Editor’s Note:

One of the biggest developments in the submarine cable industry in the first half 2017 was the acquisition of Hibernia Networks and its three transatlantic cables by GTT Communications Inc.  I had the opportunity to talk to Chris McKee, General Counsel and EVP Corporate Development for GTT, at the Telecom Exchange (TEX) conference in NYC recently.  Chris talked about GTT’s business and how the acquisition of Hibernia’s cables fits into their strategy for the global enterprise and carrier market.

“GTT is here to serve the connectivity needs of the largest multinationals in the world.  Whether it’s the Fortune 1000 customers and their connectivity needs or the carriers and their connectivity needs, we want to be the one that is providing that global data connectivity.  

What helps you address that?  Some of the largest bandwidth users were customers of Hibernia, as we were.  So we asked ourselves: 

  • Where is greatest connectivity demand?  Transatlantic
  • Where do we as a large carrier spend money?  Transatlantic
  • Where do our largest customers spend money?  Transatlantic

As we are heavily into the financial markets vertical, on which routes is there a high volume of exchange trading activity? Transatlantic

We never said, “You know, we really want to own a subsea cable one of these days.”  We don’t think like that.  We think, “What resources do we need to address what our customers need.”  And that kept bringing us back to Hibernia.

There were only a few customers that Hibernia had that we didn’t have (mostly in the financial markets vertical), but the acquisition offered the opportunity to go deeper.  For a typical financial customer, we were doing their WAN, we were doing their branch offices, now we can do their trading.  Many of our competitors are large incumbents.  Any additional services that we can provide our customers are big for us.

Even though we have decent coverage in the Fortune 1000 companies, we’re still a relatively small share of the market.  We keep looking at the assets, the capabilities, the products and the people.  What are the overall assets we need to best serve our target market?  And that brought us again right back to Hibernia.  We’re not a “build it and they will come” company.  We wait until there’s a proven business case and our customers are demanding it and then we say we want part of that.  

It’s the same with Perseus Telecom (a U.S. based high performance connectivity provider with low latency services to Latin America, Asia-Pacific, India and Africa that GTT acquired in June).  We had a desire to be in Brazil.  It’s a difficult market to get into if you’re not already there.  Perseus invested significant resources to establish themselves in that market.  

Perseus is a relatively small deal for us but it added 32 PoPs across the globe.  Just being able to expand geographically into new and growing markets, with a heavy focus on the financials, is big for us.  And that brings us back to subsea cables.  I love having the trading revenue between NY and London, but they’re also trading to Mumbai, to Marseille, to Milan, to Frankfurt, to San Paulo and to Tokyo.  We want to capture more of that.  You’ll see us doing deals that say if our customers are doing that, we want to provide it.  

In everything to do with telecom, scale provides advantage. As we expand geographically, we are adding significant scale.  We want to take what we do successfully for our customers and expand it to other customers, to other geographies.  That’s the idea behind it.  I’ve said it before, the transatlantic market is the hottest, most aggressive, most mature market in the world.  But there’s a reason why new cable projects are propagating in other parts of the world.  I still feel that the Pacific is underserved by the current cable infrastructure.  With GTT being a renter of lines rather than an owner, we see a need for customers to have better options.  I think that’s the next big frontier.  If you look at the demand and the bits that need to be moved in the Pacific, it seems to be 5-10 years behind where the Atlantic is.  

Then there are the emerging markets.  Right now, the OTTs are not putting their data centers there.  There are hundreds of millions or even billions of customers in the emerging markets who will need to be served.  Data center deployments will drive submarine cable demand.  I think that’s coming.  We want to be there to address the connectivity demands of large customers as those emerging markets develop, as we already serve the large OTTs on the transatlantic corridor.

The model for submarine cables that is being talked about right now is to get that OTT anchor tenant to justify the build and get off the ground.  We’re the operating partner.  We’re not in competition with the builders.  At the end of the day, we’re not as interested owning a bunch of fiber pairs that we can then monetize over a period of use.  We’re an operator.  We want lit capacity that we can use.  The model for us going forward is that we could be a partner to the submarine cable builders and investors who are doing drawing board designs and feasibility studies.  We’ll be in a position with our customer base to say yes, we’ve got you connected to Tokyo; we’ve got you connected to Sydney.  You want a high-speed connection between London and Mumbai?  We can also do that.  That’s our vision – connecting our customers to anywhere in the world, no matter the application.”