Capacity Europe 2011: Cooperation in Action

Jim Poole

By Jim Poole

The opening plenary at Capacity Europe 2011 saw an all star cast of carrier luminaries assembled to discuss what a profitable business model for a carrier would look like in the future.

Already a theme for the conference is starting to emerge, as the trio mulled the problems of dwindling revenues and increasing traffic – as raised by Deutsche Telekom’s Holger Magnussen moments earlier.

The panel (from left to right) of Erik Hallberg, Paolo Ferrari, and Alexandre Pebereau

The three men explained some ways their companies were refining their strategy to secure their revenues in these competitive times.

Telecom Italia Sparkle’s CEO Paulo Ferrari has placed his hopes in a solid business strategy in any environment – diversified revenues across a portfolio of services. Ferrari referenced the unlikely example of the Greek market, which given current news is perhaps an unlikely posterchild for a template market.

In Greece, Sparkle have a fully distributed mix of high-quality infrastructure and value added services that enable resilience and profitability even if any particular sector suffers. Now Sparkle is “looking to transfer this mix to the entire business… it’s expensive to put this in place, but it’s worth it,” said Ferrari.

Alexandre Pebereau, Executive Vice President of Orange’s International Carriers unit, has pinned his hopes on large scale global cooperation with other operators. Having recently announced a partnership with China Telecom, Orange is walking its talk in this regard.

Pebereau explained the rationale behind this strategy as a pragmatic one – accepting that one business can’t dominate the whole market, and therefore aiming to build an effective global network through long-lasting partnership with major regional players.

The president of TeliaSonera International Carrier, Erik Hallberg, saw future revenue growth in providing highly tailored infrastructure and services to specific verticals. He referenced gaming, broadcasting and financial services as some of the verticals where TeliaSonera saw clear opportunities.

Gaming could be a huge vertical sector for carriers

To make the distinction between gaming and gambling, Hallberg identified the phenomenally successful Angry Birds, and surprised a few in the audience by admitting he owned the game on his own smartphone.

The story is compelling. Angry Birds is a game with 500 million users, and it provide a software update to its users about once a week. There are clear revenue opportunities for the industry here.

Here’s a quick snippet from each of the three speakers:

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Despite quite separate views on strategy, we’ve seen the speakers agree on the pressures facing the industry (revenues vs traffic), and they also agreed on the outcome – that the industry will undergo a period of extended consolidation and partnership.

However conditions are difficult in the current M&A market, raising capital for big acquisitions is tough, and so we are seeing more focus on partnership between large players, while those same players are looking to acquire smaller innovative companies in the marketplace, particularly to complement their growing cloud service offerings .

Hallberg summed it up perfectly when he explained, “The next wave of M&A will be driven by consumer demand,” meaning that the pressure on price and demand for data will force carriers to exploit scale to meet that demand while remaning competitive – driving partnership and acquisition.

Equinix certainly sees an increase in cooperation and partnership between carriers – having positioned itself in the role of facilitator for the operational aspects of partnership between carriers with its Marketplace and Carrier Ethernet exchange offerings.

One thing is certain, there will be interesting times ahead for the industry!