JSE-listed Telkom has moved to buy information and communications technology (ICT) service provider Business Connexion (BCX) for R2.67-billion, as the embattled telecommunications group expands its core business into ICT to bounce back into profitability.

Telkom embarked on a strategy to pull itself back into the black after a challenging past few years and, in this strategy, a significant consideration was the global convergence trend of the ICT and the telecommunications industries.

“A key consideration of our strategy is to grow beyond our core business of connectivity and expand into end-to-end ICT services, [which] will form part of the [company’s] strategy to improve performance and restore profitability,” Telkom CEO Sipho Maseko said on Thursday.

Telkom offered BCX, which would be delisted from the JSE once the deal successfully concluded, a purchase consideration of R6.60 a share – a 20% premium over the share price of BCX at close of trading on April 14.

BCX, which had strong capabilities in managed information technology infrastructure, including data centres and application development, and generated revenue in excess of R6-billion a year, would be absorbed into Telkom as a wholly owned subsidiary.

The transaction would advance the convergence strategies of both Telkom and BCX, provide the scale for both companies to expand into other African countries and beyond, and enable Telkom to expand its existing offerings.

The acquisition of BCX, which had offices in Africa, the UK and Dubai and employed more than 6 700, was expected to create an ICT company capable of addressing the technology and communications needs of South African businesses.

“There are clear opportunities that exist between our respective companies. The dynamics of the global ICT industry are changing, particularly with the evolution and convergence of technologies that have blurred the lines that once separated telecoms players from the world of information technology,” said BCX CEO Benjamin Mophatlane.

BCX and Telkom had complementary capabilities, which provided for a “natural fit” within the client value chain.

“BCX’s client value proposition would be further enhanced through integrated end-to-end solutions, leveraging the combined capabilities of both entities,” Mophatlane said.

The proposed transaction remained subject to a number of material conditions, including approval by the competition authorities and other regulatory approvals.

Telkom’s share price fell 1.34% by mid morning, while BCX’s share price rose 7.72%.