Safaricom targets to buy Seven Seas Technologies
Safaricom is mulling acquiring a majority stake in another local IT service firm Seven Seas Technologies (SST) as it races to reduce its reliance on the voice market that is faced with increased competition and shrinking margins.
The mobile telephony firm is to sign two-year partnership deal with the firm on Tuesday where both firms will contribute Sh1.5 billion in the joint venture and Safaricom has been given option of buying a controlling stake in SST at the end of 2013.
The two firms had agreed to a buyout plan that was scuttled by the board of the mobile telephony firm which raised concerns over the viability of the business, paving way for the two-year partnership.
“We have been tasked to demonstrate that’ there is a market for managed services in the next 24 months,” said Silvia Mulinge, Safaricom’s general manager enterprise business.
“The board felt that we should take a moderate approach and that’s why we are entering into a partnership before we can pursue an acquisition of a majority stake in the firm,” she said.
The SST has been in operations since 1999 and is a lead player on software developments, network integration, data security and storage as well as cloud computing—the delivery of technology services and software through the Internet to avoid buying hardware or infrastructure.
Under the two-year partnership, Safaricom will provide its infrastructure (fibre optic network and wireless Internet connection), cash and widen customer base to SST, which will provide its expertise and talent on IT services.
The companies said they will share revenue in a ratio that they did not divulge citing a non-disclosure agreement.