NTT, DiData merger concerns raised

History shows tough road ahead.

Cultural differences between telecommunications services giant Nippon Telegraph & Telephone (NTT) and IT services provider Dimension Data could be a concern for the merged company, analyst firm Ovum said.

Ovum today questioned whether NTT's network and hosting capacity, combined with DiData's system integrator capabilities, would create integrated global services in the "age of cloud computing", as claimed by NTT.

Ovum said there were "historic warning signs" that must be considered in such a "cross-cultural, cross-industry marriage."

"With a history of less than successful telecommunication acquisitions of services organisations Telstra and Kaz, KPN and Getronics, it does raise the question of whether the cultures of big pipes/product/incumbent sales can combine with a consultative/dynamic/solution approach to create the craved-for market," Jens Butler, Sydney-based principal analyst at Ovum, said.

"The resulting culture clash may also be the major hurdle that can hinder any significant synergistic benefits," Butler said.

Management teams need to "align at the top", to avoid slow decision-making, Butler said.

Ovum's comments follow DiData's announcement last week that it had accepted a US$3.2 billion (A$3.62 billion) cash takeover bid from NTT with the deal expected to be completed by October.

On a positive note, Ovum said the merger would provide NTT with access to "untapped and expanding geographies."

Potential benefits included: "an estimated $1 billion in revenues in each of Africa, Europe, Australia and New Zealand as well as expanding its network integration, IT, and managed services capabilities."

The merged company will not have much of an impact in North America, Ovum added.

DiData would gain access to NTT's "extensive hosting capacity, a strong balance sheet to invest in its cloud vision, and an end-to-end stack to bring to market."