Thank you very much, operator. Good morning, everyone, and welcome to this conference call about Sinch's acquisition of SDI or SAP Digital Interconnect. With me on the call today is our CEO, Oscar Werner, and our CFO, Roshan Saldanha. With those opening remarks, I'll hand the word over to Oscar.
Thank you, Thomas, and welcome to this morning's call. We're very happy today that we have agreed with SAP to acquire a business unit of their called SAP Digital Interconnect. This is a business unit that has been in this market for a long time. It's one of the longtime messaging companies in the industry, and we've come to know them over many different years. Now we have reached an agreement to acquire that business unit. If we move to slide two, please. These are now our numbers before the consolidation or an integration of both Wavy and SAP Digital Interconnect. A revenue of some SEK 5.6 billion, Adjusted EBITDA of SEK 646 million the last 12 months.
Market cap is up to the market, but that was one of the days where Thomas, I think it was the day before or something, when Thomas talked to it. 766 people and present in 33 countries. As many of you know, who's been on these calls before, we do customer engagement through mobile technology and basically providing enterprises with tools to communicate with their consumers via messaging, voice, and video. We do 40 billion engagements per year, and we serve eight out of 10 of the largest U.S. tech companies in the world, and thousands of enterprises around the world as well, mainly in a couple of segments. That said, this slide has been similar, I will go on to look at a little bit more detail into what we're doing on this transaction. Operator, please go to slide number three, please.
Here we see a technological evolution in messaging, and we're going from text notifications, that is outbound messages via text messages, to richer media messaging with all the new OTT channels and new channels that are coming, such as WhatsApp, Facebook, RCS, WeChat, KakaoTalk, LINE, Viber, et cetera, which gives us ability to not only send 160-character text message. It is also possible to send videos, picture messages. You can have action buttons. You can have conversations. You can, in principle, make the message to the same inbox as you today receive a text notification, look like an app. Needless to say, it can be much, much more powerful interaction, if you can have all the functions and features of an app into a text message.
Moving also to conversational messages, because users not only can get richer media in a message, but they can also start responding to the messages. Enterprises are able to track that an outbound message is related to the inbound message, and thereby you can start to have conversations within the messaging channel in a way that is much, much harder if it's only a text notification. If you go to slide number four, please, operator. In this, we have relevance in a couple of different categories throughout the customer journey. The type of messages we do are typically as part of a customer journey, and it's particularly integrated as an integral part of enterprise's customer journey and can be for the purposes of revenue generation, service enablement, or customer care.
The revenue generation may, of course, be marketing, but that's a smaller part of it. The bigger part of it is something that is integrated into the enterprise's customer care or customer journey, but has the purpose of generating revenue. It may be for reducing your churn, or it may be for increasing customers in store or store pickup or something like that. Service enablement, examples are one-time passwords, two-factor authentication, verification, but it may also be a mobile boarding pass. Customer care is a relatively large trend where the customer care industry is moving from calls and online immediate web chat. They're moving portions of the traffic over to various messaging channels.
Basically, imagine you're sitting in a line and you're waiting for a response from a large enterprise, let's say a large utility company, and you're sitting there and you get a voiceover via voice saying, hey, you can also WhatsApp your question to this number. If you do that, you may get response quicker, but you will remain in the line if you would rather speak to an agent." You may, in the line there, WhatsApp your question. If it's a relatively straightforward question, that can be automated, and then you can get your answer via WhatsApp instead. That's a large trend or growing trend in the customer care industry.
To the customer care user, instead of the enterprise, it becomes, instead of paying on average maybe around $5 per call that will reach the customer care center, you may pay $ 1 or $ 0.50 or something to a messaging provider that has both the messaging channel and an automated AI to automate the bots, which is needless to say, a lot lower cost. Let's move to the next slide, please. Our playbook for profitable growth has been to focus on two areas. It's been the connectivity area, where we ensure the connectivity between the enterprise and the consumer without middlemen. Maybe on the voice side, maybe making sure the call is completed or in video, make sure the video call, video link can be set up or in messaging, it is making sure we deliver the WhatsApp message or WeChat message or text message.
On top of that, we see a range of attractive software- as- a- service or software module that enterprises are asking for, and that if we provide this additional software, we can charge additional fees. The software-as-a-service becomes a pure SaaS model where the connectivity— because you don't have any cost COGS, you don't have any cost of the goods you sell— becomes like a pure SaaS model with more 85% margins, on average or round about. While the connectivity business is, you have COGS, so therefore the gross margins in percentage terms obviously becomes lower because you pay fees to the other key providers such as WhatsApp and WeChat, to the operators. Let's go to the next slide. Slide six, please. We have been very clear on our M&A agenda.
We do M&A in the scale and profitability area, in the technology go-to-market, where the scale and profitability typically we acquire sticky customer relationships, a strong customer basis. We acquire direct operator connections in the markets. These are typically a little bit larger companies, almost always profitable. We add to our network by adding more customers and more operator connections and more volume to our network. If we go to the technology go-to-market area, it is where we're typically acquiring smaller companies with complementary technology and go-to-market abilities that we see, all right, this technology and go-to-market ability, we would like to complement our offering with, in order to increase the software value-added higher gross margins. Operator, if we go to next slide, please. Here, if we place SAP and Digital Interconnect into those buckets, we've lined up our acquisitions in those categories.
If we place SAP, the main reason is on the scale and profitability side here. It mainly adds to our network of connectivity. On the other hand, this is a large company, so of course when you are large, it will also add new areas and new technology bits and new offerings that we don't have. The primary reason is on the scale and profitability side here. Operator, if we go to slide eight, please. If we then speak a little bit about what is SAP Digital Interconnect. It is a global cloud communication provider. Operations in Americas, Europe, and Asia Pacific. It has three business units. It has programmable communications, which is primarily messaging, which is 67% of its revenue. Carrier messaging, which is supplying software and services often as a service to operators.
Primarily, this is on the P2P side, so SAP provides software and services to operators to handle their P2P messaging, and they do so to a couple of the world's largest operators, both in the U.S. and Europe. It has an enterprise solutions part, which is around about 5% of the revenue, where it has a contact center solution and a couple of other solutions as well. SAP Digital Interconnect do 18 billion messages on the enterprise side, which is where enterprises are supplying messages to consumers. That is the number we typically relate to as Sinch before Wavy and SAP did 43 billion messages. That's the main business of Sinch. SAP also did 292 billion person-to-person messages in 2019 to operators. This is obviously a very high number.
This is more related to the operator business where you supply the software and service to operator to provide the P2P message. That's a much higher volume in the market, but also a much lower, as you can see above from the revenue from the two different parts, a much lower revenue per message, if you will. It's very strong, obviously, to be able to handle successfully such a large messaging volume. SAP Digital Interconnect is around 320 employees, with headquarters in San Ramon in California. It also has offices around the globe in around about 30 countries. I think it's 33 in total. Our footprint will go from 33 countries to 39 countries. We have employees in a large number of overlapping countries. The deal rationale of this transaction is very straightforward. This is a business we have known for many years in the market.
When SAP mother company decided to enter a competitive process to explore a sale of this business unit, we were very interested. The reasons are, first and foremost, the customers. SAP Digital Interconnect comes with 1,500 enterprise customers, some of the world's most valuable brands, which diversifies our customer base and gives us access to longstanding, large enterprises, which are very attractive to add to our mix of customers. Number two, it's accretive. This is a highly accretive deal, which fits very well into the scale and profitability category. Number three, it significantly strengthens our U.S. presence. We're around doubling our staff in the U.S., which is our biggest market. It also adds a lot of people in both Asia Pacific and Europe, which strengthens our offerings and go-to-market abilities in those markets. The third one is obvious here.
It has very strong operator relations and it functions as a trusted vendor to hundreds of carriers and some of the largest operators in the business, which in our business model, is two-sided. You have the operators on one hand where you're purchasing capacity and need to have strong relations with. On the other hand, you have enterprises where you sell that capacity in a refined form with more software value add. It's very important to work on both ends of that spectrum, both the enterprises and the operators of the provider space. Integration. This transaction is subject to review and approval from competition authorities in multiple jurisdictions. We are engaging with those bodies. We expect that to go through. We do not see that we get too high market share in any market.
Obviously, we will submit it to the regulatory authorities, and we will work closely with them and have good cooperation with the regulatory authorities. We need to wait for approval before we start the integration here. We will combine operations across U.S., Europe, and Asia. We see there are synergies in a couple of areas, both on the SMS platform integration and on a set of core functions. This can come both from the OpEx side, and it can come from the COGS side, basically pooling the operator connectivities and the operators. If one company has a stronger agreement, then you would use that agreement, obviously, on the global level. We see both cross and upsell opportunities both for Sinch and SDI product portfolio. Financials, we pay an enterprise value of EUR 225 million.
SAP Digital Interconnect recorded revenues of EUR 340 million and a gross profit of EUR 94 million and Adjusted EBITDA of EUR 15.4 million in the 12 months ending March 20. Revenue growth has been around 10% in the last two years with the programmable communications business unit is growing the fastest. Again, closing is subject to regulatory approval, but we expect the transactions to close in H2 2020. Let's move on to slide nine, please. The programmable communications being the largest business unit here. The products are programmable communications, APIs and developer tools and digital interfaces. Similar to what Sinch is providing. It has a verification and an authentication business. It has omnichannel capabilities with SMS, email, WhatsApp, WeChat, Viber, et cetera. It has single- point APIs with rich failover capabilities. It's processing 18 billion enterprise messages in 2019.
The go-to-market is similar to what Sinch is offering, and it's a value proposition built on high quality of service and international reach and presence in some 20 countries here. On the customer side, some 1,500 blue-chip enterprise customers, very strong brands. It's a strong customer base with many of the world's most well-known brands, and it has a low churn over the years. The split of customers you can see below, bank and finance and technology being large, but also telecom operators being a large customer base.
This is not on the P2P side, it is on the A2P side, so basically providing services both for the operators to communicate with their own enterprise bases or their own consumer bases or to operators to use as a tool to sell to their enterprise bases. Marketing being a slightly larger, and then a large set of other segments that is being targeted. There you have the overall split of customers in industrial vertical sense. Programmable communications being the largest, 67% of SDI revenues in the last 12 months. Let's move on to the next slide, please. Carrier messaging, like we said, 292 billion person-to-person messages processed during 2019. It has intelligent hubbing and dynamic routing for person-to-person messaging between carriers, so supporting carriers on the P2P messaging side.
It has a messaging proxy to allow carriers to handle business messaging on a person-to-person basis in a singular solution. It has very strong relations and service quality to several of the world's largest operators. The carrier messaging portion is around about 28% of SAP Digital Interconnect revenue in the past 12 months. We have enterprise solutions being the smallest part, around about 5% of SDI revenue in the 12 months. The largest portion here is Contact Center 365 , which has an on-prem, a private cloud, and a public cloud solution as a contact center. It has a set of other solutions for enterprises, a Message Manager, being more of a tool for enterprises to send messages to their consumer base. It has an IoT offering, a smaller IoT offering, and it has a People Connect for workforce disruption communication.
Enterprises can subscribe to this, a SaaS tool. W hen there are workforce disruptions, it may use this tool in order to communicate to its consumer base in an omnichannel fashion. A set of solutions in the enterprise solution space, but the Contact Center being the larger part of this smaller unit. Let's move on to the next slide, please. This is slide 11. On this slide, you see countries with local sales that Sinch has today. As you see, we cover with local sale large portions of the globe. We are continuing to strengthen our offering. This is a very large market. Total market size of messaging is $20 billion, and the voice business is maybe $15 billion, and then the video being $2 billion. It's a very large market.
A very large portion of the enterprises in the world are using these transactions. I typically say in any country, you can go to the banks, they are doing this type of messaging or voice solutions. Therefore, a very large portion of the world's enterprises are potential customers. Here you see the distribution network. The super network, our scalable trial platform is obviously a large portion here, and which is being strengthened by this deal. Let's go to slide 12, please. With that, I will leave over to Roshan, our CFO.
Hi. Thank you very much, Oscar. Very good morning to all of you, and pleasure to be here talking about this really fantastic transaction that we announced today which will add a significant number of customers, blue-chip customers to our customer base, and also strengthen our market presence across the U.S., Asia-Pac, and Europe. Not only that, it will also add a lot of scale and profitability to Sinch's existing business together with the acquisitions that we have already announced in the form of Wavy that is not yet completed, that will be completed in the second half of 2020. On this page 12, you see sort of the pro forma numbers based on the last 12 months' outcome for Sinch, as well as for the announced, not yet closed acquisitions of Wavy and SAP Digital Interconnect.
That would combined give us a net sales of over SEK 10 billion on a last 12-month basis, and a gross profit margin of around 27%, or SEK 2.7 billion of gross profit during the same period. We're happy to see that SAP Digital Interconnect is also a business that is focused on profitable growth and they have been profitable over a period of time. That profitability then combined with Wavy will take us to just over SEK 900 million in Adjusted EBITDA. If we then add the run rate synergies that we have forecasted, the midpoint of the run rate synergies both for Wavy and for SAP Digital Interconnect, that would take us just over SEK 1 billion in Adjusted EBITDA. Remember that the synergies are not coming, are forecasted to come over the next 18 to 24 months.
These are primarily cost synergies both in the COGS area and in the OpEx area. Some of them are related to consolidation of platforms, which is expected to take some time. Finally, on the employee front, Wavy— of course, primarily being a South American-focused business —and SAP Digital Interconnect —having presence around the world with significant presence in the U.S., the major countries in Europe but also a few locations in Asia Pacific, where they have significant presence— would totally bringing us over 1,250 employees and consultants when the deals are closed. Turning to page 13. This shows you our financial leverage. At the end of the first quarter 2020, we reported a financial leverage of - 1.0x, so a net cash position in hand.
With the acquisition of Chatlayer, that would bring us to - 0.8x in financial leverage. If we were to close SAP Digital Interconnect on a pro forma basis, that would bring us to a financial leverage of 2.2x. Adding on top the Wavy acquisition and the closing of the Wavy acquisition, that would bring us to a financial leverage of 2.7x, which is well within the constraints set by banks and corporate bond covenants. Turning to page 14. Again, a reminder of our main financial targets. As communicated before, we aim to grow Adjusted EBITDA per share with 20% per year and keep net debt over Adjusted EBITDA under 2.5x over time.
Looking back historically, we're proud to say that we've consistently delivered a strong growth in Adjusted EBITDA per share and grew 52% on a rolling 12-month basis at the end of the first quarter 2020. A large part of that coming organically. Also that net debt over Adjusted EBITDA was, at the end of first quarter 2020, in a net cash position of - SEK 1, thanks to the strong support we received on the share issue that we did at the end of the first quarter. With those words, and to conclude, I will leave back to Oscar. Oscar, I think you're on mute.
All right. I was speaking into mute, saying lots of great things here. Sorry about that. With that said, that was the last part of the presentation. With that, we will leave over to questions of this exciting transaction. Thank you for your time, and feel free to ask any questions.
Thank you. Ladies and gentlemen, we will now begin the question- and- answer session. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We kindly ask you to limit yourself to one question per time in order to give all the participants the opportunity to ask them questions. If you wish to cancel your request, please press the hash key. Once again, star one if you wish to ask a question. Thank you. Our first question comes from the line of Daniel Djurberg for Handelsbanken. Please ask your question. Your line is now open.
Thank you very much. Good morning, gentlemen, and congratulations to another interesting consolidation move here. Two questions from me, on the same topic on integration. It would be interesting to understand if it's more of a plug-and-play, i.e., with the SDI seems to hold a similar setup as Sinch with the programmable communications carrier enterprise. Will it be a direct integration of these into Sinch messaging operator voice and video? Also if you can tell us a little bit more on the integration of the SMS platform, since both this and Wavy is a bit larger, really more or less like mBlox, if it would be more complex integration of the SMS platforms, et cetera. Thank you.
The first question relates to where or what business unit it will be integrated into. First, you need to know there's been a competitive process. We have received less information and less access to the team than we are typically provided, because it's been a competitive process. The first stage for us is to speak and get close to the team and understand the teams. Based on that, we will make the decisions on exactly what business units is it going to be in. That question on the overall level, we will need to get back to, because we think it's respectful. We want to understand and learn from this team and understand their best practices, and then we can decide. Generally, on the largest part programmable communication, yes.
It is combining the programmable communications or messaging business on the SAP Digital Interconnect with Sinch's. That's fair to be said, because that's the obvious one. That's the business we know the best here. That's straightforward. Your second question, if you can repeat that, please.
It was on the integration of the SMS platform. Historically, mBlox was a bit more larger, of course, bigger and also, I guess, Wavy we will come into the play now. Otherwise you have done quite smaller acquisitions and easy to integrate on the Nova platform, and so on. Those Wavy and SDI, are they larger chunks, larger process? Will it take more time and done step wise, customer by customer, or how to think of the integration on the SMS platform?
These are larger companies and that has two aspects. One, the integration process takes longer time, and you need to be very careful with all the customers, of course. That's our main focus. Yes, this is more to be compared to the mBlox transaction in terms of length of time and how long time it takes. We obviously need to make individual plans for each business, and the business is individual. Yes, it's more to be compared to that. We should obviously say that, at the time of making the mBlox transaction, Sinch or CLX then was a much smaller company than it was. I think it was 80 people or something like that on the CLX side. We're now significantly larger. Yes, it's more relative to that.
The other aspect when you make larger transactions is obviously, if you are 300 people, then you have a very stable operations yourself. It's easier to handle a transaction because it has a well-run management team and well-run processes and systems on its own right. It's a more stable business and a larger business that you take over that has been existing for many, many years. You also have a little bit more time to do these things.
Thank you very much.
The comparison to mBlox is correct .
Thank you very much. Good luck. I will get back in queue here with more questions later on. Thanks.
Thank you.
Thank you. Our next question comes from the line of Predrag Savinovic from Carnegie Investment. Please ask your question. Your line is now open.
Thank you, operator. Thank you very much, guys. Very interesting transaction today. A question on the historic growth rates here on SDI. I think you mentioned 10% growth in the last year. Can you say a bit more in a longer perspective how it's been for SDI in both net sales, gross profit and EBITDA? Also maybe on the profitability level of SDI for the past three to five years, just so we can get a sense of how the margins have developed here prior to you acquiring the business.
Thomas or Roshan, do you want to take that question?
I can comment that briefly. Predrag, firstly, I think the numbers that we state that's consolidated for the company on a net sales basis. I f you look at the three segments, programmable communications, as we've said before, is very similar to our messaging business. In that sense, the mechanics of the business and then the gross profit very much follows where we're terminating traffic or where the business is terminating traffic. That business has a slightly higher growth rate than the overall business growth rate. I think that's safe to say. On the carrier messaging side, which is the P2P communications, while P2P volumes have sort of stabilized or declined over a period of time, this is not a business that is growing significantly. It's likely either stable or declining mode.
The enterprise solutions business, of course, I think there's a combination of on-prem and cloud solutions that they have, and that business has a growth rate, and you could say that's slightly slower than the total growth rate for the company. I don't know if those comments helped you a little bit to get a view on this. When it comes to EBITDA on the different segments, I think that's nothing that we can comment at this point in time, due to reasons that Oscar explained on access to the business, et cetera, earlier.
Super. I understand. I was just wondering if whether this division has now reached a 5% margin this year when it was loss-making the past years. Has it always been profitable?
No. In that sense, the trends are very stable. There's no sudden changes in the trends. The trends that I explained are stable and sustainable, we believe.
Super. Thank you very much.
Large messaging businesses in this space are typically profitable, and this is no exception. This is a business we understand and know, and it looks very similar to our other companies in this space. They're all solidly profitable over many years.
Lovely. I'll get back in line. Thank you.
Thank you. Our next question comes from the line of Fredrik Lithell from Danske Bank. Please ask your question. Your line is now open.
Thank you. Congrats to a great acquisition. Hope you are all well. Two small detailed questions, maybe. The first one is, you're adding around 100 carrier connections. You already by yourself have around 300+ or something like that. Are there any duplicates? Does that mean anything or are these sort of 100 new ones that are added to your existing network? A follow-up on that one, is there any white spots that you cover now? For example, direct connections to Indian operators or any other places that you can highlight? Thank you. Nice talk sir.
Thank you. This is a global business that is flying large enterprise around our world. Obviously there's a large overlap of connections, but there are also new ones. It may also be so that there is an overlap, but there is a special feature or a better rate or a better access or a better capacity or something like that on one of the connections. That's a detailed comparison. I think it falls in the large number of overlaps, a set of new, and then the third category is on the overlaps, a percentage of them will have different price and functionality. We do think it adds to our operating network in a good way. Are there any white spots? That's a more detailed analysis that we need to go through.
We know a couple of countries that look very interesting, but it requires a more detailed analysis and not something we would disclose publicly. It's, yes, there are a couple of areas which look interesting from a top- level perspective. I think that was answering all your questions, right?
Absolutely. I step back into the line. Thanks.
Thank you.
Thank you. Our next question comes from the line of Ramil Koria from SEB. Please ask your question. Your line is now open.
Thank you, operator. Thank you, gents, for taking my question here. Just one high level one before I step back into line as well. SAP is obviously a pretty big entity, least to say. Presumably they've bundled quite a bit and upsell their Digital Interconnect offering as well. Are you in any way contractually sort of protected from short-term customer churn as customers all of a sudden have two vendors? Should we sort of expect this unit to have been separately managed for quite some time, given its history?
I think we should assume this unit has been separately managed for some time. That's probably one of the reasons. You would have to ask SAP, of course. It's been a separate unit that comes from previous acquisitions of SAP, so it's been run separately. We don't expect churn as a result of that. Obviously, in a transaction, there's always a risk that customers review their offerings and review their suppliers and et cetera. That's a risk we always take in the transaction. That's something we always count into the business cases, both on the positive and the negative revenue synergy case. We see no larger risks in this transaction than any other transactions we do. Very clearly operated separately by SAP for quite some time on the customer and revenue and core operation side.
I think-
What has been integrated here is more the finance/ HR functions from SAP mothership, while the other core functions, customer- facing functions, has been run separately.
Thank you.
Thank you. Our next question comes from the line of Daniel Djurberg from Handelsbanken. Please ask your question. Your line is now open.
I'm back. A question would be on the revenue model in SDI programmable communications. They have, as you mentioned, SMS, push email, WhatsApp or WeChat, Viber, et cetera. Would it be very similar to Sinch revenue model or a bit more like SAP with a bit larger recurring or true recurring revenues than Sinch? Is it a direct copycat, you could say, or not a copycat, but similar to Sinch? Thanks.
I think this is very similar to Sinch on that side. On the enterprise solution side, it is different, with more SaaS revenue, higher margin, longer contracts. That's not only on the contact center space. They also place a part of their value add to enterprises they place in this category. There you have a little bit of a difference to the classic Sinch, if you will. Sinch is also moving in a separate transaction. The classic Sinch, you have a little bit of difference there. The programmable communications part is primarily similar.
Perfect. Also from on the operator side, you offer the firewall and the RCS as a service, et cetera. Do you see a decent upsell opportunity for those products towards the carrier business or for SDI? Or can you comment a bit on that?
That's a good question. That's not the rationale for making this transaction. The main reason being that SAP supplies the world's largest operators with services on the P2P side, while our target focus has been smaller carriers and operators, basically. No, not any direct translation, direct cooperation there. Now with the SMSF and Ericsson Corporation, we are actually starting to supply the world's largest operators as well from our operator business unit. If you're looking for material benefits, no, that's not the case.
Perfect. Very clear. Thank you.
Thank you. Our next question comes from the line of Fredrik Lithell from Danske Bank. Please ask your question, your line is now open.
Thank you. Roshan, maybe on the synergies here, as it has been sort of a more competitive process, have you been able to look into the operations in such detail so the synergies are pinpointed or is it so that you have done a proxy on what type of benefits you will be able to reap on the size of it all? How have you come by the synergy in your calculations? Thank you.
Thanks, Fredrik. Of course, we have limited access during this process, but, in a broad sense, I would say it's not different than any other acquisition that we have done. At this point in time, we have had typically access to a limited number of people, more limited in this case than in other cases. The good part is that, SAP Digital Interconnect has been existing for a number of years. I think it's one of the pioneers really in this space. We have people on our side that are quite familiar with that business, and we have good experience from previous transactions. I think we mentioned mBlox, which was really a success execution for former CLX Sinch as a company. That combination of knowledge and experience makes us fairly confident on the overall synergy levels that we're communicating.
The synergies are in the OpEx and in the COGS areas primarily. I think, obviously as we go into the next phase, both until closing, but primarily then after closing, when we have full access to the business, we will further refine these plans. We're confident on the level of synergies that we communicate now.
Thank you. Maybe a second question, if I may, while I'm still on. The carrier messaging business unit and maybe also the enterprise solutions, I'm not really sure here, but it seems like these two smaller divisions of SDI will fall into your operator division. If that is so, if that is your thinking, do they have similar types of business models? I'm not sure if that was Daniel's earlier question. It might be a repeat question then. Is it the similar type of operations they are doing that you're already doing in the operator division? Thank you.
It's a good question. The carrier messaging is obviously supplying operators. That could be argued, and we haven't made the decision to merge it together with our operator business unit. That's something we need to speak to the organization. The enterprise solution is not supplying operators with services. That's both on the contact center side and its value-added services to enterprises. That should not be a group together with the operator business unit, unless we decide anything differently. From the outset, no. Business model-wise, it's a little bit different, if we talk about the carrier messaging, because it's obviously higher volume and supplying services to larger operators, and it's a different product set because this is P2P messaging. We're primarily supplying the software for SMSCs, which do P2P messaging as well.
This is more a managed service offering, where you actually operate the platform as well. It's a little bit different to our operator business unit. It's obviously falling in similar categories. This is not a product offering we have, and a little bit of a different business model as well on the operator side. On the enterprise solutions, I think also that's completely different to the operator business unit.
Thank you very much. I go back to the line.
Maybe, Fredrik, for the benefit of the audience. On our operator business, we're selling software. The typical buyer is either the network function or the IT function within the companies, within the operators, and they're buying SMS software to run their businesses. The carrier messaging business that SAP Digital Interconnect has, is typically the carrier departments or the wholesale departments that are the buyers, and what SAP offers is an outsourced hub-based messaging internetworking, that provides simplified routing, that provides cost savings. It's a different product. Not commenting on your question of how this will be organized, because as Oscar said, we're not ready yet, but just to explain a little bit on the differences between the products.
SAP's business is one step closer to our enterprise business, if you will. It's more the same departments as we deal with on the enterprise side.
It's one step closer to the enterprise business.
Thank you.
Thank you. Our next question comes from the line of Ramil Koria from SEB. Please ask your question. Your line is open.
Thank you. Could you please just provide some flavor on your plans for the enterprise solutions offering? I know it's early days, but your analysis so far, what are you going to do with the contact center capabilities here?
It's very interesting because messaging becomes conversational, as we had on one of the slides, and repeated many times. Pretty much any company, enterprise we have, when users start responding to all of the outbound messages that comes out, becomes a conversation between the enterprise and the consumer. That may start in the messaging format in our world, and then you may use the Chatlayer or the functionality to automate the responses of that conversation to some extent. W e're humans, a t some point you need human interaction. If that's 30%, 50% or 70% of the users, that depends on the use case. You need to hand that over to human agents.
That's where the interaction in between the messaging and automate the kind of consumer communication and the contact center industry is. That's where the line of demarcation is, and that's where we will engage. You would expect us to, all right, hey, the Chatlayer functionality, what can we do with that in the contact center industry? You should expect that contact center industry to use our messaging routes in an omni-channel fashion, and you should expect us to explore the interface there. How can we do something great with the interface there, and how can we understand, in a better way, how you do conversations with consumers? That's the kind of the overall, and there we need to learn, because this is new for us. It's also very interesting because it's an industry that progressively is moving closer and closer to the CPaaS industry.
There we have to set our strategy together with this business unit as we learn with it. Any more questions on that, or I understand that's a little bit hard to understand, but it's-
No, that's very good. The go-to-market is quite different here. Given what you're saying, is your intention initially sort of exploring options here before taking decisions on sort of investing in the go-to-market organization for this vertical specifically? Is that sort of the way we should read it?
True. You should see this as a separate business unit within SAP, and it becomes separate with us as well. There is a growing increase of integration in between the contact center space and the messaging space and the CPaaS space. There's large degrees of overlap, and we will explore those overlaps before we set a clear strategy on exactly how do we go forward here.
Thank you. Let me just take my final question, if that's okay, and I won't ask for today.
That's all right.
Perhaps just some high level sort of flavor on the competitive environment in the APAC region. We know who your competitors are in the U.S. Anything in the APAC region would be great.
First relating this transaction to APAC, we both have volumes and customers on the APAC region. This is, however, mainly if you look at staff and the transactions, mainly U.S. and Europe. This is more towards what we have, and this is not one of the major players in the APAC region, even though it obviously strengthens our footprint greatly. Looking at APAC, it's a very large region. It is the most populous region in the world, and there are significant players in that region in many different areas. India is a market of its own with a set of large players. China is a market of its own with a set of very large players. You have all the countries apart from that with significant regional players as well.
That's another region, which is just as large or maybe the largest region in the world in this space. Obviously, there's growth opportunities and large competitors in that space in a big way.
Should we consider this acquisition as some sort of a greenfield entry into those markets? Given that you presumably increase your direct sales presence in mainly India here, or could there be more M&A in the pipe if you want to enter the APAC more forcefully, if you will? I know it's a tricky question.
Well, obviously we don't comment on future possible transactions. You're correct. This is more of a greenfield entry, or it's more of doubling our own greenfield entry. We have done a greenfield entry there. We have a set of people in Asia, and SAP did the same. Say that this is more greenfield or doubling our own greenfield entry into the APAC region. Yes. We become a larger player, but we're by far one of the largest players in APAC by this transaction, even though we're doubling our size. Remember, this is a very large market. Should we decide to enter APAC more forcefully, yes, we can invest organically or evaluate other transactions of players who are more local to that market and larger by market share in the markets in several different regions.
Thank you very much, Oscar.
Thank you.
Thank you. Our next question comes from the line of Daniel Djurberg from Handelsbanken. Please ask your question. Your line is now open.
Thank you. My two final question, if I may, would be first, you sounded positive on the regulatory approval process. Can you comment some more on that? B ecause it was several jurisdictions, in which market will the joint company have the largest market share post the merger? Also if you can comment, if you heard anything from SDI on the COVID-19 impact, since they have 1,500 enterprise customers, in terms of volume, what they saw in March, if we compare that with you. Thanks.
Thomas and Roshan, maybe have a look at the regulatory approval.
I think we refrain from going into any details. We're assessing the exact list of countries where we will file for regulatory approval. I don't think we'll comment any more at this stage.
Fair enough. Thanks.
On the COVID-19, we have been, obviously, in these times, we are reviewing transaction volumes and how our businesses perform. It is obviously a little bit hard from the outside to assess the business, in full. Based on the information we have been provided with, they have a similar impact to what we have. Obviously, it is not good, but in the short term, we have not seen major impacts based on the information we have been provided so far. I think it's similar to what we see in ourselves and what we see in other players in the market. On the carrier messaging side, it has been a little bit positively impacted, due to the general trends that I think you read in the papers, that people communicate more via the telecom networks in these times.
Perfect. Thank you. Stay safe and healthy, and good luck.
Same to you.
Thank you. Our last question comes from the line of Predrag Savinovic from Carnegie Investment. Please ask your question. Your line is now open. Thank you.
I was wondering if you could say something on email, perhaps. I know you can offer this through partnerships, you rarely or never even speak of it. It seems that SDI does have this capability. Maybe some thoughts on this channel.
In general, we're a customer engagement company. Email is something that is requested by enterprises. It is not the core reason for making the deal, but it's one of the technologies that are interesting to get and getting the experience from that area is very interesting. Therefore, it can be added, and the knowledge can be added to our overall offering. We need to, just like with the contact center industry, we need to review that more and understand that portion more of the business before we can give any more information. In general, this is about customer engagement and customer communication. Email and in-app and all these others, that's just more channels to which enterprises can use to engage their customers.
Super. I have just two more. One, coming back to customer retention. You mentioned that one of the biggest deal rationales here is the customers, and there is some overlap on the technology side. Is there any customer overlap, seeing as SAP has been around for quite some time? Also about retention on the management within SDI. Will they stay on board here once this is finalized? Thank you.
On the customer side, of course, there are overlaps. These are large enterprises, typically have multiple vendors, and that's an active strategy on the customer part, and therefore, being two major players in the industry, there is going to be overlaps. Yes, is the short answer. Is it major? Maybe not. Yes, there will be overlaps. On the entire organization, I don't want to single out any different group, but on the acquired organization, we will, of course, review and see what are the roles in the new joint company. We have a philosophy of, from the day one that a company joins us, we're just as much part of Sinch as anybody who has been here for a long time.
We are a strict meritocracy, so we're just looking at how can we grow our business to supply our customers with the best possible service in the best possible way. That's our approach. Then we try to do just that. As you can imagine, in this stage, we're going from a 700-person company, and with Wavy and SDI, we're adding some 500 people. There is a lot of growth, and we need to upscale our own organizational structure and rethink that and make sure we follow this process, which we have been planning, of course. Therefore, it's good to have a lot of new colleagues and a lot of new competence that you can utilize in various different ways. Exactly how that plays out, we need to speak to the people and get to know the people before we can answer that question.
Super. Thank you very much, guys.
Thank you.
Thank you. We have no further question at this time. Please go ahead.
Thank you very much, everyone, for dialing in to this conference call and for your continued interest in Sinch. If you have any follow-up questions, feel free to reach out by phone or email. With those remarks, I'll hand over to Oscar for a few closing words.
Thank you, Thomas. Needless to say, we think this is a very interesting and good addition to our company. Otherwise, we wouldn't do it. We think, like I said, the customer base, the operations, the people, and the financial attractiveness of this deal, I think it's one of the steps and one of the big stepping stones on the way for us to reach our goals. Therefore, we're very, very happy to have agreed with SAP to make these transactions around SAP Digital Interconnect. That said, thank you. Thank you for your interest, and hope you stay safe.