The line between wholesale and retail is blurring
26 May 2017 | James Pearce
BICS has been on the acquisition trail to expand its portfolio. CEO Daniel Kurgan discusses the Belgian operator’s diversification strategy and the importance of a strong backbone to support it
For BICS CEO Daniel Kurgan, this diversification of strategy is key to the future of the wholesale market, and has been part of the Belgian carrier’s plans for several years.
Kurgan explains that when BICS started eying up other markets, his team identified three dimensions it could expand across: customers, products and geography. This means finding new people to sell to, finding new products to sell, and new places to sell them.
“We are a telco, a carrier, and we will still be a carrier – that’s our DNA,” he tells Capacity. “We deliver connectivity services to a number of communication service providers, but we recognise, with the emergence of OTTs and digital providers the business of our historical customers has been under pressure.
“It is not growing how it used to grow, and the emergence of digital providers of all kinds has led to a shift of some of the telco business to new segments. The emergence of new business and requirements from digital platforms mean the need for connectivity and interoperability, and that is a growth opportunity for us.”
The latest step in this process of diversification was BICS’S $230 million acquisition of US-based authentication and mobile identity services provider TeleSign. TeleSign, a communications platform as a service (CPaaS) company, was founded in 2005. Its data-driven, cloud communications platform offers security for a number of the world’s leading websites and mobile applications.
So what does BICS, a wholesale carrier that has been offering services to the industry for over two decades, want with a US CPaaS company?
Kurgan claims TeleSign is the final piece in making BICS the world’s first end-to-end CPaaS provider. “We began looking at network services and security services, and last year we decided to buy TeleSign because it ticked all the boxes for us,” he says.
“We wanted to develop a strong presence in America as it is a continent with a lot of opportunities and this acquisition meets our ambitions in terms of customers, products and services. There is almost no overlap in terms of customers, they are much more advanced than we are in terms of security with their patented two factor identification. Their HQ in LA has 20 out of 25 of the biggest internet customers working with them, they provide us with a massive acceleration in the rollout of our strategy.
“By making this acquisition we are expanding into CPaaS activity, and become the first end-to-end CPaaS, as we have a technical and commercial interface with all of these customers, with hundreds of customers all of the world. We will offer the first end-to-end service proposition, and this is powerful. We will stay as a carrier for a very long time, but we are convinced we will find growth by expanding into CPaaS.”
For the rest of the industry, expanding into CPaaS is just one option, and one that few are taking. The big wholesalers who are part of larger telcos are seeing their parent companies invest in things such as content or services. For wholesale-first businesses, the focus has been on improving their networks.
Kurgan recognises that diversification strategies will be as diverse as the word implies, depending on who is enacting them, but claims it is becoming increasingly important for the industry.
“It is important for carriers to diversify, but it depends on what your mission is as to how you do that,” he adds. “If you are a carrier, you need to transform. You don’t have to be rocket scientist to see that some of the traditional lines of business are on the structural decline. Voice minutes aren’t the only one. The challenge is in deciding where you want to go, and that involves making clear calls. Clear calls, he adds, that BICS began making as far back as 2010.
“We have tried to do this – it was as early as 2010 when we decided to leverage our mobile proposition into supporting MVNOs and roaming. But there are other areas we’ve decided not to go into. So yes, the wholesale industry has to diversify if it wants to find growth, but there are big calls to be made about which direction the industry goes.
This diversification has led the traditional lines between wholesalers and retail divisions to become significantly less clear.
“We have to recognise every day that the border between wholesale and retail is blurring more. That border is less and less meaningful. If we look at some of the more independent carriers, we are not doing wholesale only – we have extended our customer base.”
Diversifying digital services and roaming
CPaaS may have been at the forefront on Kurgan’s mind when he spoke with Capacity, but it is not the only way BICS has been diversifying its portfolio. Roaming has become an additional key revenue stream, and one that the CEO expects to grow massively, especially with the growing Internet of Things market.
“It is super important that we have the right package for the Internet of Things. We are diversifying across two axis: digital services, and roaming. We are strongly convinced that IoT will boom, and the number of situations where it will involve roaming is immense. That’s what we want to capture – we want to be an enabler for IoT roaming, by delivering IoT roaming to the big guys delivering IoT applications to companies.”
Kurgan points to the expected growth of connected cars, a market where revenue is expected to quadruple between 2015 and 2020. As more people demand in-car connectivity, and more widespread mobile connectivity allows for more intensive use-cases like autonomous vehicles, the opportunities grow.
For a roaming provider like BICS, with one of the top three roaming platforms globally, according to Kurgan, the fact that cars are mobile and will travel across borders and networks, means the sector provides a major opportunity.
“BICS will not directly deliver IoT to car manufacturers, but we want to be the partner of choice for the application providers in this space. We have one of the three biggest roaming platforms in the world and that gives us the very strong position to capture this growing need for roaming across IoT. We’re taking a long-term view in terms of monetisation – it is a market in construction – but we have a very big opportunity. It is important when you think of BICS and our expansion strategy, roaming and IoT is super important.”
Behind the BICS's DNA
Behind all of this diversification is the need for a strong supporting backbone – something Kurgan says is within BICS’S DNA.
This network includes 117 access points of presence (PoP) worldwide, capacities up to multiple 100Gb, and involvement in more than 25 submarine cables. It passes five continents, with the ability to deliver capacity up to ay street address in over 70 countries.
Kurgan adds: “The network side is still hugely important. We made a big choice a while ago in selecting Infinera as the optical provider for our European backbone. We’ve always been state of the art in terms of our network capability.”
To differentiate on the network level, BICS focuses on key partnerships, such as an agreement struck with Retelit in March that saw the two launch a new joint connectivity solution bridging Europe via Bari in Italy, to Singapore and Hong Kong through the AAE-1 subsea cable system.
“We’ve tried to differentiate through partnerships with companies like Retelit to offer end-to-end solutions to every city in Europe, while also adding diversity with routes into Marseille. This is now a landing point concentrating a lot of traffic coming in from Asia and the Middle East, but we also see customers demanding this kind of diversity.”
He adds: “Demand keeps growing, but we’re not a tier one backbone – we’ve invested selectively in our network for all our own needs, and then resell what we don’t use. We don’t have a huge resale base behind us as he have a lot of requirements, but our business cases are made of our own traffic, but we take a lot of prudence there.
“Our goal is not to become a market leader in that space – we are very strong in Europe because there we have a very dense and state of the art network, but the vast majority of IP traffic goes to the tier one IP backbones. We are not interested in this market – we much more want to expand on the capability side, and the communications services side.”
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