acquisition of wireless assets in a deal with T-Mobile US and Sprint;
- Hellman & Friedman, a private equity firm, leading the buyout of Ultimate Software Group ($11 billion);
- Nvidia buying Mellanox Technologies ($6.9 billion);
- Infineon Technologies’ acquisition of Cypress Semiconductor ($9 billion);
- The Publicis Group buying Epsilon ($4.4 billion);
- Toshiba Memory buying its preferred shares held by Apple, Dell, Kingston Technology and Seagate Technology ($4.5 billion).
- Other major international activities included:Ericsson agreeing to pay more than $1 billion to settle US allegations that it conspired to make illegal payments to win business in five countries;
- The finalisation of IBM’s $34 billion acquisition of Red Hat; Apollo Global Management making a $6 billion bid for Tech Data;
- Nippon Telegraph and Telephone Corporation launching NTT, a global technology services provider that brings together the capabilities of 28 companies, including NTT Communications, Dimension Data and NTT Security, into one $11 billion business headquartered in London;
- Plantronics changing its name to Poly;
- Toshiba Memory changing its name to Kioxia;
- Xerox bidding for HP;
- Maxcom Telecomunicaciones SAB and Weatherford International both filing for Chapter 11 debt relief;
- Facebook (again) and Twitter admitting significant data leaks.
There was an unprecedented number of IPOs during the year, including:
- Airtel Africa
- Alibaba (in Hong Kong),
- AltoStratos Holdings
- Cambium Networks
- CrowdStrike Holdings
- DouYu International
- Grand Venture Technology
- Jumia Technologies
- Linx SA
- Ping Identity Holding
- Powerbridge Technologies
- Quectel Wireless Solutions
- Sonim Technologies
- Tufin Software
- Zoom Video Communications.
During the year, Lenovo retained the number one PC slot and Dell Technologies the number one server position.
Apple remained the number one technology company by revenue and became the number one most valuable company by market capitalisation.
In addition, Satya Nadella, CEO of Microsoft, was named Fortune magazine’s number one Businessperson of the Year.
2020 and beyond?
The international scene next year looks to be another exciting one, with continued consolidations, particularly within the AI, IOT, semiconductor and telecommunications sectors.
It should also see the finalisation, or otherwise, of the proposed Alphabet/Fitbit deal, Apollo’s $6 billion bid for Tech Data, the merger of Sprint and T-Mobile; and the outcome of Xerox’s hostile bid for HP.
In addition, don’t be surprised at the demise or acquisition of some global names, including CyberArk, GoPro, Proofpoint and Splunk; IPOs from many companies currently controlled by private equity firms; the continued pillage of the Israeli technology sector; the emergence of more conglomerates and/or private equity companies that have a growing ICT portfolio; further pronouncements regarding China’s networking and semiconductor technology companies; and further legal battles involving semiconductor patents.
In Africa, expect further developments regarding the establishments of regional hubs; further developments regarding the opening up of the telecoms market in Ethiopia; and more offices being opened on the continent by the ‘big boys’, as well as SA-based companies.
In addition, expect listings in London and/or New York from some of the global tower companies.
Locally, the focus will be on:
- The outcome of Cell C’s future;
- Naspers Prosus’s bid for Just Eat;
- 4Sight Holdings’ shares trading again on the JSE;
- Government’s 5G announcements;
- The further expansion of ICT interests by many of the conglomerates.
The ICT industry continues to be very much alive and kicking, with a worldwide growth of 3.7%, although a growth of only 1% is expected in SA.
As usual, there are bound to be many shocks over the coming year, as nothing is sacred in this industry. So don’t be surprised at what may happen, and don’t take anything for granted.