The Leading Lights of Telecoms - Equant
The mood was celebratory when news broke that Equant (www.equant.com) was merging with France Telecom subsidiary, Global One. As with all mega-mergers, however, Equant will most likely reduce its global workforce by more than 20%, or about 3000 positions, with about 1500 of these positions set to go by the end of this year. As a result of the workforce reduction, Equant will incur a one-time charge of between US$40 million and US$50 million for severance and related costs during 2001.
Under its agreements with France Telecom, France Telecom will meet half of these costs. Bill Padfield, senior VP and GM, Asia-Pacific Australasia, Equant, charts its course in Asia.
It was announced that Equant will cut 3000 jobs as part of its merger with France Telecom’s data services subsidiary, Global One. How much impact would this have on Asia-Pacific resources? Yes, we will reduce 20% of the combined workforce globally, but Asia-Pacific will see less than that. We’ve inherited a strong set of resources from the SITA-Equant days, and now from the Equant-Global One merger. This is pretty fast growth for the company, and there will be shedding of back-office roles, and overlaps in the business. No areas are going to be protected, from the top to the bottom of the organisation. But we knew about this last October or November, and were given half a year to do this.
What does this mean for the management of the merged entity?
We’ve gone through the management layer by layer, and I’ve inherited a balanced team from both Equant and Global One, not heavily from one entity or the other. We’ve segmented them into these geographical areas: ASEAN (including India), China/Hong Kong, Korea, Japan, and Australia/New Zealand. Our main focus for this year and next would be on China and Japan, and we would have to gain good traction before we turn our focus on India.
Internally, we have to integrate the networks, and this takes about 12–18 months. We have to integrate our IT systems in the company, back to front, and we have to decide on the best of breed for various applications in the company. There is also a cultural integration for human resources, bearing in mind that the old Equant was a public company, while Global One wasn’t.
So changes to the company includes integration and the merging of network divisions, as well as merging teams into one sales force. The biggest challenge from all this is to make sure that we keep our customers happy.
Any change in strategy for Asia-Pacific? And how will this affect the growth of the business?
The strategy is geared towards the convergence of both companies. Global One’s business is aimed at MNCs, calling card services for voice, and carrier services for carriers. Moving forward, we will continue our focus on the MNC space with data (on IP), while the voice-switched business will be reverted back to France Telecom. The reason is to keep Equant as a pure data play.
Also, for sales strategy, we have a direct sales force and one where we forge relationships, especially in China and Japan. In China, WTO (World Trade Organization) is happening, and telecoms laws are firming up, and we’re looking at making our legal entry into China. We’re very excited about the potential of the market place.
In Japan, we’ve extended our relationships and partnerships to build our presence, and although we are twice the size we were, we’re still small. We created a separate entity (a KK-registered company) to gain more critical mass. Our key partners are Nortel and Cisco. We intend to grow that quite significantly over the next three to five years.
Open competition and cost-reduction issues in Singapore, Hong Kong, Australia, and New Zealand means we’re also well-placed to make inroads to customers. For example, the New Zealand diary board represents a very huge percentage of the country’s GDP, and to win that account is significant for us, seeing that we provide all their data and IP-based services.
We’ve also inherited Global One’s hosting centres in Singapore, Tokyo, Hong Kong, and Sydney. That’s the discrete part of our business.
What changes have you noticed about customer buying patterns today?
The IP space is enjoying good growth in North America and Europe. Since the beginning of this year, order intakes have increased. I see a change: previously customers talked about IP but bought data services; now they talk about IP and buy IP services, even VoIP. The decision-making process is also faster now, as they put a lot of emphasis on time to market, so customers are happy to pay a little more for these services. But also, these customers enjoy their ROI quicker too.
What about investments? In what areas is Equant spending?
We invest globally in IRUs, staff recruitment (adding very core roles), and in retaining management, operational and technical staff. We wheel and deal 30–40 service providers for our customers, so that we can provide end-to-end networks and provide a global service level guarantee. It goes beyond the node to the desktop. The network side of our business is still growing slightly faster than expected, but the product replacement business is quiet. Banks, IT companies and manufacturing firms have put their spending on hold, but I expect to see an upturn this time next year.
Who are your main technology/equipment partners?
Cisco Systems and Nortel Networks.
Which area of your business requires greater attention next year? Why? Our core products are our Network Services, with Integration and Managed Services representing the complementary services in our portfolio. We will also focus on our Equant IP VPN solution, as it continues to stand out as the market leader among IP VPN services based on MPLS (multi-protocol label switching) technology. The industry’s first MPLS-based IP VPN solution, it is the most extensively deployed service, with availability in up to 140 countries. More than 400 major companies worldwide have opted for the cost effectiveness and simplified management of Equant IP VPN, with automatic any-to-any connectivity to easily support expansion and other organisational changes.
As customers are demanding for more secure, high-performing solutions to enable mission-critical communications, we work in tandem to offer them a complete range of integration and managed services. Built around our IP VPN and other core network services, our services thus enables them to communicate effectively with their employees, customers, partners and suppliers.
Can you give us an indication of the Asia-Pacific telecoms scene in 2002. What do you expect it to be like? The overall datacoms services market will continue to grow in the region next year despite the current global economic downturn. Equant’s addressable market, data and IP services for MNCs, is expected to grow at over 20% next year and beyond, so we remain optimistic about our market in 2002.
Frost & Sullivan’s take on: Equant
Equant is today the second largest global managed network service provider with a presence in 220 countries. It is also the world’s first global service provider to integrate voice- and data-over-IP, allowing its users to make phone calls, send faxes, transfer files, launch video and perform dataconferencing simultaneously over the same network connection. Through its relationship with France Telecom, Equant possesses a unique ability to offer integrated mobile and fixed data services.
Equant and Global One completed the merger in July this year. The combined Equant and Global One pro forma revenues were US$2.76 billion in 2000. Although bigger is not always better, its wide-spread existence is strategic to the data market. Gain in synergies and marketshare from the merger will be strongly felt by competitors such as Infonet and Cable & Wireless.
The biggest challenge for the company is to achieve a successful integration of its network, as well as the operations of the two entities. While integration of the company’s networks is not likely to be completed before 2003, measures to integrate its sales force to provide customers a one single point of contact have already started.
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