Japanese telecommunications provider NTT Communications announced last week that it had acquired 74 percent of Indian web host and data center provider Netmagic Solutions. The acquisition, expected to close in April, is a move to support its growth plans in Asia.
While NTT Com has operated in India for several years, its focus prior to this acquisition was on Japanese businesses operating in India. This acquisition will give NTT Com access to Netmagic’s Indian business customer base, and help Netmagic distribute its cloud services and products worldwide.
In an email Q&A with the WHIR, NTT America senior director, corporate marketing communications Christopher Davis, talks about NTT Com’s plans for Asia and why it only acquired a 74 percent stake in Netmagic.
WHIR: NTT Com has focused a lot of growth in Asia. Can you speak specifically on what attracted NTT Com to India in particular?
Christopher Davis: NTT Com has operated in India for several years primarily providing network services and systems integration to Japanese customers. With India’s high growth rate for information and communications technology services, combined with NTT Com’s business transformation for providing high quality cloud computing, Internet backbones and virtualized network services worldwide, it was a natural fit for us to expand in India. Gartner’s latest forecast for the India data center colocation and hosting market reaching $609.1 million in 2012 further supports this acquisition.
WHIR: How does this acquisition fit in to NTT Com’s long-term growth plan for Asia?
CD: NTT Com believes Netmagic will strengthen its position as an end-to-end ICT solutions service provider in one of Asia’s fastest growing markets. NTT Com will be able to meet growing demand from its Japanese and global customers to provide comprehensive ICT infrastructure service in India. From Netmagic’s perspective, the company will have access not only to leading Japanese companies present in India but also to NTT Com Group’s client base of multinational corporations, throughout various geographies and verticals. Leveraging the complementary client base, as well as NTT Com’s global network service operation, NTT Com will create attractive cross-selling opportunities, and enable Netmagic to deliver its cloud services and products on a global scale.
WHIR: Netmagic Solutions has been providing hosted and data center services in India for more than a decade. With this kind of established presence in the market, what kinds of customers does it bring to NTT Com?
CD: NTT Com India is mainly providing network services and system integration to Japanese customers in India. Whereas Netmagic is providing data center related services to non-Japanese companies. It will be a complementary relationship both in business segments and in customer bases. By this acquisition, leveraging each other’s respective customer bases and abilities, we will be able to provide and enhance a “one stop shopping” ICT solution for each customer.
WHIR: Why did NTT Com acquire 74 percent of Netmagic Solutions rather than 100 percent? Was it ever NTT Com’s intention to fully acquire the company?
CD: Due to Indian foreign direct investment regulation, the maximum percentage foreign investors can invest in an ISP licensed company is 74 percent and Netmagic owns that license. Netmagic’s CEO, Mr. Sharad Sanghi, will retain their other 26 percent.
WHIR: What are the next steps in the acquisition? Are there any changes to Netmagic Solutions that will be effective immediately?
CD: The share purchase agreement was executed on January 24, 2012. We expect to close at the end of April of this year at the earliest, but it will depend on the closing conditions and FIPB/DOT approvals. After the closing, NTT Com will occupy a majority of the board seats. NTT Com expects current Netmagic executives and employees will continue to work in Netmagic as an NTT Com Group company.