Is French telecommunications giant Orange, the mobile subsidiary of France Telecom, buying JSE-listed IT services company Business Connexion (BCX)? Three separate industry sources, none of whom is employed by either company, have told TechCentral they understand the two parties are in discussions about a deal.

Orange has long been rumoured to be sniffing around the SA market for an acquisition. A couple of years ago, it was rumoured to be interested in Cell C, though that speculation was never firmed up.

A purchase of BCX, one of the largest listed IT companies on the JSE, would cost the French operator — which owns networks in a range of francophone countries in Africa — billions of rand, assuming it swallows the whole company.

BCX CEO Benjamin Mophatlane says he can’t confirm or deny the two companies are in talks. “We do not comment on a cautionary [notice],” he says. An Orange spokesman in France says the company has “no official comment”.

BCX — which is trading under a cautionary notice because it is in discussions that could affect its share price — has a market capitalisation of R2,2bn. An acquisition would be the biggest foreign direct investment in SA’s technology sector since last year’s blockbuster R24,4bn acquisition by Japan’s Nippon Telegraph and Telephone of Dimension Data.

Orange is the world’s fifth largest mobile phone operator, with more than 210m customers. In Africa, it has businesses in Kenya, Cameroon, Senegal, Madagascar, Reunion, Tunisia, Uganda, Botswana, Mauritius, the Central African Republic, Mali, Niger, Equatorial Guinea and Cote d’Ivoire.

BCX, meanwhile, has stated it is keen to expand more aggressively in Africa and analysts polled by TechCentral say a tie-up with Orange would allow it to grow into new markets on the continent where the French company already has operations.

If market speculation is correct — and one source believes a deal between Orange and BCX could be concluded within weeks, pending regulatory approvals — it could send tremors through the local IT services industry.

As telecoms operators and IT services firms increasingly converge on each other’s markets, mergers are becoming more commonplace. Telecoms firms see IT services as a new growth area and IT companies are increasingly considering it necessary to align themselves with operators.

If a deal between Orange and BCX is on the cards, it will be the second time in recent years that the SA company has been courted by an operator. In 2006, Telkom offered R2,4bn to buy the company, but was thwarted by the competition authorities over concerns the deal could have a deleterious effect on competition in the IT market. — Duncan McLeod, TechCentral