Telstra has entered an acquisition agreement with Singaporean cloud and data centre provider DeClout, offloading its Pacnet ISP assets and business operations in Singapore and Thailand for an aggregate consideration of $4.4 million.
The transaction is subject to regulatory approval from Singapore’s Infocomm Development Authority (IDA).
Post-merger the ISP businesses will operate under the Pacific Internet brand. Acclivis will also acquire the entirety of Pacnet Internet Thailand for $2.1 million, providing it with a telco licence to operate in Thailand and grow its cloud business there.
According to a Gartner report, by 2018, enterprise IT spending in Southeast Asia will total $62 billion. Singapore, Malaysia, Indonesia and Thailand spend the most on IT and account for roughly 80 per cent of IT expenditures within Southeast Asia, with the four economies expected to jointly spend $52 billion on IT in 2015, with annual growth of 6 per cent.
However, IDC noted in July 2015 that Thailand’s spending on information and communication technology (ICT) is expected to grow 3.8 per cent to nearly $20 billion in 2015, missing a previous forecast of 13 per cent, due to a weak economy and sluggish investment. As Southeast Asia’s second largest buyer of ICT products and services after Indonesia, it was expected to spend $19.64 billion in 2015 by IDC.
Growth in 2016 is predicted to be 4.5 per cent, with robust growth in ICT spending due to the Thai government’s digital economy policy and adoption of new technology. According to IDC, the Thai ICT sector is expected to account for about 7 per cent of Thailand’s gross domestic product (GDP) in 2015, achieving parity with agriculture.
This deal is predicted to grow DeClouts’s client base with the addition of more than 3000, as well as grow its revenue. Both arms of Pacnet posted approximately S$20 million (US$14.03 million) in combined revenue for the year ending December 31, 2014.
Commenting on the transaction, Acclivis CEO Marcus Cheng said,”The proposed acquisition enables Acclivis to offer a one-stop regional ICT service to our enterprise customers, and give them more choices in deploying the best latency and network through our enhanced internet connectivity services in the region.”
Cheng added, “The ISP segment of our business has been a strong growth area, and this acquisition will further enhance our recurring revenue stream. Our enlarged presence and capabilities will also help Acclivis expand into new markets, further driving our top-line growth and profitability.”
According to DeClout chairman and CEO Vesmond Wong, the deals will see DeClout enhance the quality of services offered across the B2B and B2C sectors, as well as extend its regional presence in Southeast Asia. Additionally, Wong sees the deal expanding DeClouts prospects to “…upsell and cross-sell our cloud, technology, managed services, and other telecommunications products of the group to a broader customer base.”
December 2014 saw Telstra acquire Packet in a $697 million deal that was aimed at expanding its Asia Pacific (APAC) footprint, with a focus in Southeast Asia. Originally, Telstra had planned to integrate and merge Pacnet’s operations and assets into the Telstra ecosystem.
According to official statements from Telstra, the decision to divest the Singapore and Thailand elements of Pacnet were motivated by a lack of aligned with the Telstra strategy to grow in the small and medium enterprise (SME) segment. The Thailand and Singapore operations neither aligned with nor complemented offerings to Telstra’s targeted segment of multinational firms and large regional enterprises.
In an release, Telstra stated: “Telstra has entered into an agreement to sell the assets from the Pacnet Internet business in Singapore and Thailand to DeClout. The sale is consistent with our strategy for our Global Enterprise and Services business, which includes the former Pacnet assets, to provide services to multinational companies and other large enterprises, rather than the small business segment.”