If the Optus sale to Sing Tel goes through, I believe C&W will have a net cash position of approximately USD 10 billion. These guys seem to have thought things through better than others in that they were selling assets at top dollar when everyone else was paying through the nose.
Chugs, Jay
Message 15980647
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C&W CEO sees hosting and VPN gains
Graham Wallace, CEO at Cable & Wirelessspoke recently with Network World Senior Editor Denise Pappalardo about how the service provider is tackling the market in light of the weakened economy.
What's your business strategy today and going forward?
We've been pretty consistent now for a couple of years, but it's important to remember where we came from. Cable & Wireless was very much a series of separate national telephone companies offering mobile, telephony, data and
Internet services. We were doing everything all around the world. It became clear a couple of years ago when I took over that we needed to focus. Trying to do everything everywhere was a recipe for disaster. We chose to focus on business users, data services and specific geographies.
What do you mean geographies?
We had always had a big business, for instance, in Hong Kong. But if you look at the markets where business customers are buying IP and data services you find that 85% of the world's market is in the U.S., Europe and
Japan. And if business units didn't fit, we sold them or are selling them. The result is a focused business and a very strong balance sheet. It's that balance sheet that gives us a real competitive advantage when the rest of the industry is burdened with debt.
Cable & Wireless is building networks and selling business services in the U.S., the U.K. and Japan. Are these networks identical? Are you using the same gear and technology in each?
Yes. Access is tricky, but from a core backbone perspective, absolutely. The core nodes are absolutely consistent. Obviously, local access is all sorts of different technologies. We're consistent with architecture and vendors. That gives us more clout in terms of buying, which reduces costs.
In terms of network buildout, where are you in each of those markets?
In the U.S. we've got enough capacity certainly to last us, looking at the latest numbers, a good 12 months. We did a big upgrade in the U.S. in November 2000. And before that, we were capacity-constrained, actually freezing orders, and not taking on new customers for a while because of
that. We're comfortable with what we've got in the backbone in the U.S, and the same is true in the U.K. In Europe the backbone is about 60% complete. ... We've got the most work to do in Japan. That's a sort of five-year program.
On the enterprise-user side, what services are growing fastest and what do you anticipate to grow more down the road?
We see a lot of growth in high-end hosting. The economics and the technology will drive more and more companies to outsource their hosting activity. It doesn't make economic or operational sense for corporate customers to do their own hosting.
Why are some large companies not outsourcing their Web hosting?
It's just a timing issue. One of the rules about outsourcing is that you shouldn't really do it unless you've got what you're going to outsource under pretty good control. If you don't have it under control, the person
you outsource to can rip you off. And you have to remember that Web and application hosting is still new. It's a young market.
Are your Web hosting services targeting small, midsize or large businesses?
It's a bit of them all. We want to move over time to more of the managed outsource stuff than the co-location stuff because the economics for us work better there, and we add more value at the high end. Plus at the higher end, of course, it's stickier. Because once you have outsourced your
hosting, provided that the service provider does a good job, it is quite difficult to switch. Whereas it's much easier to switch collocation service providers.
What about managed VPN services? Are you seeing a lot of growth there?
The demand is considerable. Quite frankly our problem there is meeting the demand. We've just done a very big IP VPN in the U.K. for Marks & Spencer (a store chain), connecting all of its stores. It was a bigger order than we expected, and it absorbed quite a lot of our capacity. But it's worked
out fine, and they're very happy. The economics of an IP VPN for a big company like Marks & Spencer with lots of sites are pretty powerful.
Have you noticed any changes in your customers' buying habits based on the changing economy?
We have seen some issues that are related to the economy on the wholesale side, with some of our ISP guys. They are under strain, and there is consolidation in the market. So we're definitely seeing an impact there. Right now I'm not aware of any big issues on the enterprise side.
What would you tell business users when they ask why they should choose Cable & Wireless over WorldCom, AT&T, Sprint, Genuity or any other competitor?
First of all, you've got to be competitive on price. Secondly, business users want some sort of objective measure of service performance and reliability of the network. And on the hosting side, we've got some pretty
good reference customers on the high end. And we use our financial strength. Customers want to know you're going to be around in 12 months. Those are the sort of features that we score on.
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