Monthly Archives: June 2015

Exabyte Zenith

There is a sense of déjà vu when you read about the competing plans of Greg Wyler’s OneWeb and Elon Musk’s SpaceX to build a network of low earth orbit satellites to provide cheap broadband across the globe over the next few years. Memories of past failures from the late 1990s telecom bubble come to mind with these network plans. Names like Iridium, GlobalStar, Teledesic, and SkyBridge. Maybe, this time, the dreamers with access to billions can get it right!

You never know, there may even be a comeback for broadband over power-lines (not likely according to this article)!

I did come across the latest figures from Cisco in their “ The Zettabyte Era – Trends and Analysis” piece, as previously referenced in this post. As a reminder, gigabyte/terabyte/petabyte/exabyte/zettabyte/yottabyte is a kilobyte to the power of 3, 4, 5, 6, 7 and 8 respectively. Cisco continues to predict a tripling of global IP traffic from 2014 to 2019. The graphics below give some colour on the detail behind the predictions.

Split by consumer and business traffic with each further split by traffic type. Unsurprisingly consumer video traffic is dominating the consumer 24% CAGR.

click to enlargeGlobal IP Traffic 2015 projections

Growth in the US, Asia and Europe is driving the impressive 29% metro CAGR whilst Asia Pacific traffic is the prime driver for long-haul growth.

click to enlargeGlobal IP Metro LongHaul Traffic 2015 projections

The split by region shows the status quo will be maintained in terms of traffic breakdown with Central/Eastern Europe and the Middle East /Africa regions projected to have growth rates of 30%+ and 40%+ respectively as opposed to approx 20% in the main markets.

click to enlargeGlobal IP Traffic Geographical Split

Exabytes are reaching their zenith and by next year global IP traffic is predicted to exceed a zettabyte.

Fidelity’s clever move on COLT

On Friday, Fidelity made a 190 pence offer, which is a 21% premium to the previous day’s close, for the approximately third of COLT that it doesn’t own. After years of underperformance and a series of restruturings, COLT has been long looking for a positive future. It bought the smaller Fidelity owned Asian carrier KVH last year (see previous posts here and here). COLT’s core European business has been slowly moving to higher growth and margin data and network business, as the graph below shows.

click to enlargeCOLT Telecom Revenue & EBITDA Margin 2006 to est2016

Fidelity’s offer values the debt-free business at £1.7 billion (or €2.4 billion or $2.7 billion at current FX rates) which I estimate to be 7 times 2015 EBITDA or 6.44 times 2016 EBITDA estimates (assuming 2015 EBITDA of €335 million and a 2016 10% EBITDA YoY growth). The independent directors have called the offer too low but haven’t made a recommendation due to the lack of options for minority shareholders.

From Fidelity’s viewpoint, this looks like a clever move to force any likely bidders out into the open or, failing any bidders emerging, to take the firm fully private at an attractive price. Robert Powell over at telecomramblings speculates that other European carriers such as Interroute or the US based Level 3 may be possible bidders. It will be fascinating to see how this one plays out.