2016: a turbulent year for ICT

There is no doubt that 2016 was another tough year for the ICT industry, with the overall worldwide ICT spend up a mere 0.3% and one that was coupled with significant swings on some of the key stock markets. All-time highs were reached on many western stock markets earlier this year, but these were followed by significant changes that saw many of the indices drop below the levels prevailing at the start of the year, and indications are that some indices may show little or no growth in 2016.

Nevertheless, there were many new start-ups, a significant number of IPOs, heavy private equity activity, and a feverish merger/acquisition scene. However, the continued demise and de-listings of ICT companies in the local market continues to be a major cause for concern going forward, despite many more conglomerates now having a significant and growing ICT portfolio.

From a business perspective, cost containment remains a high priority, with the areas of BI/analytics and security, especially cyber security, still key for many organisations. From a technology perspective, artificial intelligence, the continued move towards the digital world and the rapid growth of the Internet of things head up the list of opportunities going forward.

Consolidation continues apace, particularly in the security, semiconductor and telecommunications/communications fields, with many of the big boys streamlining their operations and either splitting off, listing or selling off non-strategic elements of their businesses. In addition, other major enterprises such as GE are becoming significant ICT players.

This year has been a poor one for ICT listed companies, as there have been no new listings but several de-listings/suspensions. Specifically, African Cellular Towers, Faritec Holdings and Square One Solutions Group were formally de-listed at long last, as well as Amecor, and MTN Zakhele will de-list by the end of 2016. In addition, the Huge Group moved to the main board from the AltX and Jasco transferred to the ICT sector.

However, on a more positive note, there were a number of new entrants and new companies launched into the local market, although some indirectly. These included Paratus Telecom via the acquisition of Maxwell Technology, and TrackOFF. MTN announced its new BEE initiative, and the South African ICT market size grew about 5% overall.

As usual, there was much merger, acquisition and investment activity in the local market that included AEEI investing in Kalula Communications (57%) and Puleng Technologies (51%); American Tower taking over Eaton's South African Towers; BCX buying RDC Corportion; Blue Label Telecoms taking a 45% stake in Cell C; Capitalworks investing in IQ Business; Datatec buying Lantares; Deloitte buying ConVista Consulting; Dimension Data acquiring Ceryx and MWeb Connect; Dynamic Technology Holdings acquiring 51% of Blue Pencil; EOH purchasing Aptronics; First Distribution buying Linux Warehouse; Huge Group buying ConnectNet Group; Iron Mountain acquiring the majority of Docufile SA; Kerridge Commercial Systems (UK) acquiring Integrity Software; Liquid Telecom buying Neotel; Naspers investing in Udemy but selling off Grupa Allegro, its Polish interests; Net 1 buying a small stake in Blue Label Telecoms and a majority stake in Masterpayment; Netsurit merging with Inobits and Marathon Consulting; Pinnacle Holdings buying out Datacentrix; Stella Capital Partners acquiring Amecor but disposing of its stake in Tellumat; Tritech Media making several strategic ICT investments; and Vumatel taking over Fibrehoods.

Other key events included Altron disposing of some of its assets, including Aberdare Cables and PowerTech's Battery unit, and announcing a major shake-up that will see a R400 million capital investment from Value Capital Partners and a complete overhaul of its management structure, which includes a significant dilution of the Venter's family interest in the company; Naspers opening an office in San Francisco; Pinnacle undertaking a BBBEE transaction; the collapse of the Vodacom/Neotel deal; the cabinet approval of the national integrated ICT policy whitepaper; and the publication of a new ICT sector code for BBBEE.

Key appointments during the year included new country managers/GMs/CEOs/MDs at many companies, including Ansys, Dark Fibre Africa, Dimension Data, FibreCo Telecoms, Fujitsu, HP, MTN Group, Pinnacle, SABC and SAP; while Brett Dawson, CEO of Dimension Data, and Thibault Dousson, SA country manager for HP, were among the key departures/resignations/retirements. In addition, 2016 also saw the passing of Philip Cowles, a founding member of Software Connection; and Stephen Mncube, an ex-chairman of ICASA.

From an awards viewpoint, the key winners included Sbu Shabalala, CEO of Adapt IT, as the IITPSA IT Personality of the Year for 2016; and Peter Alkema, CIO of Business Banking at First National Bank, as the Visionary CIO for 2016.

The African scene was again dominated by the telecoms industry, and in particular, the many new mobile initiatives that have been launched. These included mobile banking capabilities and further LTE deployments; the announcement of a new undersea cable initiative involving Angola and Mauritius; and the sell-off by telecoms companies of their tower infrastructure to entities such as American Tower, Eton Towers, Helios Towers and IHS Towers. However, the NTN1 trillion ($5.2 billion) fine (although slightly reduced) imposed by the Nigerian authorities on MTN in 2015 and its resolution overshadowed all the other African activities of the year.

As the African market continues to mature, the emergence of potential regional hubs continues apace, with Kenya emerging as the centre for East Africa, and a duel between Ghana and Nigeria for West Africa; while North Africa continues to fall under the Middle East/Egypt region. As previously, there are no IT companies listed in the current 'Top 500 Companies in Africa' list from outside SA, and still only a handful of telecoms companies included.

However, ICT activity on the continent continues to grow, with many new offices being established by companies such as Jasco, Networks Unlimited, SAP and SYSPRO.

Other activities in Africa included Bharti Airtel buying Econet Wireless's stake in its Nigerian operation; an IPO from Botswana Telecom; the Carlyle Group acquiring CMC Networks; Interswitch acquiring Vanso; Mobinil in Egypt adopting the Orange brand; Ntel restarting its operations; Orange taking over Millicom's operations in the DRC; the Tanzanian authorities mandating the local listing of the telecoms operators in that country and buying out Bharti Airtel's 35% stake in TTCL; and further sell-offs of telecoms towers to dedicated tower companies.

In addition, many new EMEA/regional/African appointments were made during the year, particularly in the telecoms sector as well as from companies such as Eaton, Ericsson, Genetec, Kaspersky Labs, Lenovo, Microsoft, SAP and VMware.

This year has again epitomised a healthy, thriving and growing ICT industry with significant consolidations in many sectors, although the most significant happenings were the finalisation of the Dell/EMC deal; and the take-over of Time Warner Cable by Charter Communications.

Lenovo hung on as the number one PC company.

Nine ICT companies have each been involved with at least four or five acquisitions/major investments in 2016. These companies were Accenture, Alphabet/Google, Cisco, IBM, Intel, Microsoft, OpenText, Oracle and Orange.

In addition, there were several other significant deals, including Analog Devices acquiring Linear Technology ($14.3 billion); ASML acquiring Hermes Microvision ($3.1 billion); BCE buying Manitoba Telecommunications (C$3.1 billion); Broadcom taking over Brocade Communications Systems ($5.5 billion); Canon buying Toshiba's medical equipment unit ($5.9 billion); CenturyLink buying Level 3 Communications ($34 billion); Comcast taking over DreamWorks Animation ($3.8 billion); Equinix buying 24 data centres from Verizon ($3.6 billion); Foxconn acquiring Sharp ($3.5 billion); HP buying Samsung's printer business; Micro Focus taking over HPE's software assets ($8.8 billion); NTT Data buying Dell's 'ex Perot' unit ($3.05 billion); Qualcomm acquiring NXP Semiconductor ($47 billion); Salesforce.com buying Demandware ($2.8 billion); Samsung buying Harman International Industries ($8 billion); Siemens purchasing Mentor Graphics ($4.5 billion); Softbank buying ARM Holdings (£24.3 billion); Symantec acquiring Blue Coat Systems ($4.65 billion); Tencent Holdings taking over Supercell ($8.6 billion); and Verizon buying Yahoo ($4.83 billion). In addition, AT&T has made an offer valued at $84.5 billion for Time Warner that still needs to be approved by the relevant public bodies.

Other major international activities included Xerox splitting into two units; a Softbank/Alibaba joint venture; BlackBerry pulling out of the handset business; CSC and HPE's enterprise services business merging; GE via its digital and software arms making several acquisitions; and private equity firms/investor groups buying Dell's software division, Epicor, Lexmark, Marketo, Mphasis (India), Polycom, Qlik Technologies and Rackspace Hosting. On the downside, Aspect Software applied for Chapter 11 protection.

There were an unprecedented number of IPOs during the year, including the listing of Acacia Communications, Apptio, Black Line, Carbon Black, Cotiviti Holdings, Coupa Software, Everspin Technologies, Gridsum, Impinj, Line Corp, Nutanix, Quantenna Communications, SecureWorks, Shellanoo (Israel), Talend and Twilio.

Major international appointments included new CEOs at 3D systems, Altice, Arris, Avnet, Cable & Wireless, Canon, China Telecom, Citrix Systems, ePlus, Ericsson, Etisalat, FireEye, Gilat, HCL Technologies, Marvell Technology Group, Megafon, NTT DoCoMo, Plantronics, Polycom, Progress Software, Rogers Communications, Sabre, SFR, Skyworks Solutions, Stratasys, Symantec, Tableau Software, Tech Target, Telecom Italia, Telefonica, Toshiba, Xerox, ZTE and Zynga.

Key departures/resignations included Nikesh Arora, president of Softbank; Michael Brown, CEO of Symantec; Mark Pincus, CEO of Zynga; and Thurman Rogers, founder and CEO of Cypress Semiconductor. Unfortunately, there were a number of deaths, including Robert Allen (ex AT&T), Bill Campbell (ex Intuit), John Ellenby, Andy Grove (ex Intel), Marvin Minsky, a pioneer in the field of AI, Ray Tomlinson, the 'inventor' of e-mails, and Alvin Tofler of 'Future Shock' fame.

During the year, Lenovo hung on as the number one PC company; HP became the number one server company; while Apple overtook Samsung as the number one ICT company by revenue. In addition, the annual re-ranking of the NASDAQ-100 Index, composed of the 100 largest non-financial stocks listed on the NASDAQ Stock Market, was announced: from a technology viewpoint, it showed KLA-Tencor joining the index and NetApp leaving the index.

The international scene looks to be another exciting one next year, with continued consolidations particularly within the semiconductor and telecoms industries. Also, many smaller players in the cyber security space are likely to be acquired.

Don't be surprised at the demise or acquisition of some global names, including Fitbit, GoPro, NCR, Netflix and Twitter; the outcome of Yahoo's break-up following the Verizon deal; IPOs from many companies currently controlled by private equity firms and well as one from Snapchat; the continued pillage of the Israeli technology sector; a split by Samsung Electronics into two entities; the emergence of more conglomerates that have a growing ICT portfolio, such as GE; and more from the ongoing legal battle involving Apple and Samsung.

In Africa, expect further developments regarding the establishments of regional hubs; MTN's listing in Nigeria; and more offices being opened on the continent by the 'big boys' as well as South African companies.

Locally, the heavy focus will be on the rationalisation of the telecoms sector, including the future of Cell C following Blue Label's investment and other restructuring; the future of Neotel following its deal with Liquid Telecom; the outcome and implications of the proposed changes at Altron; and final resolution of the Prescient/Stella Capital deal. Also, look out the formal de-listing of Digicore, which is currently under suspension; the de-listings of Datacentrix and possibly TCS; and the further expansion of ICT interests by many of the conglomerates. In addition, the overall market growth is predicted to be about 4.3%, somewhat lower than 2016.

Despite all the happenings enumerated above, the ICT industry is very much alive and kicking, and a worldwide growth of between 2.5% and 3% is expected in 2017. There are bound to be many shocks, as nothing is sacred in this industry, so don't be surprised at what may happen, or take anything for granted.