Africa's Liquid Telecom owns and operates what is arguably the continent's biggest fiber network. Having established itself as one of the key players in east Africa's wholesale markets, the company is now moving from being a connectivity player to one that develops "solutions" for its various customers, in the words of David Eurin, Liquid's chief strategy officer.
In the first of a two-part interview with Telco Transformation, Eurin explains why the enterprise sector is a strategic priority, what's driving growth in the wholesale business and why Liquid is building a new submarine cable linking Africa to the Middle East.
Telco Transformation: What growth potential do you see in the enterprise sector and what are your plans there? Is it fair to say that your cloud and managed service offering is still not that developed?
David Eurin: I would say enterprise is definitely a focus. We've been busy rolling out fiber as fast as we can. A few years ago we bought the Altech assets in Kenya and Uganda, which gave us the old KDN [a Kenyan wholesale network provider], and there is a big ISP in Uganda with a lot of infrastructure that we spent quite a bit of time rebuilding and modernizing. Then we realized that we have all these assets and are doing well on the wholesale side, but the enterprise was definitely lagging. So we strengthened the sales team through multiple factors -- we hired a number of people from other operators who are used to selling telco solutions for enterprises and we now have a very strong sales team completely focused on that.
We are moving from a pure connectivity play into a solutions-focused player because that is what clients are asking for. The large multinationals are quite happy to see that we own a big chunk of the infrastructure because we can give them end-to-end connectivity and control in the east of Africa -- so from Kenya all the way to South Africa -- entirely on our network all the way to the building.
We are now partnering with mobile operators that have built their own fiber so we can fill gaps. It's obvious to us that it's much easier to offer something in the east because we control the infrastructure. We better understand now what people who don't own the infrastructure actually face because the vendor management part is much more complicated than when you can walk in to the data center, put in the card and say "here we go." But that's the way it has to be because we want to have a pan-African offering -- that's what the client wants and that's what we are building for them.
So I would say yes -- enterprise is the largest piece we haven't had until now that we want to grab. Wholesale is doing quite well because as operators launch 3G and 4G they are needing IP transit and the fact we have got all those networks means it is natural to come to us. But the market is very mature and obviously focused on the pipe. The enterprise market is more interesting because there is a solution to be provided -- we get to hire people who visit customers and see what they are doing and provide something that actually sticks.
TT: Would you say the enterprise market is booming in Africa right now?
DE: It is booming. There are definitely hotspots. There is a lot of business in Nairobi and a growing business in Kampala and Kigali, although obviously much smaller. We are also looking at Tanzania -- Dar es Salaam is an interesting business center as well, but we haven't done a strong play there yet and are trying to fill that gap. Zimbabwe remains for us a central piece of the puzzle because it's where we started, it's where we have the largest network to date, key customers are there and our market share is vastly higher than anybody else's. We are trying to replicate the market share we've achieved in that market in other places and I believe there is nothing that stops us from doing that because the quality of service we deliver is better than anybody else's.
Next page: Wholesale and submarine opportunities
TT: When it comes to wholesale capacity, what kind of price erosion are you seeing? What is the topline growth?
DE: There is topline growth but nothing related to the 80% to 100% per year of data growth that we see in our own market and have to provision on our own networks. I would say 15% to 20% in the wholesale market is quite achievable where we are. There is price erosion -- much faster than we would like -- but there is topline growth in there. The big purchasers of this capacity, which are the leading mobile operators, recognize they have to pay more to get more. They are themselves making more money from data, which really drives this amount of connectivity they need, so the discussions are quite productive.
TT: Is there a structural imbalance in that the big Tier 1s tend to self-provision?
DE: It really depends. What we see is that where we've already made our mark in the market in growing fiber -- and I would say Kenya is the exception to that rule -- the mobile operators are actually not keen at all to invest in fiber. They do but it's often quite limited. The discussions we have with them are that mobile operators don't want to own the fiber but need it, and so what can we do together to provision this fiber to them without them feeling they are stuck. There is give and take each time but that actually works.
In Kenya the situation is that you have a large Tier 1 player that was a customer of an asset we bought and quite unhappy with it. They were in a corner where they had an unfulfilled need and had to invest, which is for us a worst-case scenario because this is the part of the market where we think we're good. Even in that situation, with our modernization the discussion is much more about our model, where the extension of the network is likely to be done through us rather than against us. The infrastructure-sharing model works quite well.
In South Africa, you have another situation where mobile operators have tried to do things together and created consortiums. That has not exactly been a success, because they all have different needs and different ways of working and find it quite hard to converge to something that works without feeling other operators won the argument. They are now moving away from the consortium and approaching players like us to say can you be the independent party that will build or buy or own the asset and offer it as a common service to all of us.
TT: Why are you deploying a new submarine cable off the east African coast, which wouldn't seem to have a fiber supply gap? Is this about the need for a long-term on-net solution?
DE: Definitely there is a flavor of on-net there. Every year we find we invest more in networks we don't actually own and are actually funding somebody's else's assets. There is a need to be on net and actually control the asset so the capacity we need is available when we need it. There is an opportunity to create more competition and capacity in the long term. The cable system we are putting together will have way more capacity than the cables in there today. The technology we are putting in the ground is the latest and the cost base will be much more attractive. And the architecture -- if all goes well -- will allow us to avoid a lot of the outages we see today. Those occur at the landing station or nearby where anchors rip of the cable and so forth. We are trying to get an architecture that means if something happens there it avoids taking the entire cable out. It is not done like this on the east coast of Africa right now, or off the west coast, for that matter.
TT: The announcement mentioned 20 to 30 Tbit/s of capacity. What about the latency to London or the US relative to other cables?
DE: I don't think the latency will be vastly different because we are covering the same ground. The capacity will be more and I think those numbers are the minimum of what we'll put in. The key thing is to have an asset that's always up. You see this week again that a number of cables had problems. If the entire African continent is in the black for a few hours, for us that is not acceptable and not something we see in the US or Europe. We want to take the continent away from those problems. Having another cable that doesn't follow exactly the same route is a big plus. And having capacity at a cheaper price is what we are doing.
— Iain Morris, , News Editor, Light Reading, Editor-in-Chief, Telco Transformation