NTT takes foothold in Africa with Dimension Data

NTT is buying the company for US$3. 24 billion

Japanese mobile operator NTT is finally moving to invest in Africa's lucrative telecom market, completing the buyout of South Africa's Dimension Data.

Deminsion Data has a presence in many African countries but with the buyout, the company is now poised to expand its services. NTT is buying the company for US$3. 24 billion and makes it the first Japanese telecom company to take a major stake in the African market.

The deal will likely open a window of investment in Africa by Japanese companies that have been reluctant to enter an expanding telecom market that has become a center of an investment war by international businesses.

Dimension Data is a services and solution provider. By buying the company, Africa's largest technology firm, NTT is expanding its geographical boundaries in addition to further fueling stiff competition in the region.

By leveraging the complementary strengths of both companies, the company will provide a global, high quality, end-to-end ICT services across the services lifecycle, according NTT president Satoshi Miura.

Dimension Data management and shareholders endorsed the offer last week and the deal is scheduled for completion by the end of this month.

Africa's improving telecom infrastructure, rising personal income and growing middle class are major attractions for telecom companies. While European and Middle East service providers have been making inroads into the African mobile arena for years, it is now Asian operators that are scrambling to get a slice of the world's last unsaturated market. Asian operators are increasingly looking at telecom markets in Africa in order to expand their geographical footprint and double their profits through acquisitions and tie-ups with existing operators.

Asian companies' push for investment in Africa comes after decades of ignoring the African mobile market due to poor communication infrastructure. However, because of a number of undersea cables now servicing the region, including Seacom and EASSY, Asian operators have realized that Africa is a market that can longer be ignored.

Despite corruption involved in the acquisition of operation licenses, Africa still remains an indisputably profitable region for the mobile phone business.

The ability of Asian telecom companies to lower communication costs and take calculated risks in investing in the African region is however, seen as a significant challenge to European and Middle East companies that have slowed down their investment in the region. Vodafone and France's Orange are the major European mobile service providers operating in Africa.

"We are no long protective of the incumbent Zamtel because it's been put in private hands. This means that the regulatory framework favors any investment in the sector," Zambian minister of Finance Situmbeko Musokotwane told lawmakers Friday.

As in Zambia, many African governments are moving to privatize incumbent operators after failing to recapitalize them, thereby removing restrictive regulatory framework and opening up the sector for international investment.

From West Africa to Southern Africa, Asian mobile operators are pressing hard for acquisitions and tie-ups with African operators in a bid to get a share of the remaining African telecom market. China's Unitel is part of a New Generation Telecommunication consortium that is buying Nigeria's incumbent operator Nitel and its mobile unit M-tel. India's Bhariti Airtel now operates in over 13 countries in Africa after acquiring Zain Africa operation while Essar Group and another Indian operator have operations in East Africa.

Tags business issuesNTTtelecommunicationMergers / acquisitionsVodafoneorangedimension data

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Michael Malakata

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