Transformation through acquisition
23 October 2017 |
BICS has struck a deal to buy US 2FA provider TeleSign. BICS CEO Daniel Kurgan and TeleSign exec Stacey Stubblefield explain how the deal will transform the Belgian wholesaler
What do you do when financials are closing in on you, when revenue is flat or falling, and not because you’re doing a bad job, but because pricing is down everywhere?
“There’s not much we can do on the top line decline,” admits BICS CEO Daniel Kurgan. “We are not targeted on revenue… we know part of this top line decline is beyond our control and it cannot be the right metric.”
BICS – owned by Belgian operator Proximus, along with Swisscom and MTN - “sells reach” Kurgan says repeatedly, as we sit down for breakfast alongside TeleSign co-founder Stacey Stubblefield and a number of other journalists. We are discussing BICS’ recent agreement to buy US communications platform-as-a-service (CPaaS) provider TeleSign and reach is just what the US company needs.
With more than 130 points of presence worldwide, as well as participation on more than 25 subsea cables, and connections with more than 500 mobile providers worldwide, reach is certainly something BICS can provide. What it has been struggling with is the decline of the traditional wholesale business.
BICS registered sales of €645 million in the first six months of 2017, a fall year-on-year of 9.8%, while profit was down 7.4% to €67 million. This followed a disappointing 2016, when revenues fell 9.6% to €1.5 billion and profits slipped 7.2% to €149 million.
Sustaining a cashflow somewhere north of €100 million per annum is no small task in the current climate, but BICS needs to diversify, Kurgan explains.
For BICS, then, the acquisition provides a new working model – a transformation, if you will – that Kurgan says will allow the company to move out of the limits of the traditional wholesale model.
“We recognise that the traditional business and traditional customer – voice, messaging – for telcos is declining,” he explains. “We wanted to diversify across three dimensions: customers, products and geography.”
For the BICS CEO, that means making “a footprint available to the segments that need that” whilst capitalising on TeleSign’s existing customer base, which includes 20 of the top 25 most-used internet services.
It is a long way from voice, messaging and data business traditionally seen at wholesale companies, and it marks the digitisation of the Proximus-owned carrier. This transformation, Kurgan adds, has been underway for more than a decade, and started with diversifying its portfolio.
“We’ve taken three steps to get here,” he explains. “We at first extended from being a voice carrier to offering a full proposition to the mobile community. Then at the beginning of 2010 or 2011, we realised that in order to stay relevant, we’d need to develop a stack of new services to run on top of the core transport. To do this, the best way was to use the information passing through our network. To deliver value added services around reporting, analytics, business intelligence, security, fraud prevention and so on. And now we’re into our next stage.”
When the $230 million deal to buy the 12-year old US company is closed, it will seal BICS’s transition into what Kurgan claims is the world’s first end-to-end communications providers as a service (CPaaS) firm.
(Tele)Signed, sealed, delivered
Enter TeleSign, an American digital services company which most people have, in the words of co-founder Stubblefield, “never heard of, but they almost certainly would have interacted with”.
TeleSign provides two-factor authentication (2FA) solutions to 20 of the top 25 websites globally using tools that will be familiar with the wholesale industry – SMS, voice, data.
Adds Stubblefield: “If you’ve been asked to enter your phone number during registration on a website and have later received a one-time passcode, there’s a good chance we were powering that interaction. We do not only SMS but we also do data behind the phone number – is it likely to be risky, should they accept it at registration.”
When Stubblefield and co-founders Darren Berkovitz and Ryan Disraeli founded the business in California 12 years ago, demands for fraud prevention – and internet fraud in general – were very different beasts.
Hacking “wasn’t a business like it is today” she explains, and verification was carried out through voice calls ran from servers in a kitchen. In fact, when the servers went down, Stubblefield would carry out calls herself, “putting on a robotic voice”, for affect.
Now, TeleSign does “billions” of two-way SMS services, with around 80% of that traffic international, showing a huge scope for BICS to run this traffic over its own international footprint, potentially seeing significant efficiencies.
For TeleSign, it is “interesting to see how little the web properties know about telecoms, and how little the telcos know about the web properties,” by which Stubblefield means websites and online service providers.
“It’s like you’re in two different worlds speaking two different languages, and bridging those worlds has been very interesting and a great opportunity,” she adds. “We think this opportunity is even bigger now having BICS as our backer because BICS brings even more knowledge about the telecoms world, and can bring even more products and opportunities for these web players.”
“What we sell is the reach,” Kurgan adds. “We are connected physically and commercially to more than 500 mobile operators worldwide. What we sell is this reach to a huge network of operators. Bu we are extending to the MVNO community, we are extending to the digital world, and we are touching upon IoT.
“The TeleSign opportunity has brought 500 digital platforms to work with BICS. It’s now about making our footprint available to companies that need it. We have to improve our API capabilities, we’ll be beefing up our MVNE (mobile virtual network enabler) offering for a company wanting to be an MVNO. We have a telco DNA.”
With great change, however, comes great challenges and, as Stubblefield notes, combining the two “different worlds” of telecoms and digital isn’t always simple. Various telcos have tried it with varying degrees of success.
So what are the major differences? Stubblefield explains: “Telcos are highly regulated and that makes them more risk averse, while that isn’t really a thing that exists on the west coast of California. Web properties expect things to move quickly, they have an idea and want to implement it tomorrow. On the communications side looks for further development, and there is a culture clash in that way.”
Though the deal hasn’t been closed the two companies are assessing synergies and identifying potential new products they can bring to market – the first of which could arrive as early as Q4 2017. Kurgan identifies three main areas which the BICS-owned Telesign will tackle. “One is obvious in short-term: we have a worldwide routing platform that will be made available to Telesign. The other one is really pushing the voice API. You may think voice is dead and so on, but it is actually the opposite. The reaction from clients on the digital side was to show a strong interest in our voice capabilities. So we are accelerating the development of our voice API, although this is more complex than our messaging API. When I see the quality of service we receive from some of the platforms that are using voice APIs, there is a huge room for improvement.”
He adds: “The third is enriching the core capabilities for data we have on our network. We have conversations with mobile networks all over the place looking to monetise their assets. So we would source information from these operators that we already have commercial relationships with to feed the data flow for this core projects.”
“We have work going on to bring the first combined product to market in Q4, which is quite rapid, but it depends when the deal closes,” Stubblefield adds. “It is a two-way voice communications product, allowing two users to communicate to one another anonymously via voice.”
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