RHK numbers on DWM/SDH in Asia Pacific:
lightreading.com
According to a report issued today by RHK Inc., the Asia-Pacific region is virtually immune to any slowdowns in optical spending. RHK says combined revenues in the region from terrestrial wave-division multiplexing (WDM) and Synchronous Digital Hierarchy (SDH) gear will shoot from $3.5 billion in 2000 to $17.2 billion by 2004.
Interview with Telstra exec on price of cable:
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December 5, 2000
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INTERVIEW:Price Drop On Fiber Cables No Worries -Telstra
By ANETTE JONSSON
Of DOW JONES NEWSWIRES
HONG KONG -- While some analysts argue that the rapid expansion of fiber optic cables in the Asia Pacific region will lead to oversupply and falling prices in coming years, the head of the global wholesale division at Australian telecommunications operator Telstra Corp. (TLS) isn't fretting - in fact he embraces such a development.
While anticipating that the price for transmitting data in these broadband cables will fall by between 30% and 60% in the coming years, Managing Director John Hibbard says demand will at the same time grow by 60%-100% a year.
In addition, Telstra's wholesale division sells connectivity, not raw cable capacity, and is therefore in a good position to benefit from the anticipated surge in demand from new telecom operators entering the market without getting hit by falling prices, he told Dow Jones Newswires in an interview.
In some periods of six or 12 months, there may well be an oversupply of cable capacity, he said, but then there are also likely to be periods when supply cannot meet demand.
"But, dare I say, because (supply) is an input it is not a problem to me. So when people say prices will fall and capacity will get cheaper, I say 'goody' because that's what I'm buying," he said.
Also, margins should widen in the wholesale part of the business, which buys up cable capacity and adds a switching and servicing function before selling it to operators in the form of minutes of connectivity that will enable them to link up with the rest of the world, Hibbard said.
"The margin percentage will go up...because (we) have the chance to add some value that (we) charge for," he said.
New Market Entrants Key To Growth
And Telstra, which is currently in the process of merging its global wholesale division with the corresponding operations of Hong Kong's Pacific Century CyberWorks Ltd. (PCW) into a new joint Internet Protocol-based backbone company, sees no shortage of operators requiring its services.
"The market will absolutely explode for servicing of new entrants in the market. They are all out there dying to sell stuff but there is no way to sell at the moment because they cannot provide connectivity without paying really high prices to the existing carriers," he said.
By 2005, Hibbard projects the global connectivity wholesale market will be worth US$75 billion compared with US$48 billion today, with the Asian Pacific region contributing around 25% of that. As mobile phones become a tool for accessing the Internet and demand for high-speed data connections increases from both corporates and residential users, the data portion of the total (as opposed to voice traffic) will grow to US$45 billion, or around 60%, from US$13 billion or less than 30% today.
But the key market for Telstra's and PCCW's 50-50 venture, according to Hibbard, will be the discretionary data market, or the part where new entrants come in to buy capacity, which is likely to grow to around US$40 billion in 2005 from less than US$1 billion today.
"That's what we are trying to capture, or at least a significant percentage of it," he said, noting that the target is a 25% share of the non-voice market.
Today, Telstra and PCCW have a joint market share of around 6%, three quarters of which comes from the voice market. Voice transmission is, however, expected to undergo fairly flat development in the coming years with some market growth, but prices falling to "as low as they will go," Hibbard said.
"It will be a fairly steady, good cash-generating business in the long run, but won't have exhilarating growth about it," Hibbard said.
Listing May Be 9 Months Or Several Years Away
Continuing deregulation of the regional telecom markets will help drive demand, as new entrants to these markets will gain both market share and volume at the expense of incumbent players, Hibbard said.
In addition, smaller incumbent carriers are also starting to question whether they need to operate a costly international network of their own, he said.
Hibbard forecasts the IP backbone company, which is scheduled to be fully integrated and up and running by Feb. 1 next year, will see 10%-15% revenue growth a year - slightly above the 10% that is typical in the industry at the moment - and says much of that growth will be from external parties.
At the outset, the venture is expected to have revenue of US$2 billion, a net profit of around US$500 million and a market capitalization of US$6 billion, according to the merger document.
The company will buy most of the cable capacity that it sells, but will also build its own cables where it is either not possible to buy or it is economically more favorable to build, Hibbard said. He noted the company will consider offers to get involved in various cable consortiums, but said apart from the ongoing construction of the Asia Pacific APCN2 cable, in which it holds around 6%, it isn't involved in any cable-building activity at the moment.
Hibbard also repeated statements from various Telstra and PCCW officials that the timing of a listing for the IP backbone venture depends to a large extent on market conditions, but added that global expansion may also delay the plans.
"We might decide for instance, if we get approaches from a European or American partner, to say we go together first and do an IPO later," he said.
"There is no absolutely overpowering pressure to rush out and do an IPO, we will look at doing it at a time when we can get maximum value out of such an exercise. The time frame for that could be as short as nine months or could be several years, there is no deadline set," he added. |
