Industry consolidation, driven by merger and acquisitions, will remain a strong trend in the traditional South African tech space, and also in the consolidation of the tech and telecoms sectors, according to an analyst at Thebe Stockbroking.<\/p>\n
Keith McLachlan, a senior equities analyst of small- and mid-caps at Thebe Stockbroking says: \u201cWith a statement from Telkom, and hints from other telecos players, the long-term collision between the telecos and the ICT services markets appears inevitable and will also likely result in parallel market M&A-driven consolidation – most likely telecos-acquiring-tech.\u201d<\/p>\n
In June, Telkom said it would aim to marry its fixed, mobile and data offerings into a single solution and would also launch cloud services for business in Q3-Q4.<\/p>\n
In an interview with BusinessTech,\u00a0Telkom Business managing director, Brian Armstrong\u00a0said that he expects a shake-out in the unified communications space, with fewer competitors in the market.<\/p>\n
\u201cCertainly [with] unified communications, we [Telkom] know who is trying to play: Vodacom, MTN, Internet Solutions, and Dimension Data. But none of them actually have all the building blocks necessary to deliver a compelling, fully-unified communications offer – which we do.\u201d<\/p>\n
According to the business lead, the SA ICT market was valued at R196.4 billion in 2009, and is set to reach R263.4 billion in 2014.<\/p>\n
McLachlan\u00a0questioned if there wasn\u2019t perhaps something in the recent Business Connexion cautionary announcement, \u201calthough this may be just wild speculation on my part,\u201d he added.<\/p>\n
Earlier this month, JSE-listed IT services group Business Connexion issued a warning for traders to tread with caution when dealing with its shares as its company directors consider various opportunities.<\/p>\n
\u201cAlso, look for the early adopters of new technology, for example, Gijima’s recent establishment as a value-added distributor (VAD) of Apple, particularly for iPad,” the analyst said.<\/p>\n
In October 2011, Core Group, the VAD for Apple in Southern Africa, announced that ICT group Gijima had been appointed the first Apple-authorised systems integrator (SI) in the country.<\/p>\n
SA ICT on the JSE<\/strong><\/p>\n Overall, McLachlan noted that the ICT sector has run quite hard on a relative basis against the JSE All Share index (ALSi) over the last 12 to 24 months.<\/p>\n \u201cThis has been driven mostly by the relatively higher margin ICT services component, which remains robust and is likely to continue to perform well.\u201d<\/p>\n He pointed to technology and outsourcing company, EOH Holdings as being a star performer in this particular sector, “while Gijima is the obvious example of a tragic under-performer\u201d.<\/p>\n EOH Holdings has seen its share price rise to R35, and a market cap up to R3.46 billion, having traded\u00a0at R20 in August 2011 – while Gijima has slipped from 72 cents in November 2011, to a current price of 42 cents and a market cap of R406 million, despite its government backing.<\/p>\n \u201cThe problem remains that the Technology Index remains trading on a premium PE of 14.5x against the ALSI’s PE of 12.3x, which perhaps implies it is a little top-heavy,\u201d McLachlan said.<\/p>\n Related article<\/strong><\/p>\n Business Connexion issues cautionary warning<\/a><\/strong><\/p>\n EOH interim results impress<\/a><\/strong><\/p>\n Telkom singles out convergence competitors<\/a><\/strong><\/p>\n