With us today to offer his perspective is euNetworks’ CEO Brady Rafuse, who previously stopped by a few years ago. Since that time, euNetworks has expanded is pan-European fiber footprint organically and made three acquisitions as well. The latest of those was FibreLac, extending their footprint up into the Swiss Alps. But the newest change at euNetworks has been the recent transaction by which the company has de-listed from the Singapore Stock Exchange.
TR: How does it feel to leave behind the listing in Singapore?
BR: As a Western European bandwidth infrastructure provider and at the stage of our development, it was appropriate to take the steps to delist. We continue to have the support of long term investors who are in Singapore, but for the business, being focused on where we operate is best for our future. This gives us the ability to be a lot more nimble and is more reflective of the size and focus of the company. The free-float at the close of the mandatory general offer was less than 6% and we have now delisted from the Singapore Stock Exchange. We also have some new investors in the business and a group of shareholders who are very supportive and committed to euNetworks.
TR: In what ways will being privately held let you be more nimble?
BR: Being privately held provides euNetworks with greater flexibility with respect to raising capital. For a company of our size, undertaking such capital development while being listed is no small task. Our listing has to an extent in recent years hindered our ability to be nimble.
TR: That sounds as if you plan to raise some money this year. What would you do with the proceeds?
BR: We are highly under-levered today. In the short term levering up our business is something we will certainly look to do. We continue to invest in the network, so pursuing organic opportunities that are aligned to what our customers need. That is capital intensive and supports our growth. There are a number of opportunities we are working on currently and many more identified which support our customers.
TR: Last year you bought FibreLac, are there more consolidation targets of this type out there you might take aim at?
BR: While Fibrelac wasn't a large acquisition for us, it was important. It added fibre to our footprint in Switzerland, brought on some important data centers and offered us a platform for our Frankfurt-Zurich ultra-low latency route for euTrade. As ever with the landscape in Europe, there are more potential acquisitions. We continue to pursue our inorganic approach, acting if the opportunity is right for our business and the price is in line with the asset up for sale. During my time at euNetworks we have completed acquisitions, all of which have added value to the business. Growth through inorganic activities remains an option that we constantly review but that’s not our key driver of growth today nor has it been historically. The investments we make in our network have and continue to be important to how we grow our recurring revenue.
TR: Consolidation among fiber networks in Europe has seemed slower and more hesitant than what we saw in the US, why do you think that is?
BR: The European fiber market has always been complicated and multijurisdictional. There are very few opportunities in Europe such as the Sunesys and Fibertech deals recently closed in the US. If you draw a map of fiber in Europe, and especially Western Europe, a significant percentage of the fiber assets are held in the hands of either large carriers or local/regional utility companies within each country. That makes consolidation infinitely more complicated than in the US.
At euNetworks we really are a simple business. We sell dark fiber, wavelengths and Ethernet to a targeted range of customers. We keep our efforts focused and scale from there and there are not a lot of companies in the European market that do that.
TR: Is fiber a core business for energy utilities in Europe, or do you think they might sell such assets?
BR: When it comes to the utilities, it's the four seasons of strategies. At certain points in time they just will or won't like them, just because that's the natural flow. I think there a couple of fiber networks owned by utilities that will come up for sale this year and next year. But you also see a lot of such fiber networks moving towards residential strategies, pursuing government grants and broadband initiatives etc.
TR: In terms of organic growth, will you be focusing your energies on adding breadth or depth?
BR: Depth mostly, although sometimes there may be an expansion out of our current region. If you look at traffic and bandwidth growth and the importance of information carried on networks today, the density of those networks is key. Diversity isn't enough anymore. High bandwidth using companies want to avoid big cities as well as go through the middle of big cities. They want to be coming at every key site from every point of the compass. All of that creates great opportunity for us.
TR: How has euNetworks’ organic growth varied across the various countries?
BR: The growth across all the geographies has been pretty powerful. The UK has been very impressive year to date. We've also had some really good customer relationships develop in Germany, and some very strong sales successes.
TR: What makes the German market such a different project?
BR: It takes a while sometimes to find your role within a market. Germany is a very complex country for people who aren't German to understand. Its business environment was founded on small and medium enterprises and is dominated by national businesses that export rather than multinational businesses. It's a very federated country as well. You could argue that to run a fully national network you'd need to be in 35 cities. Finding our place there has taken a little time, but I'm very proud of our team's performance and we have a strong local approach now. Germany represents 42% of our revenues, but our market share is lower than any of our other markets -- it's just a huge market opportunity for us.
TR: In the US, we’ve been seeing content shift out toward the network edge. Is there a parallel trend in Europe, and is the concept of the edge the same in European markets?
BR: Yes in Europe content is shifting out towards the network edge. Traffic is moving to the edge, but it’s complicated. Doing business in Europe is quite complex whether it's what the European Commission thinks about it, how data protection laws evolve, how very different business environments are from place to place, or the design impacts of the peering policies of the many incumbents.
TR: We’ve also heard a few calls for one pan-European network. Do you think anything will come of that?
BR: You hear things like that and you think you just might as well walk out into traffic, it would be just so complicated. Can you imagine bringing together 12 PTTs and pooling their network assets, finding a common valuation measurement, integrating the back offices, and agreeing on who is going to run it all? Meanwhile consumers are downloading video quicker than ever before across multiple devices and not waiting for you to figure it all out. I just don’t see how that could ever work.
TR: Thank you for talking with Telecom Ramblings!