SingTel has announced an $810 million takeover of security specialist TrustWave in anticipation of burgeoning demand for managed security services in the enterprise sector.
The Singaporean incumbent, which owns stakes in some of Asia's biggest telecom players, will take a 98% stake in TrustWave, with TrustWave chairman and CEO Robert McCullen retaining the other 2%.
The acquisition will help Singapore Telecommunications Ltd. (SingTel) (OTC: SGTJY) cater to a global need for security solutions amid rising concern about cyber attacks and the threat they pose to enterprise organizations of all kinds.
SingTel cites market research from Gartner's prediction that revenues from managed security services will grow from $13.9 billion in 2014 to $24.2 billion in 2018, with most of the demand expected to come from North America and the EMEA region.
Headquartered in Chicago, TrustWave has 1,200 employees across 26 countries and claims to serve more than 3 million business customers globally.
SingTel says it will continue to operate TrustWave as a standalone business following the takeover, although it expects to bolster the company's portfolio of services and help it address opportunities in the Asia-Pacific region through its existing assets and market presence.
A particular attraction for SingTel appears to be TrustWave's SpiderLabs division, a forensic and threat research security unit employing what SingTel describes as an "elite team" of security experts.
"We aspire to be a global player in cyber security," said Chua Sock Koong, SingTel's CEO, in a company statement. "We have established a strong security business in the region, both organically and through strategic partnerships with global technology leaders."
Like other big operators, SingTel has identified the market for cloud and ICT services as a major growth opportunity. It flagged a 6.5% year-on-year increase in revenues from these services in its October-to-December quarter, climbing to S$584 million ($431 million), with overall revenues growing by 3.5%, to S$4.43 billion ($3.27 billion), over the same period. (See SingTel Profits Boosted by Overseas Gains.)
SingTel expects to finalize the TrustWave acquisition in the next three to six months and reckons it will be EBITDA positive from the second year after the takeover and earnings accretive from the third year.
News of the TrustWave deal comes several months after SingTel Optus Pty. Ltd. , SingTel's Australian telecom subsidiary, agreed to pay A$13 million ($10 million) for Ensyst, a small local managed services provider and partner of software giant Microsoft.
SingTel has also recently highlighted the success of its G-Cloud-branded private cloud infrastructure, which is now being used by a number of government agencies in Singapore.
The operator is not the only one prioritizing the development of security expertise. In Europe, Deutsche Telekom AG (NYSE: DT) is eager to play a major role in this market and has been expanding its portfolio of security services in the wake of revelations about online eavesdropping by government intelligence agencies, including the US National Security Agency and the UK's Government Communications Headquarters. (See T-Systems Looks to Restructuring for Recovery and Gemalto Denies Spy Agencies Stole Encryption Keys.)
In a security report published in January, Arbor Networks noted a huge spike in the number of large cyber attacks in 2014 and said that many organizations were poorly equipped to cope with them. (See Anti-Spoofing Decline 'Bad News' for Security.)
— Iain Morris, , News Editor, Light Reading