Private Equity And Atlantic Consolidation

A lot of private equity money has been funneled into telecom infrastructure investments. My impression is that returns have been poor largely because the funds don't really understand the challenges in making wholesale operators successful. The key ingredient is not technology. That is available to all. Anyone who has the money can have Ciena's latest version of Wave Logic. It is the ability of management to run a nimble, lean operation that leads to success and very few high profile telecom managers understand that point. Sales cycles must be short and provisioning even shorter. Most managers chosen to run new projects come from staid, often incumbent telecommunication service providers that try to solve problems by throwing bodies at them. They are highly risk averse so they throw sand in the cogs by allowing lawyers to dictate the pace at which everything moves. I have seen customer NDAs with four pages devoted to data processing alone. And NDAs don't prevent customers from sharing price points. Telecom conference gossip is largely about who did what deal at what price.

Digital 9's portfolio has been written down due to poor performance and the portfolio includes Aquacoms, a major Trans-Atlantic and Irish sea Layer 1 cable network. I expect EXA to consolidate the Atlantic by buying Aquacoms or its key assets. EXA has two old cables, EXA North and South, that will be decommissioned in five to six years. Its low latency Express cable is relatively young since it was RFS in 2015. EXA has a Dunant fibre pair and spectrum on other cables as well. Aquacoms would bring AEC-1, AEC-2, Havfrue, and Amitié fibre pairs. The result would be a two gun slinger scenario with EXA and Telxius dominating the Atlantic route.