Asher Bohbot, CEO of fast-growing JSE-listed IT group EOH, has downplayed the potential threat posed by telecommunications operators wanting to muscle into the business technology services market.

As convergence between traditional IT services and telecoms gathers pace, telephone companies are keen to expand their portfolios in the business IT services market.

This was evidenced a few years ago when Telkom tried (and failed) to buy Business Connexion. Since then, companies such as Vodacom and MTN have launched business divisions aimed at serving the corporate market with converged solutions.

But Bohbot says telecoms operators will struggle to move up the value chain and begin providing advanced IT services to corporate SA, especially in applications and middleware.

He says they will enjoy some success in the small and medium enterprise market, but will struggle to break into the corporate IT services space.

“One mustn’t underestimate them, but where they come from they have a consumer and connectivity mindset.”

Bohbot says over time operators may be able to build IT services businesses, but “we don’t see them as competition for now”.

“Operators that acquire IT services companies will take a battering,” he predicts. “It’s just a different business. It would be like me buying a meat company. Would we enhance their value? Probably not.”

He admits that cash-flush telecoms operators could easily afford to buy IT services companies — EOH’s market capitalisation is R1,6bn against MTN’s R255bn and Vodacom’s R115bn. “But what happens the morning after? By the time a transaction takes place, there will be nothing left.”

Bohbot describes operators as “process and technology businesses” and IT services companies as “people businesses”.

“EOH looks like a technology business, but we’re actually a people business. That gives us protection against a hostile takeover. I don’t mind it happening to our competitors because it would be more an advantage to us that a threat.”

IT services is a “complex” field, and “becoming more so”, Bohbot says. “It’s not a field that telecoms companies understand.”

As more IT services are delivered in the “cloud” (through online and centrally managed data centres), the line between technology services companies and operators is beginning to blur.

EOH has invested in its own network and data centres, and has established facilities at data centre operator Teraco. But Bohbot says this is not EOH’s core focus. — Duncan McLeod, TechCentral