Monday, 19 February 2018

Aqua Comms: Building a profitable subsea model

By Chris Kelly, Total Telecom
Tuesday 23 January 18

Nigel Bayliff is CEO of subsea specialist firm Aqua Comms. We caught up with him in the run up to the Submarine Networks Europe 2018 event, to discuss the state of the market and to get the latest on the company's involvement in the Havfrue project

The Atlantic can be a difficult market for subsea companies – what lessons can be learnt from working in the region?  Our primary goal here is to build a model that makes sense and is financially viable in the very, very difficult market of the Atlantic. If we succeed in this, we can look to extend that model out to markets that offer much better financial gains. The margins outside of the Atlantic are much higher, so if we can make our model work in the low margin markets, then we can transfer it out [to somewhere more profitable] in the future.   What is the state of the market at the moment? Are companies ready to invest in the high capex that subsea projects demand?  I think companies are willing to invest…

The Atlantic can be a difficult market for subsea companies – what lessons can be learnt from working in the region? 

Our primary goal here is to build a model that makes sense and is financially viable in the very, very difficult market of the Atlantic. If we succeed in this, we can look to extend that model out to markets that offer much better financial gains. The margins outside of the Atlantic are much higher, so if we can make our model work in the low margin markets, then we can transfer it out [to somewhere more profitable] in the future.

 

What is the state of the market at the moment? Are companies ready to invest in the high capex that subsea projects demand? 

I think companies are willing to invest. For us specifically, because we are a consortium member on Havfrue, we are a company that is only having to finance part of the cable. We're able to do that through internal funds so we are not having to go out to external markets to raise funds. The ability to raise funds in this market seems to have increased, from what I can see. Maybe not in the Atlantic market – there have been numerous cables discussed on this route over the years and they don’t seem to have been able to lock in the required financing for them. Going forward, I think it's going to be the case that you can only do these really big type projects if you are doing it with one of the really big OTT parties, who are looking for ownership grade capacity. 

 

What was the biggest challenge associated with the Havfrue project? 

Building cables is a challenging endeavour. You have the conditions of the sea to contend with and the North Atlantic is a challenging place – you are going through the same area where the Titanic sank. You have to time your construction programme to fit with the most favourable weather conditions. Even then, there are unforeseen storms and other events which can really disrupt the process. So, you have to be at the top of your game in terms of planning these activities. 

Then when you get to the North Sea between Scotland and Denmark, you are encountering a sea bed that looks relatively benign, but its shallow water, its covered in oil assets and other pre-existing cabling systems, so you have to pick your route very carefully. That being said, it's not necessarily any more challenging than other parts of the world. What you must do is make sure that you have the right companies advising you. We are a company that has a wealth of experience with many people working for us who have done this type of thing many, many times before. 

 

What other locations are interesting to you? Where else could you look to transplant the Havfrue model? 

There is a lot of talk about the route to India, from the Mediterranean, of course everybody is talking about that. Typically, in my three decades of experience in this industry, there will always be a lot of talk about routes that are important and practical and are worth doing. The route to India certainly fits that bill. You could also look at the other side of the US [West Coast]. The routes down to Brazil have all been built and actually we partnered with SeaBras on delivering services into Sao Paolo. 

It's really a question of where there are key targeted requirements that make sense for us to work in collaboration with the OTTs. We are not going to just build it with the attitude of "build it and they'll come". The route to India is a hot topic at the moment. But so is the topic of Arctic routes, or routes up the coast of Norway. So, there is a lot of scope for projects like these. Iceland is another place where there is a small but blossoming data centre industry that needs more connectivity. 


Any predictions for the state of the industry over the next year to 18 months? 

My prediction, pretty much for the past 3 or 4 years in this industry, has been that companies need to specialise in something. Gone are the days of the massive, vertically integrated megalith that builds submarine cables and delivers cell phone services at the other end. That's a pretty hard target to try and spread your capex, and your company's focus, across. 

I think we are going to see, what I have referred to in a number of panel sessions recently as, a lamination of the industry. We sit in what we think is a very clear lamination – submarine infrastructure. There are terrestrial infrastructure companies, there are towers companies, there are mobile phone service companies. So, there are a lot of companies now who are going to need to specialise – to pick a specific part and become very good at it. They need to become very efficient and they need to model their company on addressing the specific needs of that market. For example, we sell only to carriers, we don't sell to enterprises.

The industry needs to define itself a little bit more by what it doesn’t do, because that helps you to understand the specific specialisms. No longer can companies view themselves as "full service" providers. 


Nigel Bayliff will be taking part in the Keynote Panel at next month's Submarine Networks Europe event. The session will look at the evolution of the subsea sector, and will examine strategies for negotiating tricky market conditions and maximising ROI.  

Andy Hudson, Chief Network Officer, Aqua Comms, will also be speaking at the event. Andy will be sharing his expertise and taking part in a workshop focussing on strategies for averting the capacity crunch. 

Click here for a full agenda and to find out how you can be part of the event. 

 

 

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