Infracapital secures SSE Enterprise Telecoms stake

Infracapital has become the latest investment firm to secure a stake in the increasingly popular connectivity industry with a £380 million investment in SSE Enterprise Telecoms.

The deal will see Infracapital secure a 50% stake in the SSE Enterprise Telecoms business, with £215 million to be paid on completion of the transaction, the end of June, and up to £16 million in a series of instalments depending on the performance of the business in the future.

“Infracapital’s investment in SSE Enterprise Telecoms shows the confidence it has in the future growth of the business,” said Colin Sempill, SSE Enterprise Telecoms MD. “It recognises the success we have achieved to date, building out a great network, winning notable contracts and being relentlessly focused on customer satisfaction. Both parties see this as an opportunity to help develop the network infrastructure that this country needs to turn the vision of the UK’s digital economy into reality.”

“High-speed connectivity is vital to economic growth and prosperity and we are delighted to announce this partnership with SSE plc.,” said James Harraway, Infracapital Director. “SSE Enterprise Telecoms is an established telecoms infrastructure provider and is well positioned to support growth in this critical sector. Infracapital has considerable expertise of investing in digital infrastructure and we look forward to working closely with our new partners as the business continues to grow, deliver new projects and expand its networks.”

While SSE Enterprise Telecoms is not necessarily a heavyweight on the UK’s connectivity scene, this investment is just another example of financial firms becoming increasingly interested in alternative network providers, or Alt-nets. Hyperoptic is another example, having secured £250 million from eight international banks to extend its full fibre optic network, while CityFibre secured a debt package of £1.12 billion last month, after being bought by a Wall Street investment consortium in April.

More than anything else, this is an indication that perhaps things are not going as badly in the telecommunications as some would have you think. It might be going through a rocky time competing with the OTTs, regulations might not be going all the right directions and revenues are not growing at a rate of knots, but such investments show there is confidence in future success. The industry has demonstrated consumers are willing to pay for larger data bundles and fibre connectivity, and now the financial industry is listening more acutely.

For the Alt-nets and the consumer, it is a great sign. Securing more investments in the business, especially from those organizations which are not necessarily chasing the short-term pay out, will provide more security around CAPEX and deployment plans. It might not be the most exciting news from today, but it perhaps some of the most reassuring.

CityFibre bags £1.1bn for nationwide fibre rollout

During yesteryear, CityFibre was known for moaning for the sake of moaning, but in securing a debt package of £1.12 billion, the firm’s ambitions are starting to look very real and very interesting.

Seven banks have financed the transaction, ABN AMRO, Deutsche Bank, Lloyds Bank plc, Natixis, NatWest, Santander and Société Générale, which will serve as the first installment of CityFibre’s £2.5 billion commitment for a nationwide fibre rollout. CityFibre has given itself a target of providing fibre to five million homes, a third of the Government’s target of 15 million, by 2025.

“The appetite from these institutions to support our financing is further evidence that CityFibre’s strategy is the right one for the UK,” said Terry Hart, CityFibre’s CFO.

“As our networks are rolled out, this will benefit everyone, driving innovation and increasing fibre penetration across the UK, providing the future-proof digital connectivity the UK needs. CityFibre’s target to reach five million homes by 2025, as well as thousands of businesses and public-sector sites, will catalyse huge economic growth in regional towns and cities across the country.”

CityFibre made it abundantly clear in its statement that this is an endorsement of the firm’s business model from heavy hitting financial institutions, and perhaps it does indicate a change in attitudes from investors.

Back in October, we attended an investor panel session at Broadband World Forum featuring the likes of the European Investment Bank and also Amber Infrastructure, a specialist venture capitalist firm. The message was clear from this panel session; investors are increasingly happy to fuel fibre rollouts as the business case has been justified and consumer demand has been validated.

This is where CityFibre sits. It doesn’t want to be a telco but become a serious infrastructure player. Owning the relationship with the consumer is of zero interest but creating a nationwide alternative to Openreach and becoming a connectivity wholesaler is the big picture. However, to be considered a viable alternative, there needs to be more of a presence than there is today.

Telcos don’t want to have a patchwork of relationships across a country to meet the connectivity demands. Multiple relationships create more overheads and more opportunity for something to go wrong. CityFibre has made good progress in rolling out fibre spines in numerous areas across the UK, but the gaps will have to be plugged if it wants to be a viable and realistic alternative to Openreach.

That said, CityFibre is looking like a business which has the right ingredients for a market which is primed for disruption. Aggressive ambitions, a head-strong CEO and the confidence of being owned by one of the world’s most powerful businesses. CityFibre is a very strong contender to make a genuine and permanent dent in the connectivity infrastructure game.

And a £1.1 billion investment from seven major financial institutions is a very good place to start.

Ofcom’s competitiveness quest continues with another ducts and poles assault

Ofcom has unveiled its latest edition of its business connectivity market review with an all too familiar feel; how can it force Openreach and BT to play nicer with competitors.

As with any former state-owned monopoly, BT/Openreach is in the enviable position of having the groundwork already laid for future-proof infrastructure. Of course it has not done enough across the years to meet the demands of tomorrow’s fibre-based diet, though one factor behind this is a lack of external pressure on the business. Without competition, the enforced need to invest and innovate is not there. This is ultimately Ofcom’s objective; create an environment which encourages other ISPs to lay their own connectivity foundations, decrease the reliance on Openreach and improve connectivity options for the consumer.

“We want to give companies greater flexibility to lay fibre networks that serve residential or business customers,” Ofcom said in a statement. “So today, we are consulting on proposals to allow access to Openreach’s ducts and poles to companies offering any type of telecoms services including high-speed lines for large businesses, networks carrying data for mobile operators and high capacity lines supporting broadband services. We intend to implement this unrestricted duct access from spring 2019.”

This review focuses on the areas where there is minimised or no competition for BT. Ofcom believes BT currently has almost 5,600 local exchanges, though at roughly 5,000 of these sites there is competition from fewer than two competitors. BT’s position has been deemed unacceptable in these areas.

Starting with the areas where there is evidence of potential competition, but BT still maintains ‘significant market position’, Ofcom will no longer impose a cost-based charge control or quality of service standards on BT’s wholesale services, which combined with access to BT’s ducts and poles, the theory is competitors will have a stronger incentive to build their networks.

In areas where network competition is unlikely to be a reality, Ofcom has proposed a price cap for services at 1 Gbps and below to protect customers and provide certainty and stability over the course of the review. What is worth noting is that this is a relatively short-review, as while the proposals could come into play next spring, 2021 would see a new review and therefore new proposals.

The final proposal comes at the 4,300 exchanges where BT faces no competition from rival operators for inter-exchange connectivity, and Ofcom has deemed opening up the ducts and poles will have little impact. Rival networks are too far from these exchanges to make it economically viable to serve these exchanges, therefore BT is the only choice as a supplier for backhaul. Ofcom is proposing a requirement for dark fibre at cost for inter-exchange circuits that connect to these locations.

This is of course not the first time the dark fibre suggestion has emerged from Ofcom. In April, Openreach officially launched a compromise between full dark fibre access and full managed service after months of bickering and reviews with BT attempting to resist the Ofcom intervention. Ofcom seemingly lost that battle, with fingers being pointed at suspect market definitions, though now it appears ready to restart the assault.

This is of course only the consultation stage of the process, though the plans are to get the new rules in place by next spring. Whether this timetable is realistic with the almost guaranteed legal challenge from BT remains to be seen, but this is just another step in the never ending Ofcom quest to improve connectivity and competition across the UK.

Orange goes submarine with Google cable partnership

Orange has been announced as the latest partner to join Google on its monstrous mission to bulk out its connectivity infrastructure maze.

The telco will act as the French ‘landing partner’ for Google’s Dunant transatlantic submarine cable, which is set to come into operation in 2020. As part of the partnership, Orange will provide backhaul services to Paris, while also benefiting from fibre-pairs with a capacity of more than 30 Tbps per pair.

“I am extremely proud to announce this collaboration with Google to build a new, cutting-edge cable between the USA and France,” said Stéphane Richard, CEO of Orange. “The role of submarine cables is often overlooked, despite their central role at the heart of our digital world. I am proud that Orange continues to be a global leader in investing, deploying, maintaining and managing such key infrastructure. Google is a major partner for Orange and this project reflects the spirit of our relationship.”

Announced back in July, Dunant (named after Nobel Peace Prize winner Henri Dunant) is Google’s first private investment across the Atlantic and supplements one of the busiest routes on the internet. The cable will be 6,600km long, connecting the west coast of France to North Virginia in the US. The cable is set to be the first to connect the two countries in 15 years.

While many organizations are investing in infrastructure through consortiums, Orange has invested in more than 40 submarine cables, few have taken Google’s approach in being the sole investor. It might be a more expensive approach, though Google will have more control over capacity and the route of the cable, perhaps giving it a bit of an edge over competitors. The weight of such investments have been putting some dents in the spreadsheets, the CAPEX column doubled during the latest quarterly earnings call, though it does put Google in a solid position.

From Orange’s perspective, the partnership will strengthen the telcos position to support the development of new uses for its consumer and enterprise customers in Europe and America. It will also be in a stronger position to provide services to wholesale market such as content-providers and third-party operators.

Telarix and Starhome Mach merge to offer global wholesale telecoms portfolio

A couple of companies involved in the areas of operator interconnectivity, roaming and general wholesale action have decided to merge.

The combination of Telarix and Starhome Mach inevitably claims to offer a full end-to-end set of wholesale solutions for operators, covering voice, SMS, clearing, settlement and fraud prevention. The new company has 450 customers in 130 countries. All this mucking about with telecoms plumbing also creates business opportunities in BSS, subscriber analytics and that sort of thing.

“CSPs must manage their complex partner ecosystem from negotiation to traffic management, to billing and settlement, while at the same time, providing differentiated services to consumers, businesses and IoT.,” said Telarix CEO Marco Limena. “This merger will enable the development of new  innovative solutions overcoming the complex challenges of today’s digital transformation era to drive desired business performance.”

“Our success in launching SaaS versions of our leading roaming and clearing platforms introduced a variety of other innovative solutions in real-time anti-fraud, Network Function Virtualization and the Internet of Things,” said Starhome Mach CEO, Itai Margalit. “Bringing our offerings together with Telarix’s solutions will bring new solutions to the market and we see a huge opportunity to accelerate company growth.”

“Telarix and Starhome Mach have been very successful in their respective markets,” said Steve Pusey, former Group CTO and Senior Board Advisor to Telarix. “The joining together of this expertise creates a unique opportunity to address the market demand for full spectrum solutions.”

While positioned as a merger this looks more like the acquisition of Starhome Mach by Telarix. Private equity is involved one both sides but only Vista Equity Partners, which is behand Telarix, will remain involved, it will be based in Telarix’s home of Vienna, Virginia, and Limena will be the CEO of the new company, with Margalit becoming President of the roaming silo. You can read further analysis of this move at Light Reading here.

3 + BT + SSE = 5G, FYI

UK MNO Three has announced a new deal that gives it access to a bunch of BT local exchanges to augment its backhaul. This will be handy for 5G, we’re told.

This move was made possible by a new project undertaken by SSE Enterprise telecoms to unbundle 177 BT exchanges over the next two years, thus enabling it to offer wholesale fibre services itself. Three is the first customer to seize this opportunity, which SSE is virtue-signalling as being a significant contribution to UK fibre access or something like that and Three seems to be adopting a similar position on 5G.

“By significantly increasing our access to fibre, we are putting our network on the best footing possible to take advantage of the benefits of 5G technology,” said Bryn Jones, CTO at Three UK. “Our customers use 3.5 times more data per month than the average UK consumer and this deal will help us maintain our leadership in providing a fantastic data service. Fibre is essential to the UK’s digital future and more needs to be done to improve its availability to ensure that the UK benefits from 5G at the earliest opportunity.”

“5G will allow Three UK to grow capacity on its network more than twenty-fold,” said Colin Sempill, MD at SSE Enterprise Telecoms. “But for 5G to live up to its potential, the right infrastructure must be in place. High capacity fibre connectivity is absolutely critical. We’re fully invested in supporting the UK’s digital ambitions, demonstrated in our recent investments in expanding our network, and it’s exciting for us to be playing such an important role in Three UK’s journey towards a 5G future for consumers and businesses.”

Three says this deal will allow it to increase its network capacity 20 times, which is pretty significant and necessary since it anticipates UK punters hoovering up 90GB per month by 2025. Oh, and in case you missed it, this will make it really good at 5G too. SSE, meanwhile, seems to be positioning itself as a major fibre backhaul provider thanks to this project.

BICS and Fastweb combine to link Europe and MEA

Connectivity vendor BICS has joined forces with Italian operator Fastweb to augment communications links between Europe, the Middle East and Africa.

The strategic partnership aims to combine BICS’ pan-European network with Fastweb’s fibre backbone in Italy and its access to submarine cable systems originating in Sicily. The point of this joint effort is to offer intercontinental connectivity services wholesale to other operators.

“We are highly satisfied with this partnership agreement with such a major international player as BICS, which highlights the strength of our network and the solid nature of our strategy,” said Fabrizio Casati, Chief Wholesale Officer at Fastweb. “The partnership with BICS adds further value to our investments, following on from our participation in the Open Hub Med consortium in Sicily and the development of an innovative and future-proof Flexible Optical Network all along Italy.”

“BICS has always been committed to providing its customers with first-class connectivity, and this partnership confirms our position as a bridging partner for operators expanding their capacity provision throughout Europe,” said Daniel Kurgan, CEO at BICS.

In case you’re wondering where else BICS connects here are a couple of maps for you. We couldn’t find any for Fastweb, sorry.

BICS Europe

BICS global

BT consolidates its B2B business units under Gerry McQuade

UK telco BT is merging a bunch of B2B business units into one – called BT Enterprise – that will be run by the current head of BT’s Wholesale and Ventures unit.

Gerry McQuade has run the wholesale unit, which offers services mainly to UK communication providers and broadcaster, for a couple of years. He will effectively swallow up BT’s Business and Public Sector unit to create one big part of the company that focuses on business all the way from SMBs to the public sector. The former head of the latter unit – Graham Sutherland – has decided this is a good time to call it a day at BT.

“Having brought together our Consumer and EE businesses, this is the next step in the simplification of BT’s operating model,” said BT Chief Exec Gavin Patterson. “Combining our enterprise businesses will allow us to strengthen the services and products we offer to businesses and sharpen our focus on customer service, through clear accountabilities and by introducing efficiencies. Gerry McQuade has successfully led the Wholesale and Ventures business since its inception in 2016 and is the right person to drive the new organisation forward.

“I’d like to thank Graham for all he has done for BT over the past 12 years. During his time as CEO of the businesses in Ireland and MD of BT Business, he materially improved the profitability and performance of those divisions. Most recently as CEO of BT Business and Public Sector he has successfully led the integration of EE business into BT and the turnaround of our Public Sector division. I wish him all the very best for the future.”

McQuade came into BT from the EE acquisition and, with EE boss Mac Allera now heading up the consolidated consumer business unit, it’s interesting to note the increasing prominence of EE people at the BT top table. The two companies have very different business cultures and trying to combine a former state monopoly with a relatively fast moving MNO will inevitably have created friction. Patterson seems to be saying the whole company needs to modernise its attitudes with these appointments.

Wholesale and pricing strategy in mobile markets

In this commissioned report by The MVNOs Series, we cover a number of topics, such as the changes in the mobile wholesale market, Wholesale-as-a-Service and the impact on digitalisation, network innovation and the impact of virtualisation, what to expect from a future with 5G and the new opportunities it brings.

The mobile market is well-established as one of the most strategically important sectors of the global economy. The wider mobile ecosystem is estimated to deliver $3.6 trillion in value added, accounting for 4.5 per cent of global GDP.

There are now more than five billion people connected to mobile services worldwide, likely to rise to close to six billion – three quarters of the world’s population – by 2025.

With its central role in communications infrastructure and the predicted development of IoT, mobile will become one of the key enabling technologies driving growth and innovation across all sectors, from healthcare to education, manufacturing to financial services.

Yet even an industry with such strong credentials for success is not without its challenges. Mobile network operators (MNOs), the gatekeepers to mobile connectivity for all end users, have not found the transition from an industry built around voice and SMS services to internet and data entirely straightforward.

In purely economic terms, MNOs have seen revenues drop by 12 per cent from their peak in 2012. The recalibration of the market around data has been a major trend since the start of the decade and beyond, yet telcos have still not found a way to generate the same ARPUs they could generate from voice and SMS.

Buffered by regulation on roaming and mobile call termination (MTC) rates, and finding themselves at the centre of a much more complicated web of customers jostling for mobile data services, many mobile operators are looking at wholesale operations and pricing strategy with a fresh pair of eyes in a bid to generate new revenue streams.

In this report, we analyse how the switch to data-first mobile services is changing the relationship between operators, resellers and MVNOs. We will look at how new use cases for mobile services, such as IoT connectivity and multiplay content bundling, are creating new market opportunities while also attracting new players into the space.

Looking forward, we will then focus on the impact of new technology on the mobile wholesale market, zooming in on two areas in particular – the emergence of a ‘wholesale-as-a-service’ cloud-based B2B services market, and the impact of network virtualisation which will accelerate with the arrival of 5G.

For an in-depth analysis, download a copy of the report.

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The Openreach virtual dark fibre service finally sees the light of day

Six months after proposing a compromise between full dark fibre access and full managed service, Openreach has formally launched ‘virtual dark fibre’.

The proper name for this fibre wholesale service is Optical Spectrum Access Filter Connect and the thinking behind it was explained to us by Openreach General Manager of High Bandwidth and Passive Services, Darren Wallington, in October of last year. In essence it aims to combine the service assurance and response times of a managed service with the scalability and flexibility sought from dark fibre access.

“We’ve re-engineered our high-bandwidth optical services to give our wholesale customers far greater flexibility at a fantastic price,” said Wallington. “OSA Filter Connect allows providers to grow their needs affordably, at their own pace and using their choice of innovative equipment.

“By innovating a virtual dark fibre service, we can give customers that extra flexibility whilst still being able to monitor our network and respond to faults and issues proactively. With a regulated dark fibre access product, we would’ve literally been left in the dark with no monitoring capabilities and significantly longer service interruptions due to the reactive nature of fault reporting, but this means we can commit to a national five-hour response time.”

Pricing seems to be one of the things Openreach has worked on a fair bit on the last six months, much of which have been spent in what Openreach characterizes as ‘proper, constructive engagement’ with UK stakeholders. Additionally it has received a significantly increased level of direct lobbying from MNOs, keen to get ahead of the game on 5G fronthaul and backhaul.

“We’ve listened closely to our customers,” said Wallington. “They wanted something that would address the perceived failings of a ‘one size fits all’ regulated product and they’ve helped us to shape the product we’re launching”

“Both large and small customers told us they wanted a service that offered more competitive high bandwidth pricing with low incremental scaling costs. They also wanted more flexible and configurable services that give them more control, the ability to support fast evolving technology – like synchronization, and more efficient use of space and power.”

It’s not for us to say whether or not this is the right solution to the dark fibre access issue, but it does seem like a good-faith attempt by Openreach to balance a number of different factors and needs. We’ve copied the new pricing tables below to help you make up your own mind.

 

*Pricing – OSA filter connect prices below, note the 5 year term variant is less than our original consultation range

This provides CPs with a 10GB managed service with spare filter ports that they can use to scale to higher bandwidth by themselves with no additional costs from Openreach. We will continue to offer additional Managed Wavelengths for those CP’s who prefer a managed service at very competitive price points.

Product Minimum Period Connection £ Exc VAT Rental per annum £ Exc VAT
OSA Filter Connect FSP3000 – 12 month 12 month £15,550 £7,845
OSA Filter Connect FSP3000 – 36 month 36 month £12,233 £6,276
OSA Filter Connect FSP3000 – 60 month 60 month £12,233 £5,775

* Can be upgraded to 20Gb without a site visit

 

EAD 10Gb will see connection prices reduced by up to 32% and rentals by up to 53%

At the same time the 5 year term variant will now in effect make be a 3 year term product, as we’ve set the early termination charges for Year 4 and 5 to zero.

Product Charge type Current Price New price for 3 April 2018 Price reduction
EAD 10000 Connection £5,990 £5,590 -6%
EAD 10000 Rental £10,500 £4,980 -53%
EAD 10000 (60 month minimum period) Connection £5,990 £4,090 -32%
EAD 10000 (60 month minimum period) Rental £8,400 £4,380 -48%
EAD Local Access 10000 Connection £5,990 £5,590 -6%
EAD Local Access 10000 Rental £7,500 £4,146 -45%
EAD Local Access 10000 (60 month minimum period) Connection £5,990 £4,090 -32%
EAD Local Access 10000 (60 month minimum period) Rental £6,000 £3,648 -39%

 

Dual Fibre mainlink, the headline rate will be reduced from 37.2p to 24p

OSA Main Link charge feature Current price (pence per meter) Price on 3 April 2018 (pence per meter)
Main link per metre or part thereof  37.2 24.0
Main link + Standby link per metre or part thereof  82.8 57.6
Diverse main link per metre or part thereof 42.0 28.8