Tuesday, 12 December 2017

Subsea operators must get to grips with new market conditions to realise growth potential

By Chris Kelly, Total Telecom
Monday 20 November 17

A surge in demand for connectivity between Europe and Asia is fuelling growth in the submarine network sector, but carriers account for a smaller proportion of traffic

The subsea cable sector is enjoying a period of protracted expansion, with the industry set to grow by a compound annual growth rate (CAGR) of 5.75% between now and 2020, according to a recent report published by Research and Markets. However, operators in the sector need to re-evaluate their existing business strategies if they are to take advantage of developing market trends…

The subsea cable sector is enjoying a period of protracted expansion, with the industry set to grow by a compound annual growth rate (CAGR) of 5.75% between now and 2020, according to a recent report published by Research and Markets.

However, operators in the sector need to re-evaluate their existing business strategies if they are to take advantage of developing market trends. Speaking to Total Telecom, Jukka-Pekka Joensuu, executive advisor at Cinia Group, said that the industry was facing a range of challenges, including funding and market dynamics.

"It used to be the case that this industry was very carrier led but with the new systems you have a situation where only 30% of the traffic is actually carrier generated. That means that the traditional business models are changing," he said.

Understanding the changing dynamics of the market and being able to put in place the cash flows needed for their successful operation will be critical.

"You have to figure out a way to have the right customer structure in order to have a sustainable business case," Joensuu explained.

The surge in demand for subsea data cabling systems has been driven by two distinct factors.

"Firstly, for the past five or six years it has been driven by the emergence of big data. Secondly it has been driven by the growth and profitability of the over the top (OTT) providers. They have been able to lead the development," he explained.

Cinia Group is currently working on its Arctic Connect project – a subsea cabling system that will connect Finland and the Nordic counties with strategic business hubs in Europe and Asia.

"We will have direct links between London, Amsterdam, Frankfurt, Shanghai and Tokyo," Joensuu said. 

The Arctic Connect project will boast 100 Tbps of capacity over that route, and will build on Cinia's existing Sea Lion network, which connects Finland with mainland Europe. 

The project is expected to be complete in 2021-2022 and will address increased demand for capacity in the Asia-Europe route.

"What I see in the very near future is that Asia will continue to grow very, very quickly. We need to think about how we can answer that challenge. You need to put the infrastructure in place to be able to do business with the Far East," he said. 

Jukka-Pekka Joensuu will take part in a panel session at the forthcoming Submarine Networks Europe 2018 event, in London. The session will address the key challenges and opportunities surrounding the acquisition of finance in the subsea cabling sector and look at ways of balancing investment and returns in such a fast growing market.

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