Friday, August 27, 2004
Built for America, Owned in Asia
By now, you've probably heard about the attempt by Reliance Telecom and Tata Indicom to take over Tyco Global Network's assets for about $200 million (compared to the $3.4 valuation at the peak of the boom). This comes after Reliance's takeover of the Flag network which was preceded by SingTel's buyout of Global Crossing's $10 billion network for about $250 million. It is interesting to see this transfer of assets (at fire-sale prices) built by U.S. investors (mostly for U.S. customers) into Asian hands. This has resulted in U.S. carriers losing their chokehold on the flow of data traffic. The growth of domestic network exchanges in many countries hasn't helped either. As broadband usage grows around the world, it would be interesting to see the consequences of this shift in the routing of international data traffic. Jennifer Schenker has more details on this power shift.
Some $30 billion in international telecommunications infrastructure owned by United States companies was sold to foreign-owned entities from 2000 to 2004 for a total of about $4 billion, said Sam Paltridge, an economist at Organization for Economic Cooperation and Development in Paris. Because it bankrolled the networks, "Wall Street has inadvertently financed more telecom infrastructure overseas than the World Bank and other international agencies,'' Mr. Paltridge said.
The change in the balance of ownership may have political consequences. The international pieces of a nation's communications infrastructure, considered strategic and defensive holdings, can be controlled by some who may not share that nation's interests. The new profile of owners has changed the business. The smaller companies that sought for years to be treated as equals by American rivals can offer their customers global end-to-end services, including access to the biggest market - the United States - over their own networks or others owned by partners they are better able to negotiate with.
Bharti Enterprises in India and Singapore Telecommunications have teamed to build a cable called i2i that promises to offer the largest amount of bandwidth capacity of any undersea fiber-optic cable in the world, said Alan Mauldin, a senior analyst at TeleGeography. "At a time when everyone is thinking the telecom boom is over and the industry washed up, in India they are just getting ready to go,'' Mr. Mauldin said.
The same competitive and pricing pressures that hit the American telecommunications industry are expected to hit the new Indian and Chinese global players. It is an intensely competitive market, but entering at bargain-basement prices should help the new competitors, analysts said.
Some $30 billion in international telecommunications infrastructure owned by United States companies was sold to foreign-owned entities from 2000 to 2004 for a total of about $4 billion, said Sam Paltridge, an economist at Organization for Economic Cooperation and Development in Paris. Because it bankrolled the networks, "Wall Street has inadvertently financed more telecom infrastructure overseas than the World Bank and other international agencies,'' Mr. Paltridge said.
The change in the balance of ownership may have political consequences. The international pieces of a nation's communications infrastructure, considered strategic and defensive holdings, can be controlled by some who may not share that nation's interests. The new profile of owners has changed the business. The smaller companies that sought for years to be treated as equals by American rivals can offer their customers global end-to-end services, including access to the biggest market - the United States - over their own networks or others owned by partners they are better able to negotiate with.
Bharti Enterprises in India and Singapore Telecommunications have teamed to build a cable called i2i that promises to offer the largest amount of bandwidth capacity of any undersea fiber-optic cable in the world, said Alan Mauldin, a senior analyst at TeleGeography. "At a time when everyone is thinking the telecom boom is over and the industry washed up, in India they are just getting ready to go,'' Mr. Mauldin said.
The same competitive and pricing pressures that hit the American telecommunications industry are expected to hit the new Indian and Chinese global players. It is an intensely competitive market, but entering at bargain-basement prices should help the new competitors, analysts said.
