On the chopping block
However, Arivia.kom – its core offerings include IT infrastructure solutions, business infrastructure and a biometric smartcard solutions division – has become the first high value quasi-Government ICT firm to be put on the market.
With a staff headcount of 1 400 and an extensive ICT backbone that’s enabled the R1bn turnover firm to tie up long-term contracts with several SA Government departments, the Arivia sale is certain to pull ICT heavyweights into a bidding race.
Although second network operator, Neotel’s management remains guarded concerning any involvement, SA’s new telecoms entrant is among a number of local ICT groups reported to be contemplating a bid for Arivia.kom.
"Neotel’s reported interest in Arivia is hardly surprising," says Khulekani Dlamini, a telecoms analyst at Renaissance Asset Management. "Arivia’s major shareholders – power utility Eskom and Transtel, the telecoms division within Transnet – both have beneficial interests in Neotel.
"By selling their stakes to Neotel, Eskom and Transtel would simply have transferred their assets and lucrative contracts to Neotel," says Dlamini, adding that Arivia’s lucrative contracts with Government departments would give the new fixed line operator a massive head start considering that incumbent Telkom has virtually disadvantaged Neotel by tying up potential corporate clients with long-term contracts.
Arivia has an extensive footprint in other African markets – including Uganda, where, in a deal worth R15m, it’s been contracted by the government to overhaul the national social security fund and replace it with a next generation integrated information management system.
Arivia’s other high value African contracts include a near R200m contract in Nigeria to roll out, maintain and support the national lottery network.
Says Dlamini: "It isn’t necessarily the value of those contracts that should be of interest to Neotel but rather Arivia’s capacity to source business opportunities beyond SA’s borders. That Arivia’s international contracts are mainly with government departments is an added incentive. Just as in SA, governments worldwide have the biggest ICT spend."
Now that SA’s Competition Commission has vetoed Telkom’s interest in JSE-listed technology group Business Connexion (BCX), BMI-T telecoms analyst Richard Hurst says that Telkom could make a play for Arivia. "The two companies have similar business models and offer similar services."
Though not entirely ruling out that possibility, Dlamini says BCX was in fine financial fettle compared to Arivia. "You have just got to look at BCX’s corporate client profile – which includes Anglo American, BHP Billiton and Nampak – and then you can understand why Telkom is desperate to lay its hands on BCX."
However, Telkom spokesman Lulu Letlape dismissed outright any suggestions that Telkom could switch its focus to Arivia following the Competition Commission’s decision to veto its bid for BCX.
"Our decision to take the matter to the Competition Tribunal is a reflection of our commitment to push through our bid for BCX. We’ll stop at nothing to acquire BCX. We aren’t interested in Arivia. It’s not even among the options that Papi Moletsane (Telkom CE) has drawn up for the worst-case scenario."
If the Competition Tribunal throws out its bid, Letlape says Telkom would, among other options, organically grow its ICT services division.
Dimension Data and Verizon Business SA could also enter the fray. Dlamini says both Didata and Verizon would be looking to consolidate their forays into the public sector and Arivia was attractive, given its huge portfolio of public sector accounts.
Altech, through its smartcard solutions subsidiary Namitech, could also be in the frame but only if Eskom and Transtel agreed to break Arivia up and dispose of it in pieces.
Finweek
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