SEACOM moves beyond subsea
01 September 2017 | James Pearce
African subsea cable operator SEACOM is now tackling the enterprise market. CEO Byron Clatterbuck tells James Pearce about its business transformation, changing customer base, and the growth of the African market
Africa is seeing huge growth in data, but the trans-formation of the fastest growing telecoms market is being driven by the same things that have led to huge growth in the Western world – international carriers, content companies and OTT providers are all piling more traffic into Africa. For SEACOM, this marks a significant change from where its business was when it launched its subsea cable system back in 2008.
For CEO Byron Clatterbuck, it is welcome news. “If you look at our customer profile, five years ago all of them were African carriers, ISPs and mobile operators. But now more than half of our business is the international carriers and service providers, predominantly American, and the OTT guys make up a big chunk of that,” he explains, speaking from his home in Hong Kong.
“We provide the network connectivity for all the major cloud players now. They are big customers requiring big transmission backbones into Africa, particularly South Africa, Kenya and Nigeria, and also more and more are looking to use us to move into the enterprise space.”
When SEACOM launched, it had 80Gbps of capacity, but eight years later it now carries over 1Tbps – more than 10× growth. In the last 18 months, the number has doubled – a huge leap.
“We’re seeing a huge amount of growth in Africa and the market has changed over the last two years, with more competition at the domestic and terrestrial level,” Clatterbuck adds. He credits the growth to two key factors – an increase in the number of subsea cables in operation since SEACOM launched, and more competition on access, mobile or fibre.
Many companies “are rolling out fibre in metropolitan areas across the continent”, he says. “The likes of Microsoft, Facebook and Google need that content closer to their customers.”
To stay relevant, SEACOM has upgraded its own technology. All of its rivals have either upgraded, or are in the process of doing so, although Clatterbuck claims this is easier for SEACOM, given it is not a consortium. Though there have been new cables, and there are a few in development – most notably the South Atlantic Cables System (SACS) and the South Atlantic Inter Link (SAIL) – these are primarily on the west coast of Africa.
There are west coast cables that have been touted. “Everyone and their brother has been talking about building new cables – DARE, Mercury, Africa One, Liquid Sea – but no-one has signed a construction agreement.”
Why? “Everyone has been positioning,” he says, “but they have realised that if you’re going to build a new cable, unless you’re going to add diversity or a new feature like low latency, it is a brave investor who is going to pump billions of dollars into a market where the likes of SEACOM or EASSy are upgrading at an incredibly low unit cost.”
People do want it, but, at its core, there is a question as to whether it makes financial sense. He adds: “I think something will happen, because there needs to be more balance east and west – but it won’t go live for two or three years.”
One challenge Clatterbuck identifies is on one of the northernmost parts of SEACOM’s network – the branch that splits off to Mumbai, launched in partnership with Tata Communications. The challenge, he says, comes from the fact that existing traffic from Asia tends to travel through Europe, before heading to Africa.
This “unique” route will become important, he insists, because “no one connects India with Africa directly”. But it hasn’t been so far, he adds. “Most of the big carriers hub and spoke. They go from Asia to Europe, but much of it is through London. As Africa gets bigger, people will start to look at India direct to Africa as an added benefit. We built it that way because Tata wanted Mumbai direct to Europe and allowed for that design. We’re seeing uptake, but 95% of our traffic is going to Europe.”
The other challenges come in transform-ation, some of which he admits will come through a merger and acquisition strategy that he says is open to new opportunities.
He explains: “Aside from daily operating success of the business, we expect to take part in more mergers and acquisitions. That’ll probably be the case across the industry. We want to be part of that. We have a unique strength in our international network and we want to build capability into our terrestrial assets.
“Where we are going to build, we’ll be quite selective. But by buying companies that already have fibre, already have build- ings, already have customers, we can plug our network in and that will accelerate what we do. We’ll build where we need to, but we’re looking to acquire more companies.”
Its most recent acquisition, announced in August, saw SEACOM snap up Cape Town-based ISP MacroLan, in line with its strategy to extend its fibre to more metropolitan areas across South Africa.
Does a subsea cable company buying a South African managed services firm sound odd? Perhaps, but with the changing nature, SEACOM has also transformed. It has diversified. It has “changed significantly”, says Clatterbuck.
“We have made a significant change to our strategy. If you look at the wholesale market globally and in Africa, it is 5% of the total corporate market for data. Even for voice, it is small compared to corporate.”
Why target the enterprise sector? Clatterbuck claims the “buying behaviour” of a lot of companies in this space is “almost like carriers”. He adds: “The network is fundamental to their business and those are the type of customers we have started to go after.”
This has led to a massive boost in the number of customers the Cape Town-based firm is serving – up from around 60 just two years ago to more than 2,000 today.
Clatterbuck admits that SEACOM initially “cast a wide net” and ended up with some customers that are perhaps not suited to its proposition, but the CEO, with over 20 years’ experience, says that is a normal part of a major company-wide transformation.
Now, the enterprise space is the “fastest growing” part of its business, he says. “We try to connect customers over fibre that we can control and manage, and we can try to support the growth path as customers go from 10Mbps to 1Gbps,” he adds. “In Africa, they maybe didn’t realise that could happen – it was all over coax, microwave or copper, so for us to walk in and say the minimum speed is 25Mbps is a big shift.
“We got a lot of attention for that. That’s the fastest growing part of our business. We focussed on two markets initially. We will probably look to expand to other markets, but we still have huge room to grow in those markets, and they are pretty fast growing in our space.”
Hence the acquisition of MacroLan – which manages an expanding fibre network serving a growing number of Cape Town’s commercial users. It also owns and manages fibre infrastructure and access at numerous commercial buildings, offering clients access to a range of business broadband services as well as value-added services.
Clatterbuck explains: “SEACOM has grown significantly following the successful launch of SEACOM Business, which focusses on bringing broadband and cloud services directly to commercial business users. The MacroLan acquisition is a continuation of this story, through which we will grow the SEACOM family of talented staff and satisfied customers in the Western Cape.”
With this transformation, however, comes challenges, such as dealing with a much higher and more demanding customer base, when your historic base has been much smaller.
For Clatterbuck, that transformation has meant changing the culture of SEACOM’s entire organisation, in order to become much more agile and adaptive to customer needs.
For the much travelled CEO, who is next off to the US via Cape Town, being adaptable is key to SEACOM’s future.
He explains: “As you transform a company, going from 60-80 customers in the service provider space to adding 150 customers a month, you have to change the whole culture of your organisation. Your people, your processes, everything has to change – you have to be much more adaptable, flexible and quicker. That takes time. That’s the path we’re on and, as we gain more customers, we try to change.”
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