Backbone upgrade and AAE-1 key to OTEGLOBE’s 15% growth, says COO
12 April 2018 | Jason McGee-Abe
OTEGLOBE has recently announced a 15% increase in EBITDA as part of its 2017 financial results, COO George Nikoloudis explains to Capacity how the carrier has reached €333.5 million in revenues and 2.9 billion total traffic billed minutes.
JMA: What are the key conclusions that can be drawn from your financial report?
GN: Our EBITDA margin was significantly improved in 2017 when compared to 2016 thanks to the continuing strong performances in Europe and Asia, where our recent investments in AAE-1 and the upgrade of our European backbone network with new fibre lease and next-generation technologies have started yielding results. We have created cash and cash equivalents (bonds) of more than €100 million, despite our heavy investment in new network infrastructure. OTEGLOBE also remains one of the few Greek companies that stay “loan free”.
OTEGLOBE reached €333.5 million in revenues in 2017 recording a 15% increase in EBITDA. This was a result of the company’s previous years’ investments and the maintenance of high revenues in international voice services. 80% of 2017 revenues came from international customers.
JMA: There was a price decrease in international wholesale on OTEGLOBE’s revenues, what were the main reasons for this?
GN: Stiff competition in a shrinking market, combined with new regulatory frameworks to reduce termination rates in EU markets led to significant price erosion in both international data and voice wholesale business, with a strong negative impact on companies’ revenues and profitability. In this challenging and unfavourable environment, OTEGLOBE achieved not only to operate fluently, but increase its profitability with a positive, healthy EBITDA margin.
JMA: In the management report it says that “the company successfully addressed significant challenges, such as: fiercer competition in Greece by international wholesale companies with alternative infrastructure connecting the country with neighbouring markets”. Please could you name a couple of the ways OTEGLOBE has differentiated itself from this competition?
GN: OTEGLOBE is continuously trying to differentiate from the competition not only in Greece but also in Europe by: leveraging on its strong and innovative network infrastructure, expanding towards new markets and building strong partnerships with other well-known carriers worldwide.
Our company is the only carrier that connects Greece and the Balkans to Western Europe with four different routes, two routes transiting Balkan countries and another two routes transiting Italy. During 2017 we expanded and redesigned our network by leasing new fibre across Europe and now have more than 21,000km of own dark fibre connecting all the major European hubs.
At the same time we have expanded our data business to new markets in Asia, M. East and Africa by investing in a new intercontinental submarine cable, Asia Africa Europe -1, that connects Hong Kong, Singapore and other countries to Europe and that became fully operational in the second half of 2017. OTEGLOBE is a full member and landing party in AAE-1, with its international cable landing station at Chania – Crete. Traffic from Asia is routed through AAE-1 new subsea cable to OTEGLOBE’s landing station at Chania, and from then on through OTEGLOBE’s diverse and protected terrestrial network to Europe, ensuring resilience and diversity in the region.
Finally having become the leading regional carrier in Southeast Europe, OTEGLOBE has built strategic partnerships with other telecom providers worldwide to offer “OFF-NET” services beyond its network’s footprint. A significant portion of OTEGLOBE’s data revenues can be attributed to off-net services, from places where OTEGLOBE does not have own infrastructure and relies on its partners networks to offer the end to end service.
JMA: This report also says another challenge was: “Delay or even suspension of the implementation of strategic development plans in the broader markets of Middle East and North Africa due to the volatile environment and political instability in certain countries, e.g. Syria, Libya.” Please could you provide me with updated timeframes if possible?
GN: During the previous years we have made plans to partner with other carriers to build new routes connecting Middle East and Africa to Europe and provide much needed diversity on the existing subsea cables. Unfortunately due to the turmoil in countries in the region i.e Libya, Syria these plans had to be postponed or even canceled. The situation in Libya has improved lately and I’m happy to report today that the Silphium cable connecting Libya to Greece will resume its commercial operation within 2018.
JMA: Total traffic billed by the company network was 2.9 billion minutes (2.6 billion in 2016), what is your initial prediction of how this traffic may increase in 2018? What do the January and February 2018 figures suggest?
GN: We expect a significant increase of international voice traffic within 2018. Part of it because of the new EU regulation that diminishes roaming fees within EU networks, hence boosting the voice traffic across Europe, another part due to increase of IP and hubbing business models that make global destinations such as i.e Africa and Latin America accessible to a regional carrier like OTEGLOBE. January and February results are not indicative, high season in Greece and Southeast Europe is during the second and third quarter of each year, so we will have a clear picture of the new traffic trends during the last quarter of 2018.
JMA: How this increase was as a result of both the upgrade of the international network with the new IP capabilities and the targeting of hubbing services that reinforced the company’s commercial activity and led to the expansion into new developing markets, such as Africa and Latin America?
GN: During 2017 OTEGLOBE carried around 5.8 billion minutes (in/out) over its IP voice platform, not only supporting voice roaming to Greece but also to other remote destinations in i.e. Africa or Latin America. The expansion of our hubbing activities helped us reach these new destinations and maximise the potential of our international voice network and IPX platform. Moreover as an important voice hub in Southeast Europe OTEGLOBE maintains more than 200 voice bilateral commercial agreements with major wholesale carriers around the world in order to offer exceptional voice services worldwide.
JMA: What are the main wholesale areas of focus for OTEGLOBE in 2018?
GN: Maintaining our leading role in Greece and the wider area of Southeast Europe is our primary target. By investing in AAE-1 we aim to enhance and strengthen our position in the developing markets of the Middle East, North Africa and Southeast Asia to make Greece the alternative hub in the Mediterranean region. In our Voice Business we will continue placing emphasis on international hubbing services to reach remote destinations and maximise the benefits of our international voice (IPX) network. And last but not least we’ll keep on reducing our operational costs to cope with price erosion and remain competitive in a tough market.
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