* Competition concerns scuppered initial bid in 2007
* Telkom offers 20 pct premium
* BCX shares up 7 pct
(Adds analyst comments)
By Helen Nyambura-Mwaura
JOHANNESBURG, May 22 South African
telecommunications company Telkom made a second attempt
to buy IT infrastructure firm Business Connexion with a
2.7 billion rand ($256 million) offer, seven years after
competition concerns scuppered its first bid.
Telkom, whose core business is providing fixed and mobile
phone lines and data, has already begun diversifying into
information and communication technology services in common with
many of its counterparts in other countries.
Business Connexion (BCX) runs data centres and acquiring it
would bulk up Telkom's IT capacity.
"This will form part of the (diversification) strategy to
improve performance and restore profitability," Telkom Chief
Executive Sipho Maseko said in a statement.
Maseko is already driving cost cuts worth an annual 1
billion rand for the next five years in an attempt to turn the
state-controlled operator around.
BCX shares had risen 7.4 percent to 6.40 rand by 1249 GMT,
but stayed below Telkom's offer price of 6.60, suggesting
investors are sceptical about the bid's chances of success.
The competitive landscape had changed significantly since
2007, so the deal was unlikely to be rejected this time round,
said Greg Cort, an analyst at asset manager Electus.
Telkom, which traded down 1.3 percent at 37.66 rand in a
stronger overall market, offered a 20 percent premium over the
price that BCX was trading at before the IT company first
alerted the market about a possible deal on April 15.
BCX would become a Telkom subsidiary and delist from
Johannesburg's stock exchange if the deal went through.
"It would ... further entrench their (Telkom's) position in
the convergence space," Cort said.
"Many of the things we were hoping to come through in BCX,
like getting the data centres utilisation up, haven't
materialised. There has been excess capacity in the South
African market, so if this is absorbed down the line it would
result in extra value to Telkom shareholders. As things stand,
it is a reasonable price."
BCX trades at a price to earnings ratio of 8.53, compared
with 19.19 for Johannesburg's All-share index.
In March 2006, Telkom offered to purchase BCX for 2.43
billion rand but the Competition Commission and competitors
opposed the bid on grounds it would hamper fair pricing in a
country with high telecoms tariffs.
The new deal, which Telkom is funding from its cash
holdings, was arranged by Investec Bank and Absa Bank,
the South African unit of Barclays Africa Group.
($1 = 10.4174 South African Rand)
(Editing by John Stonestreet and David Evans)