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China Telecom looking at expansion, acquisitions in Europe

In the four years since it was established in the U.K., China Telecom Europe has experienced strong growth and is now looking to extend its footprint in Central and Eastern Europe and Africa, as well as seeking to acquire an applications provider to bring services to end users.

In addition, the company is working on the launch of a new terrestrial cable route between China and Europe to improve latency and make its offering more attractive to enterprise and carrier customers.

China Telecom Europe has three terrestrial routes connecting Europe and Asia: TEA (in cooperation with Rostelecom) and China-Russia 2 (in cooperation with Transtelecom), plus the recently-opened Transit-Mongolia link that connects Beijing into the other two via a shorter, cross-Mongolia route.

"We are now considering cooperating with a Kazakhstani carrier (Kazakhtelecom)," for a fourth route, China Telecom Europe managing director Yan Ou told Total Telecom on Wednesday. If the deal goes ahead, this Transit-Kazakhstan link "should be [in place] by the end of this year," Ou said.

The Kazakhstan cable would provide "the best route between Europe and Asia," since it would be shorter than the existing links, Ou said, explaining that, "latency is a very important factor," for the company's customers.

Current terrestrial links between Beijing and London can provide round-trip latency of 180 milliseconds, compared with 240 milliseconds on an Indian Ocean submarine cable, Ou said, adding that terrestrial routes are more reliable than subsea cables.

While large carrier customers were already familiar with China Telecom when it opened its doors in Europe, the operator faced a difficult task breaking into the enterprise space. However, four years down the line, the business market accounts for a large portion of its revenues.

"Most European [enterprise] customers... didn't know us very well," admitted Ou. "We [had to] try to [build] our brand awareness in the market."

Up to 2008 the majority of China Telecom Europe's revenues came from the carrier side, "but we have developed the enterprise," and by the end of 2009 "enterprise customer revenues exceeded the carrier market revenue," Ou said. Enterprises now account for 80% of the telco's customers.

Ou claims that when it comes to serving European business customers, China Telecom has certain key advantages over its Western competitors, despite their better-known brands.

"We know the Chinese market. We know how to fulfil their requirements in China," he said. In addition to international bandwidth services, customers often need connectivity between offices in China and even help with other, non-telecoms-related issues in the country.

"The local carriers cannot do that... They cannot provide a direct service to you," said Ou.

He also noted that China Telecom can provide a flexibility that its rivals cannot.

Last year the telco won a deal with a manufacturing firm in the Nordic region to provide flexible IEPL (international Ethernet private line) services between its market and Beijing, as well as connections within China.

"Our competitors can only provide fixed bandwidth," that is STM-4 or STM-16 transmission, Ou said. "But [often] the customer's requirement is in the middle of that... We provide an IEPL solution" at flexible rates.

The company recently won a contract in Germany for the same reasons, Ou said.

Plans for growth
When China Telecom formally inaugurated its European operations in London in September 2006, it claimed two points of presence (PoPs) in the market, one in London and one in Frankfurt, and Ou headed a team of just four. Now China Telecom Europe has almost 50 members of staff and boasts 10 PoPs across eight cities: there are now two PoPs in both London and Frankfurt, and one each in Moscow, Helsinki, Stockholm, Paris, Dubai and Johannesburg.

In the fourth quarter on 2006, its first in operation, the business brought in revenues of £110,000. For full-year 2007 turnover came in at £1.6 million, rising to £6.2 million in 2007 and £7.7 million in 2009.

"This year... it will be over £11 million," Ou predicted.

And the company has ambitious expansion plans.

The coming years will see China Telecom extend its coverage in Africa and in Central and Eastern Europe. It plans to set up a German limited company this year (it currently has a sales office in Germany), which will be "helpful to expand the business in Central Europe," Ou said.

In addition, "next year [we are] planning to set up representative offices in South Africa," Ou said. Most of the company's business so far is in the south or the north of the continent, the north being served by its Dubai PoP.

Many Chinese companies, plus the Chinese government, have invested a lot in Africa recently, Ou explained. Also, many Africans now live in the south of China; in Guangzhou alone there are over 200,000 Africans, he said. "[Africa is] a new emerging market," he added.

The telco also plans to dabble in the M&A market in order to boost its presence in the EMEA region.

China Telecom can provide managed bandwidth services to enterprises, but the value-add comes from the applications, Ou said.

There are many Chinese companies providing end-user applications, security systems and so on, Ou said, but they are not known in Europe.

"We are looking for opportunities to buy them," Ou said. "We can combine together to win the market."

Источник: Total Telecom

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