NTT enters Africa with Dimension Data purchase

Japanese operator NTT is to acquire South African IT services company Dimension Data for approximately $3.2 billion.

NTT says the deal shows its commitment to new service areas, like cloud computing, and answers increased customer demand for IT solutions.

Dimension Data is active in a number of regions where NTT’s presence is limited, including Africa, the Middle East and Australia, but the two already have a complementary stake in Asia, Europe and the US.

“To date we have not been able to develop a sufficiently strong presence in certain business domains, such as maintenance of network equipment within client sites,” said Satoshi Miura, CEO and president of NTT. “We have also lacked the geographical reach in some rapidly developing regions, notably Africa, the Middle East and south America, and this is where the strength of Dimension Data lies. It offers a full lifecycle service, providing a complete suite of solutions from development to maintenance of its clients sites.”

NTT’s investment will make it the biggest Japanese telecoms company active in sub-Saharan Africa. Operators from India and China, such as Bharti Airtel and China Mobile, have by comparison been quick to exploit the region’s growth potential.

With little room for expansion in their home markets, more Japanese telcos can now be expected to follow NTT into underdeveloped opportunities in places like Africa, believes Paul Budde, managing director of research firm Buddecomm. He believes Japanese players are well placed to follow up Indian and Chinese investment in basic broadband infrastructure with advanced, high-quality services.

“The potential for investment in Africa is huge,” said Budde. “The Japanese may have been less competitive than India, and especially China, so far. Japanese telcos have been seriously underperforming internationally for many decades, and it will be interesting to see if they get it right this time.”

NTT already hosts data centres in 31 countries. Its most recent international investment was a 26% stake in India’s Tata Teleservices in 2008, worth $2.7 billion. It says emerging markets will continue to be at the heart of its acquisition strategy.