ANALYSIS: Deutsche Telekom and Colt join voices

25 February 2015 |


Burgeoning competition and stringent regulation have pressured wholesale operators to reduce costs in an increasingly global market.

In a move to protect margins and extend their global reach cost effectively, Deutsche Telekom and Colt Technology Services have signed a five-year deal to provide international telephony services.

As part of the agreement, Colt will use Deutsche Telekom’s network interconnects to complement its footprint. In return, Deutsche Telekom International Carrier Sales & Solutions (ICCS) will have access to Colt’s voice portfolio and network in Europe, allowing it to better support its carrier customers across Europe.

The deal will see both companies benefitting from lower network and voice termination costs outside their network, without the burden of extensive investments.

“Deutsche Telekom is a strategic partner for us, in the sense that they are present where we are not, and vice versa,” Richard Oosterom, Colt’s executive vice president of voice services told Capacity.

“It has a very strong cost base in Eastern Europe with the acquisition of GTS. Deutsche Telekom can also benefit from our takeover of KVH and in European countries where it doesn’t have its own voice infrastructure.”

He said the partnership with Deutsche Telekom ICSS strengthens its offering “with considerably less risk than doing it by ourselves from the ground up”.

Both companies have recently made acquisitions which have significantly expanded their footprint. In November, Colt completed its takeover of Japan’s KVH Telecom. Earlier in June, Deutsche Telekom closed its acquisition of GTS Central Europe.

Oosterom sees growth opportunities in Eastern Europe and Asia. “On the enterprise side, we’re seeing our customers expanding into regions like Eastern Europe and Asia. We’ve seen demand for us to deliver services in the geographies where they are expanding,” he said.

He adds that the collaboration could bring about products involving public voice networks and voice over IP. “Despite the fact that OTT players will play an important role, the public voice networks will continue to be an important focus,” he said.

Holger Magnussen, senior vice president of Deutsche Telekom International Carrier Sales & Solutions (ICCS) said operators are under strong pressure to decrease costs because of increasing competition. “The situation of the wholesale market where all carriers are buying from each other is getting tougher and tougher,” he said.

Magnussen said the partnership is a win-win: Both companies will enjoy cost benefits and be in a stronger negotiating position with local players. “This is a good signal to the wholesale market. The pressure in the market is so high; collaborations like these will help us serve our customers better,” he said.

Both companies say the growing globalisation of today’s businesses and the increasing usage of the internet and IP are key drivers to pursue more strategic partnerships.

"Where it used to be normal to make national calls 20 years ago, it has become more commonplace to use international calling because of the increasing globalised strategy of our customers," said Magnussen.