My GX Conference Notes
Winnick
· Japan/U.S. competitors are not up and running yet. They are not generating revenues.
· AC is paid for.
· 200 cities and 27 countries connected seamlessly in 2001
· Less than 25% of revs coming from bandwidth sales.
· In 2001, AC will provide less than 2% of sales.
· SWIFT Financial Consortium – 7,000 financial institutions, doing $5 trillion in dailey transactions with an estimated 5 million emails/day.
· Signed a deal with the British govt, linking 240 embassies/consulates worldwide.
· 1.5 years ago, GX faced competitive threat in the Pacific in the form of a telecom consortium (the Club). Today, the Club is still not functioning, and many of the Club members are now GX customers.
Casey
· GX is being (or has been) transformed from a construction company to a value added services provider.
· Control their network from end to end (minor exceptions). Ability to monitor and maintain enhanced considerably.
· In the process in bringing fiber to buildings in the 200 cities in which they operate. Will JV with local loop guys or do it themselves. They should have 40 cities completed in 2001.
· CAGR for global bandwidth = 82% thru 2004.
· Majority of Internet users are outside the U.S., but access most content from the U.S.
· NO BANDWIDTH GLUT. Demand expected to exceed supply by 50% thru 2004.
· Very expensive to light up fiber after it is built (I don’t understand exactly why, but it is. I plan on calling the company for more detail.)
· Subsea cable is the bottleneck to global communications.
· Declining costs -> declining prices, but margins stay the same or increase because of the price elasticity of demand being greater than 1.0. This leads to increasing cash revenues.
· The GX acquisition strategy. Migrate up the value chain from carriers’ carrier to a global enterprise services provider.
· Bought IX/Net due to its expertise in IP/VPNs. Wave of the future.
· Exodus is the world’s largest edge intermediary, yet has only 7% market share.
· When GX sold Exodus Global Centers, they took back a $4-$5 billion service contract.
· GX now has 10 product offerings, down from 36.
· Focusing on 7 sales channels:
o Carriers
o Nextgen companies (like Exodus)
o Financial Services
o Media/Entertainment
o Multi National Corps
o Gov’t
o Bandwidth sales ala Enron
· 8 Services (see below)
· Presence in 200 cities, 27 countries, 20,000 buildings, 101k miles of all optical network.
· Total capex for AC was $1.0 billion; total AC revs so far, $1.5 + billion.
· GX is lowest cost producer.
· Not too troubled by current global economic scene.
· GX value prop allows it to offer reduced spending for customers via outsourcing to GX.
· GX is already fully funded. Any new competitors would have to raise new capital in today’s cap market environment to attempt to duplicate GX’s system. Even if they could (highly unlikely), the competitors would be over 2 years behind GX.
· Incumbent competitors have customers, while GX has breadth, depth and lower costs.
· Incumbents have legacy systems and are culturally inhibited monopolies.
· Incumbents are trying to build new data optimized networks while fighting voice revenue erosion.
· GX is going to take away the incumbents’ customers with better value prop offerings. GX is also hiring away all the best sales people of the incumbents.
· New entrant/competitors have the following barriers to deal with:
o 2+ years behind
o Incomplete networks
o Capital constraints
o Cannot beat GX economies of scale or service offerings
o Less diverse revenue bases (still dependent upon capacity sales)
· In summary, Casey says that GX strengths are:
o Unmatched economies of scale
o Network is 85% complete and fully financed
o All pricing now is based on marginal cost, as capital costs have been recovered
Walsh
· GX’s focus will take ALL market share in the following segments:
o Media/Entertainment
o Financial Services
o Professional Business Services
· Re Media/Entertainment, I thought Walsh said that currently it took 55 hours to transmit a 1 hour video/film. So much for the bandwidth glut.
· 8 services:
o Broadband
o IP/VPN
o Voice
o Conferencing
o Internet Access
o Hosting
o Frame Relay/ATM
o Metro Services
· Focusing on 7,500 customer in the 7 sales channel mentioned above. These 7,500 = 85% of the total market.
· GX has 80,000 small/medium sized accounts, producing $800 mm in annual revs. GX will deemphasize mass market and transport.
· The carrier market will be $50 billion in 2001. GX has global contracts in place. Can move wholesale voice of IP better/cheaper than anyone else. World is moving to VoIP.
· NextGen – Exodus partnership. GX controls 60% of Exodus traffic in Asia, and 50% elsewhere.
· Media/Entertainment – FCC mandate to be all digital by 2006. Will require broadband to implement.
· MNC markets – GX has new sales team, all with industry expertise.
· Gov’t Markets – UK deal.
· Bandwidth Markets – GX currently has 0% share, but is going after competitor’s contracts which are due to expire within 6-8 months. These are corporate leased line deals.
· Each GX Voice over IP port costs 1/10 as much as a legacy TDM port. Enormous cost savings for customers in terms of real estate, capex, maintenance, etc.
· The network core will be all optical. See a slow decline in SONET/SDH.
Cohen
· GX focusing on outsourcing business. A tough economy means companies will come to GX to outsource their networks.
· GX has 11,000 routers at customer sites, expects to add 6,000 new routers this year based on contracts already signed for 2001.
· SWIFT is the largest, securest financial network (consortium) in the world. 7,000 players, in 190 countries. SWIFT went from dealing with 100 Telcos with 500 contracts to 1 company, GX, with 1 contract.
Clayton
· Clayton went thru the numbers. All of the slide presentations can be found on the GX website, I believe, so I’ll skip them here.
· Sees 40% data growth in both N. America and S. America.
Grivner
· Competitive gap in Europe is getting worse for potential competitors. European countries/cities have or are closing the door to new entrants by prohibiting tearing up any new streets to lay fiber. By contrast, GX has the real estate and rights of way. No new ones being created.
· New entrant/competitors lack service offerings.
· New entrant/competitors lack customers.
· Europe to go from 100 mm net users to 200 mm in 24 months.
Legere
· Asia is now pretty much unregulated. GX built cable to shorelines and systems when it was still illegal to land the cable. Bet that dereg would take place. Won the bet and are ahead of any potential competitors by 2 years.
· Asia is the fastest growing telecom market.
· EBITDA in Asia is about 40% of Revs.
· “Game will be over in Asia in 1 year.”
I stopped taking notes about here. Everything after this was pretty much cumulative evidence of near future gorilladom, and can be found on the GX website, I guess. I can say that these guys were the sharpest bunch of execs I have ever seen. Very mission oriented, like a powerful well oiled military machine.
One final thing, though. I asked Casey if he had read the Wired magazine article about the Chinese version of GX that the Chinese were funding, and that the Chinese guys said that by the time ATT, Worldcom, GX, etc. got there, the Chinese company would have 80% of the Chinese market sewed up. Casey said “Yeah, I read the article. We’ve signed a deal with these guys, and are going to ramp thru China with them. We just haven’t announced yet. We don’t want to get ahead of our partner there. We want them to announce when they’re ready.”
Very impressive, indeed. |
