Zayo continues to grow with organic expansion in Europe
23 November 2018 | Alan Burkitt-Gray
Annette Murphy joined Geo Networks a decade before Zayo bought it. Now head of Zayo in Europe, she talks to Alan Burkitt-Gray about how it is delivering growth
Zayo is expanding organically in major European cities, including Dublin, London, Paris and Amsterdam – rather than growing by acquisition, as it is doing in the US. Annette Murphy, the managing director of Zayo Europe, is reluctant to say the group is looking for inorganic growth – acquisitions – on the east side of the Atlantic. Instead, she steers the conversation away deftly: “Never before have we seen more opportunity for organic expansion,” she says.
From its Boulder, Colorado base, Zayo US has bought Optic Zoo Networks and Spread Networks this year alone, and Electric Lightwave last year, plus Allstream in 2016, on top of a selection of data centres. In Europe, the last acquisition was Viatel’s infrastructure at the end of 2015 and Neo Telecoms in France in 2014. A few weeks before that, it bought London-based Geo Networks. But nothing since Viatel.
Perhaps Murphy is just being ultra-cautious: top executives rarely like to admit they’re actively pursuing acquisitions – Zayo CEO Dan Caruso is a famous deal-maker; we’ll take Murphy’s reluctance to comment with caution and wait to see what happens.
“Our strategy remains consistent with what it’s always been – we’ve always been disciplined about acquisitions,” she says. “There is a certain lack of discipline out there now. Our strategy remains unchanged. There have been some nice complementary tuck-in assets [in North America]. That remains the modus operandi.”
Murphy joined Geo in 2004 – after a spell at BT Global Services – and stayed after the Zayo takeover, to become sales and business development director for its wholesale operations in Europe.
Geo “was a 100% fit with Zayo’s core strategy”, she recalls. “The focus is assets and what we do with those assets and the markets we serve. I don’t think we could have found a better trade purchaser for Geo than Zayo.”
Into the sewers
Many of Zayo’s fibre assets are in the London sewers through a deal signed in Geo days with Thames Water. The fibres are fixed to the side of the brick walls that were built in the 1860s under the direction of the brilliant engineer Joseph Bazalgette, and they are still in good condition 150 years later.
“The sewer network has been a key USP for us,” says Murphy. The fibres are deep, secure and economical. “They go right across London and come up through the manholes,” leaving Zayo to call out the diggers for only short stretches. The company also uses sewers in Paris, thanks to a parallel decision by Geo. “They’re even better: they reach right into the cellars.”
At the first Metro Connect Europe conference in September, Murphy compared the European and North American markets. We pursue that theme in the interview in Zayo’s office. “Two years ago I’d have said there was a five-year difference between the two markets. Now, I’d say Europe is fast catching up with the US, and some market segments are at parity.”
And Europe is seeing new entrants from the US, bringing new potential customers, “companies we previously didn’t see here. It’s very positive for Zayo because we serve them in the US market and the partnership is strong.” She points to – but doesn’t name – over-the-top (OTT) companies, “big webscale companies” that Zayo works with in the US. Previously customers in Europe tended to use less fibre than in the US, she says. “They were buying wavelengths across Europe and now they’re buying a very high fibre count as companies roll out infrastructure across the region.”
There’s a big difference, of course, in the wireless markets, where each country in Europe has a separate set of competitors – all with different policies with regard to backhaul. Some provide their own fibre, but others go to the fibre market.
There is parity in many areas of the market on each side of the Atlantic. “Financial services, for instance.” New York is comparable with London, Paris and Frankfurt. “In investment banking we feel we’re particularly well positioned, given that we’re an organisation that likes to own its fibre. Access and ownership lets you provide the best level of service. You have control of the entire architecture.”
Murphy says Zayo was “was built for today’s world rather than one that’s trying to move into today’s world.”
Take its IT system: “Our entire business is built around a simple IT architecture and everything is on a single system. That makes everything across the business work better – pre-sales, delivery, service. Data is always in the right place. It allows us to focus on what’s important.”
Zayo has assets in eight European countries, says Murphy, focused on fibre assets and service, “and that allows us the opportunity to expand”. It operates in five main market sectors – wholesale telecoms, including wireless; content; financial services; professional services; and public sector and health.
As head of Europe, Murphy spends “most of my time on trains and planes”, between London, Paris, Amsterdam, Frankfurt, Milan and the US.
“I don’t think of Paris as an international trip any more,” she adds. But all of those take her away from her husband and “three little boys of four, seven and nine” in south-west London.
Back in January, Caruso said he wanted to inject a new energy into Zayo. Does Murphy see this? “Oh absolutely. We operate at a very fast pace – we call it ‘the speed of Zayo’, and it’s a very exciting environment, a very challenging environment. It’s not for everyone. You need very high levels of commitment from people here. We focus on building very effective teams,” she says.
“Dan is very focused on the culture of the business, on retaining the entrepreneurial spirit on which we were founded.”
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