The world is changing fast and to keep up you need local knowledge with global context.
I first encountered Dimension Data in 1987 when Jeremy Ord’s then three year old networking business joined the JSE’s new listings boom. Since then I’ve been an interested observer (and grateful participant in a couple of DiData Pro-Ams) as the business became a modern day Icarus, surging to a London Listing and a string of global acquisitions before falling heavily back to earth. Although Richard Came left some years back, Jeremy Ord’s other co-founder Doc Watson remains a big part of the business, running the key relationship with Cisco. A core of the old team – Brett Dawson, Steve Joubert, Pat Quarmby, Dave Sherriffs – serve on the directorate, supporting their chairman through some rough storms. By 201o Ord and his colleagues had piloted the business to calmer seas and negotiated DiData’s R24bn sale to Japanese mega-group NTT. Since then, DiData was been out of the limelight, quietly expanding its footprint especially on the African continent. During this time it has only occasionally raised its head above the parapet. One such time has been through the takeover of East African ISP Access Kenya – providing the ideal opportunity for an update from Africa’s biggest IT group. Derek Wilcocks, another of the “lifers” and now DiData head of Africa and the Middle East, obliged by coming through to the CNBC Africa studio. He didn’t disappoint.
ALEC HOGG: Derek Wilcox is the CEO of Dimension Data for Africa, Southern Africa and the Middle East. Derek, good to have you here on the programme particularly as you’re such an old timer with the group. When you started at Internet Solutions I was watching an interview that Bronwyn Nielsen did with you on CNBC Africa you were employee number 12.
DEREK WILCOCKS: That’s right.
ALEC HOGG: And look at you now, how many people do you have in your group?
DEREK WILCOCKS: The group’s about 21,000 people globally now or at least in Africa’s about seven and a half, it’s not so big.
ALEC HOGG: And you’re getting aggressive in Africa. The Access Kenya transaction will close next month. Is there any fear that it might not go through?
DEREK WILCOCKS: Well, there is a chance we don’t get the necessary shareholder uptake, but I think that’s
quite a small chance. The feedback we’re getting currently from a number of the larger shareholders is that they are on the whole positive about the offer. An independent report which has come out which the board of directors of Access Kenya have used as the basis to recommend to their shareholders that they accept our offer, shows that it is in fact more than fair value for the company.
ALEC HOGG: So there’s no problem? No antagonists on the Nairobi Security Exchange who are saying, refuse this; or asking?
DEREK WILCOCKS: Well, Kenya has very free press and there’s no doubt that there have been a few individuals who feel the offer’s too low. The basis for that largely seems to be the fact that Access Kenya did trade at a higher price a few years ago. They feel that they’ve bought in at a time and now they’re being forced to take a loss. However, I think you’ve got to look at the fair value of the asset in today’s market and a lot of your smaller telecommunications companies across the Middle East and Africa have battled in this market and I think this represents very fair value to the shareholders today.
ALEC HOGG: DiData is getting a lot more inquisitive, a lot more aggressive it seemed that it took a couple of years for the Japanese acquisition (by NTT) to settle things down, is that the correct reading, are you now looking to expand again?
DEREK WILCOCKS: We are looking to expand again. We have entities back in the mandate to do that. The entity themselves would like to double their business outside of Japan in the next five years and they want to do that in part through acquisitions. So they are encouraging us to look for opportunities to make acquisitions in order get to scale and geographies where we don’t have scale at this point in time and also to get into new technologies, things like Cloud computing and mobility.
ALEC HOGG: Where are your gaps on the continent?
DEREK WILCOCKS: On this continent I think we’re pretty well covered I suppose one market that we’d still like to be in, in the future would be Egypt, but I think with the current political situation, Egypt is probably not one we’ll look at in the near term. I think our biggest challenge across well at least Africa, there’re several markets where I feel we can still be substantially bigger. So you look at our operations in Kenya, which is I think is a very attractive market because it’s the hub for East Africa, and in Nigeria, there’s no doubt in my mind that we could be substantially bigger in those markets.
ALEC HOGG: So it would be a similar play, although you do have operations on the ground, bolt on acquisitions in those channelling?
DEREK WILCOCKS: Across all of our brands in both East and West Africa we have about 300 people altogether and I think critical mass is probably getting closer to 1,000 in each of those geographies. So we would like to go and do some of that organic, by winning deals with clients and some of it through acquisitions.
ALEC HOGG: How much time do you spend in those two areas?
DEREK WILCOCKS: Not much, I actually visit each of them about once a year. We make extensive use of video conferencing technologies we’re trying to cut our costs in the current environment as well. I must say I find video conferencing to be a very successful technology. It’s one we sell, so we also try and encourage our clients to use it. It’s just amazing how the technology’s come on in leaps and bounds. I’ve just actually come through a round, in the last couple of weeks, of interactive sessions with our staff in both of those markets chatting to them getting and feedback from everyone them via a video conference and it wouldn’t have been possible a few years ago, it’s not only possible but very accessible.
ALEC HOGG: Of course, the rest of us use Skype, but you’re talking about the top end of the market.
DEREK WILCOCKS: Correct, although I suppose it’s not that dissimilar from Skype. I think Skype does it on a different scale, you’re dealing with a lot of people in different rooms, etc. across the continent. We also use Skype internally I think it’s a fantastic technology.
ALEC HOGG: Derek, coming back to South Africa we have a new communications minister, Yunus Carrim, the first local tech leader or technology leader to have a comment on it was Alan Knott-Craig who’s very bullish, how do you feel?
DEREK WILCOCKS: I think it’s very positive. I think he’s somewhat of an unknown in this particular sector but I think if you look at his track record there’s no doubt he’s somebody who looks at the facts, listens to what the people have to say, and then comes out with some quick and decisive action. I think that’s what we need in the telecommunications industry.
ALEC HOGG: But you haven’t been well served.
DEREK WILCOCKS: I think the previous ministers have no doubt had their own challenges and problems, it’s a macro political landscape, but there’s no doubt that decisions have been taking too long in our industry and I think that’s something we really need to look into.
ALEC HOGG: What kind of regulations would you like to see at the top of his business priorities?
DEREK WILCOCKS: Well, I think the first thing that needs to be address is the allocation of spectrum. I think it’s very important how spectrum gets allocated. We see it operating in a market like Kenya versus a market like South Africa. I think South Africans like to think of ourselves as being the tech leader on African continent but I think we really are slipping behind it in a number of key areas. So broadband in the Kenyan market is a lot more readily available and a lot cheaper than it is here. Comparing ourselves to the United States and Western Europe we are slipping behind on the African continent, and I think the allocation of spectrum is absolutely critical to resolve these issues and also the future market model our group would like to see is a more open access approach to telecommunications infrastructure and spectrum. So by that we mean that we’d like to see somebody as a wholesaler own that facility, build up the facility, and then make it available as a retail offering into the market through a variety of service providers we’d obviously like to be one of those.
ALEC HOGG: So the unintended consequences of South African regulations has been that the country has slipped behind other parts of the continent and particularly East Africa. What have they got right over there that perhaps could be learned from the bottom end of the continent?
DEREK WILCOCKS: I think what we’ve seen in the Kenyan market in particular is a couple of different factors. First of all you had a far quicker introduction of competition at the infrastructure level. So you had a couple of years before South Africa saw infrastructure levels so a number of competitors come in fully empowered. Secondly they seem to have allocated the spectrum licenses far more quickly, some would argue too quickly because you’re now seeing some of the entrants that came into that market force prices down showing that they don’t really have sustainable business models, maybe a little bit of restructuring needs to happen there as well.
And I think in the third instance you’ve also seen the Kenyan government being very proactive with the way in which they’re using technology. It’s not that the South African government doesn’t use technology, but when it comes to things like social media if you look at the recent Kenyan elections they had a programme they used through the social media to ensure the elections were peaceful. Whenever I go to Kenya and open a newspaper, there’s a full page ad about a government function that you could contact and get advice about what seeds you should be planting. So I think they really made that technology directly relevant to the people on the ground. Of course, there’s the famous M-Pesa story, not that it was government led necessarily, but I think it has demonstrated that technology can take a first role type application and make them accessible to very rural people. It’s interesting I saw this morning that Facebook have just announced Facebook phone which is a very interesting technology to allow Facebook to be used on a feature phone not a smart phone.
ALEC HOGG: Derek, let’s get back to Dimension Data itself. You’ve been with the group since the mid 90s you’ve gone through the boom of R70 a share to just under R2 a share. There’s a lot of talk in the market that you guys are readying yourselves for a relisting, is there any substance at all in that?
DEREK WILCOCKS: I suppose we’ll never discount, I think our chairman Jeremy Ord has been on record as
saying it’s something he would look at again in the future. At the moment I don’t know if he has plans to relist.
ALEC HOGG: Does NTT have any other subsidiaries around the world that are listed?
DEREK WILCOCKS: It does have subsidiaries that are listed, but not wholly owned subsidiaries. We are a wholly owned subsidiary.
ALEC HOGG: But you could become part of NTT that could conceivably be sold?
DEREK WILCOCKS: That’s correct. NTT does have outsider shareholders either through a listing or simply through a private outside shareholder arrangement in a number of areas. In fact if you look at their most famous asset entity, Kokomo, the mobile operator they’re the majority shareholder but they are the shareholders in Kokomo.
ALEC HOGG: And the whole aggressive approach towards acquisitions by DiData wherever it might be on the continent, is this something that we can see accelerate?
DEREK WILCOCKS: It’s not only on the continent. Dimension Data is looking to get bigger in some of the developed markets as well. So we are looking to reach scale in North America, Europe and Asia. We are looking at positions in those geographies as well. In fact, I think that the bulk of our acquisitions over the last ten years, has been in developing markets. So we have gone from being essentially in zero countries on the African continent to ten as the DiData brand, and if you look at all of our brands, it is in fact about 17 on the African continent. We’ve moved into South America, we’ve moved into large parts of South East Asia, smaller and maybe less successfully moving into Eastern Europe. I think what we’re seeing now is that we’re in a phase where we feel we just have to be bigger and stronger in Western Europe, in North America and I think we’re looking at acquisitions in those geographies.
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