ALEC HOGG: It’s Thursday July 15 and in this special podcast we go across to London now and link up with Jeremy Ord, the executive chairman of Dimension Data (JSE:DDT), on the day that Dimension Data is going to become Japanese. I guess that’s if everything goes through. Jeremy, incredible news this morning that Didata, which you and a bunch of pals started in 1983 has received an offer worth R 24.5bn from one of the biggest IT and communications companies in the world, NTT. The courtship phase of this transaction – how long has it been going on for?
JEREMY ORD: Alec it really started almost three years ago, in fact. Where we were talking about mutual co-operation with regard to our customer base, in both ours and theirs and really from there we spent a lot of time talking and it’s just developed along those lines as I say, almost three years.
ALEC HOGG: The Japanese culture is such that you have to work your way up the ranks, how long did it take you to engage with the chief executive?
JEREMY ORD: To be frank, we were always dealing at a very senior level. The head of finance was our primary interface most of the time, so they had a strong team, and really it was a long courtship. It was many, many meetings in different parts of the world and ultimately culminating in this.
ALEC HOGG: You’ve been strong on the perseverance stake. Didata’s had its highs and its lows but in the past few years you’ve surprised friend and foe, I think, with the way that you’ve really knuckled down again, built up this business once more and today, I suppose, there are some who are surprised that you’ve decided to finally sell the business.
JEREMY ORD: Yes, you know, I think that we’ve got a strategy, a medium term strategy that will, ultimately we hope to get our net operating margin to about 7%. We think that there is going to be dramatic changes or can see big changes happening in the whole telecommunications and ICT sector, in a strong convergence in there. And equally the big global partners are consolidating their base with regard to the amount of suppliers that they have and the type of people that they want looking after those networks. So ultimately, we could’ve continued going down the path that we are but the opportunity to work with a company that was so strong in its home market, has a great communications and telecommunications infrastructure around the world but very little presence and allowing us to grow that, was quite compelling. So it actually made sense to pursue this particular deal.
ALEC HOGG: You talk, or the NTT president talks of a “shared vision” that the market will evolve in a particular way and then reading more in the detail, it looks like you’re having quite a big bet on Cloud Computing, on revolutionary change within the industry. Can you share the way you are seeing it?
JEREMY ORD: Alec, yes firstly, cloud computing is here, it’s coming now, it’s still early days but at the end of the day, you are seeing massive growth in the whole data centre environment, data centers in all different parts of the world, the amount of bandwidth that people are using and then again, the applications that are on there.
So cloud computing is really an extension of all of those things, where you are going to have these database centers with lots of information stored in different parts of the world and so transmitting huge volumes of data all over the place. We just think and we believe that’s quite a step change to where it has been in the past and exciting. I think that the amount of global customers, the amount of opportunity in the market and the growth that we foresee, for the big established companies on the one hand but equally for the smaller emerging markets. We are pretty strong around the world in all those emerging markets and we think there are going to be lots of growth opportunities for the big multi-nationals in those emerging markets.
ALEC HOGG: The size of NTT is quite breathtaking. Number 44 on the Global Fortune 500, they are the third biggest company in Japan after Toyota and Japan Post and I guess, dwarf most other companies in South Africa. This investment of
R24.5bn in buying out Dimension Data is that the biggest deal that we’ve seen from, it seems to have been the biggest deal from Japan but the biggest inward bound investment from an offshore company so far?
JEREMY ORD: Well I think you’ve obviously got to think about the Vodafone-Vodacom deal, I think that was pretty substantial, in fact bigger than this. I can’t talk for NTT but I certainly think it’s the largest deal that they’ve done in quite a while. Yes, so I think from a South African point of view, it’s certainly a big deal. It’s certainly the biggest technology deal that London has had for quite some time. I think in most terms it’s substantial.
ALEC HOGG: That brings me to the next part, which in your documentation you talk about this deal, from which Dimension Data and South Africa will gain access to NTT’s world-class scale and technology. There was a small announcement that came out yesterday that your local operation, Internet Solutions, has done a transaction with Nashua Mobile, where you are going to start offering voice over Internet protocol through mobile phones?
JEREMY ORD: Yes.
ALEC HOGG: I don’t want to put one and one together and make seven but with that little comment that you put into your statement, does that suggest that NTT-type products, telecoms products from the second biggest telecoms group in the world after AT&T, will also be coming to South Africa?
JEREMY ORD: From an internet solutions point of view, if I can talk about them, the whole de-regulation of the market and there’s these well-documented discussions around spectrum auctions and things like that and the whole next generation of technology, LTC coming to the fore. We think that certainly, and a lot of people have been across to the labs at NTT to see exactly what goes on there. There is some incredibly exciting technology that they are busy producing and we think for Internet solutions there’s a lot of opportunity in a de-regulating market but also in the wireless environment, the fiber environment but equally, we’ve seen some breathtaking technology with regard to video conferencing. NTT themselves have developed some really, really incredible technology in this area and I think that there’s going to be lots of opportunities for us to exploit those capabilities. Not only South Africa but the rest of the world.
ALEC HOGG: But it appears then that there could be a battle on in the southern African market between NTT, which you’ll be part of, and as you said earlier, Vodafone. NTT is almost twice the size of Vodafone, so it does presume, you spoke about scale in your announcement as well, that there will be a push here.
JEREMY ORD: No I think that Vodafone-Vodacom are in the mobile space and they will continue to exploit those technologies. NTT are more of a traditional
fixed-line operator but they do have DOCOMO, which they have a major share in as well. I think we will try and leverage, and one of the areas that I would like to think that I see opportunity is the wireless market. I think Japanese have been at the forefront of some of those technologies and we’d like to think that we can bring some of those to the African and South African market.
ALEC HOGG: Then that really is where I was getting to, NTT DOCOMO having a presence in South Africa.
JEREMY ORD: I think it’s too early to talk about that but we will look at all opportunities to work with them and the greater group.
ALEC HOGG: That brings us down to culture, Japanese are notoriously difficult. They have a command and control culture, they have a very different culture to the one that South Africans are used to. It’s veils of secrecy in Japan. In your face from a South African prespective. How are you going to overcome that?
JEREMY ORD: Alec, I think this is for us, one of the most interesting facets of this deal. From the outset and from when these discussions got quite serious, the Japanese made it very, very clear that they had no plans at all to interfere with the culture of the business, to change the brand of the business, to change the name of the business. They recognise very clearly that the people are what it’s all about with Dimension Data and the entrepreneurial spirit is what it’s all about. So they were pretty clear in their view that they firstly, as I say, keep the brand but the people were all important and we really worked hard between the two of us to put a lot of mechanisms in place to make sure that we retain those people and all the spirit of the company. As such, they don’t even want to change the Board, they are pretty insistent that the Board stays as it is and it runs as it is. So it’s very much a hands off approach but looking to us to help them service their vast client base around the world.
ALEC HOGG: That’s fascinating. So the Didata organisation, although it will no longer be listed on the stock market, will remain as a separate entity?
JEREMY ORD: That’s correct yes, totally separate.
ALEC HOGG: Your friends at Cisco, right from the outset you’ve been very close to Cisco, one of the biggest partners that Cisco has got around the world. What do they think about this transaction?
JEREMY ORD: Over the period of these discussions, I’ve consistently kept John Chambers in the loop in terms of the fact that we have been talking and I’ve had to do that because they’re such big partners of ours. Obviously we wouldn’t want to destroy relationships that we’ve got there. Quite frankly they have a very strong relationship with NTT and I think that all it’s going to do is add more opportunity for us. Because I think from their point of view, we’re a very big partner of theirs and I think the last thing that they would want to happen is that somebody like NTT took us over and destroyed the business that we have with Cisco. So from all points of view they seem to be very satisfied.
ALEC HOGG: Jeremy, Africa is often off the radar, for most of the time it has been. Lately it seems to be coming more to the forefront, the fact that Didata is so strong in Africa, has that registered with NTT in terms of their thoughts on this transaction?
JEREMY ORD: Very much so Alec. I think that the World Cup has also helped to put Africa on the map but more than that I think that they are very keen to extend their reach into the African continent.
ALEC HOGG: You say the World Cup, were the NTT guys here to watch Japan play?
JEREMY ORD: There were a couple of people here during some of the discussions but they told me before the game, before the World Cup, that they didn’t think Japan were a very good team and I think they were proved otherwise. They seemed to be quite a good team overall.
ALEC HOGG: Your visits to Japan, have you visited there often? I really am getting back to this culture thing because sure for most of the people at Didata there’s not going to be much of a change in the day to day but for the Chairman of the company with a Japanese parent it might be different.
JEREMY ORD: As I say, we’ve been talking for almost three years and we really have been at great pains to make sure that we’ve spoken. We spend a lot of time coming to London to speak to each other and all over the place and I have to say there’s been an incredible consistency in the message over all those years. Not once has it been anything to the contrary. Even in the last final days when we were putting the agreements together, nothing that we agreed prior to that was different. Not one single aspect and really has been a case of totally accommodating, bending over backwards to make sure that our staff are well looked after. So we’ve had a very good experience up to now, to be honest.
ALEC HOGG: And in the South African markets to close off with, how is Dimension Data’s competitiveness and perhaps, drive into this market going to change?
JEREMY ORD: Well we don’t see any change at all. We think that the spirit of the company will continue. One of the things that not being a listed company, you may say what happens to things like share options? Even there, even though they’ve taken out 100% of the listed shares at this moment in time, we will be putting together another scheme that will be very similar to the one that’s in place now. Even there, our staff have been well taken care of and the other issue which they’ve been at pains to protect is the entrepreneurial spirit. There’s no restriction on trying new things, getting involved in new ventures. So even things like internet solutions where there’s going to be a lot of funding required and things like that in the future because of the opportunities. They are 100% behind it and saying keep going, keep going the way you are, don’t change.
ALEC HOGG: A big vote of confidence in Didata and in South Africa from Japan.
JEREMY ORD: That’s very much so, yes.
ALEC HOGG: Well the Dimension Data directors who own 1.1% of the equity, yourself included, agreed you are going to be selling VenFin, which owns 25%, it’s going to be selling. Allan Gray, it’s going to be selling. Are there any shareholders out there that you have approached who are negative or against the deal?
JEREMY ORD: We haven’t approached any shareholders. Obviously NTT prior to making this offer today have been in discussion through their advisers with both VenFin and Allan Gray. Once again, I can’t talk for any of the shareholders other than to say they reached an agreement on a price that was acceptable and certainly to my board it was acceptable. The balance of the shareholders now have to make a decision. We’ve had great shareholders in VenFin and Allan Gray, in fact, and been very supportive throughout and I think that it’s been a good return for them.
ALEC HOGG: Jeremy Ord, one of the co-founders and executive chairman of Dimension Data. Founded in 1983 by a bunch of school friends from Johannesburg. Well today they have been acquired or in the process of being acquired by the second largest IT company and telecoms company in the world, NTT Communications of Japan.