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Telkom finally can unleash BCX

By Gugu Lourie

Telkom ‘finally’ has managed to convinced the country’s regulators that it is in the interest of the sector  for  the country’s biggest fixed-line operator to buy Business Connexion (BCX). It can now unleash one of its secret weapons in its turnaround strategy.

Storage-Rows700x350“We wish to inform shareholders of BCX and Telkom  that the Competition Tribunal of South Africa has approved the acquisition by Telkom of the entire issued share capital of BCX with conditions, which conditions are acceptable to Telkom and BCX,” said Telkom and BCX in a joint statemnt to investors.

The last remaining condition precedent to the proposed transaction is the issue of a compliance certificate by the Takeover Panel.

Telkom’s turnaround strategy to improve performance and to reposition the company for sustainable growth has, as a key component, focused on the growth and enhancement of Telkom’s ICT service offering to its customers.

 “We are very pleased that the Competition Tribunal has approved this acquisition, which will benefit both Telkom and BCX customers,” said Sipho Maseko, Telkom Group Chief Executive Officer. “As a result of this transaction, Telkom will be able to grow beyond its core business of connectivity by expanding into ICT services, while reinforcing our connectivity offering and enhancing Telkom’s convergence strategy.”

Isaac Mophatlane, Business Connexion Group CEO
Isaac Mophatlane, Business Connexion Group CEO

Maseko said the proposed transaction will leverage Telkom’s expertise to further address the technology and telecommunications requirements of clients in South Africa and elsewhere in Africa.

“BCX has very strong capabilities in managed IT Infrastructure, including data centres, cloud based services and application development,” said Isaac Mophatlane, Business Connexion Group Chief Executive Officer. “The merger will enable Telkom to expand its existing offerings while, at the same time, providing scale in IT services, which will help reinforce Telkom’s core connectivity business and enhance Telkom’s convergence strategy.”

Mophatlane added that he believes that the merger will improve the customer value propositions of both companies through a greater ability to provide integrated end-to-end ICT solutions and a more global and competitive offering, particularly on the African continent and beyond.

Telkom regards ICT services as a key enabler for economic growth.

BCX is one of the largest ICT services providers listed on the JSE when measured in terms of turnover, total assets and staff compliment. The company employs more than 6,700 people on the African continent with offices in various African countries, the United Kingdom and Dubai and generates revenue in excess of R6 billion per annum.

Telkom  is offering BCX shareholders R6,60 per share to buy 100% of BCX.

Telkom is chasing BCX to bulk up its information and communications technology business in order to address the technology and communication needs of South African businesses nationally.

BCX has operations in Botswana, Kenya, Namibia, Nigeria, Mozambique, South Africa, Tanzania and Zambia.

Sipho Maseko, Telkom chief executive
Sipho Maseko, Telkom chief executive

It is a leading IT service provider in South Africa, provides strong presence in East Africa and has an established presence in West Africa, which it continues to grow through aggressive acquisitions.

BCX is also the largest employer of ICT skills in Africa with close to 7 000 employees, who have vast experience in delivering large projects on the continent.

Telkom will reverse integrate Cybernest into BCX once the transaction to buy the technology group is completed,
creating a formidable standalone business.

The Telkom deal has so far cost BCX about R7.7m.

Cybernest, which was founded in 2009, has six fully-fledged data centres, with close to 600 specialised data staff, managing in excess of R2.5bn worth of IT assets. It operates 9 700m2 of data centre space.

In the 2014 financial year, Cybernest generated R347m in revenues, reflecting a 69% rise compared to the same period last year.

Email TechFinancials.co.za at editor@techfinancials.co.za

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