Reliance Globalcom rides recession with global Ethernet

Robert Clark
28 Oct 2009

Crisis equals opportunity, they say, but some preparation helps as well.

When the financial crisis broke a year ago, Reliance Globalcom was as ready as anyone.

In the previous 18 months the carrier – the global division of India’s Reliance Communications - had acquired US Ethernet carrier Yipes for $300 million and UK virtual network provider Vanco for just $77 million net.

In a restructure last October, it put these new assets into a new global data division, just in time to take advantage of what CEO Punit Garg called the demand for “value deals” as the world economy crashed around our ears.

In the first quarter of this year it increased managed services revenue 23% to $399 million over the previous Q1. It hiked ebitda 40% and signed new contracts worth $38 million, helping offset the fall-off in wholesale demand.

Said Garg: “From our perspective, we have the opportunity to win new business by leveraging our existing infrastructure and low-cost global delivery and operations center based in Mumbai.”

That’s one part of the pitch. The other is the combination of the new expertise it has acquired with its global network.

Owen Best, Asia-Pacific president, said with the Yipes acquisition Reliance had hitched its star to Ethernet, which because of its cost and simplicity, the company expects will become the world’s most widely-deployed enterprise networking platform.

“The technology and the comfort zone around LAN technology is so huge; everybody is familiar with it,” he said.

Yipes’ specialty in the US is financial services, with customers such as the NYSE and the Chicago Mercantile Exchange. As well as its US network, it brought in these customers plus some Ethernet security technologies.

“Our concept is to take Ethernet service capability and globalize it using the Reliance Globalcom infrastructure,” Best said.

The other acquisition, the asset-light carrier Vanco, brought expertise in network services, convergence, VoIP and security.

“Because of the Vanco expertise, we are particularly attractive to enterprise customers. Instead of maintaining multiple supplier relationship, they can outsource it to a single supplier,” he said. “They can remove their in-house labor cost and outsource it to us. We are also held accountable for the quality we deliver.”

That’s the standard outsourcing pitch, but it seems to be working. Best says Reliance Globalcom now takes as much revenue from managed services as it does from the declining wholesale business.

He says Reliance has “good growth” in Asia, especially from Australia, and is “putting a lot of effort” into sales in Japan, Korea Hong Kong and China.

Unlike most of its bigger rivals, which are focused on servicing customers from their home markets, most of Reliance’s Asia-Pacific business is from EU or US enterprises.

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