OverviewoftheDataCommunicationServices&NetworkingEquipmentIndustryAmerica’sTelecomITP,2001Author:EvaPetocz-BAPresentedbyStaggNewman-DCTextMAPRAC-TelecomITP02-01(America)2Summary•Datacomplayershaveevolvedaroundtwobusinessmodels,retailandwholesalefocused,withdifferenttargetedcustomers,serviceofferingandinfrastructureowned.Thesemodelshavedifferentkeysuccessfactorsandtrends,butacommonstrategytogainscaleandfocusonvalue-addedservices:web-hostingandASPs•Thenewdatacomplayershaveimportantcompetitiveadvantagessuchasfocus,state-of-the-arttechnologyandcostefficiency.However,incumbentsarereorganizingtheirdatabusinessinspecificbusinessunitsorseparatecompaniesinordertofocusandtakeadvantageoftheirhistoricassetofretailrelationshipswithcorporatecustomers•Bothstrongdemandfromdatacomplayersandequipmentmanufacturers´willtoextendtheirtechnologyportfoliohavefueledastrongconsolidationprocessinthenetworkingequipmentindustry.Nowadays,thisindustryisveryconcentratedandisexpectedtoexperienceastronggrowthdrivenbyvalueaddedservices(VoIP,VPNs)andbroadband•Hottopic:opticaltechnologyisbecominganimportantpartofnetworkingdevicesandisonethefastestgrowingindustries.However,playersarefacinganumberofchallengesasthisindustryisstillinitsinfancyMAPRAC-TelecomITP02-01(America)3TheInternetisakeydriverofdatatraffic-ISPsareonekeyelementofincreasingdemandGigabitsperday–typicalmodelGigabitsperday–typicalmodel000000VendorbusinessplansrelyVendorbusinessplansrelyonavirtuouscircleonavirtuouscircle1995199519951995200320032003200340404040Internet/Internet/datadataInternet/Internet/datadataVoiceVoicePSTNPSTNVoiceVoicePSTNPSTNISPs/corporateISPs/corporatenetworksdemandnetworksdemandmorebandwidthmorebandwidthISPs/corporateISPs/corporatenetworksdemandnetworksdemandmorebandwidthmorebandwidthInternet/dataInternet/datanetworksbecomenetworksbecomemore‘user-friendly’more‘user-friendly’–i.e.,faster–i.e.,fasterInternet/dataInternet/datanetworksbecomenetworksbecomemore‘user-friendly’more‘user-friendly’–i.e.,faster–i.e.,fasterInfrastructureInfrastructureprovidersprovidersoffermoreoffermorebandwidthbandwidthInfrastructureInfrastructureprovidersprovidersoffermoreoffermorebandwidthbandwidthEnd-usersEnd-userssendmoresendmoredata,moredata,moreoftenoftenEnd-usersEnd-userssendmoresendmoredata,moredata,moreoftenoftenMAPRAC-TelecomITP02-01(America)4MostcompaniesinthisindustryhavehighgrowthexpectationsSource:IDC;CompanyreportsEstimatedlong-termEstimatedlong-termEBITDAmargin(%)EBITDAmargin(%)ExpectedExpectedCAGR2000-2003(%)CAGR2000-2003(%)DatacomHosting/ASPITConsulting20-2520-2520-3020-3030-3530-3590-10090-10030-3530-3540-5040-50MAPRAC-TelecomITP02-01(America)5ManynewplayershavecapturedthisopportunityandhavecreatedhugevalueinthepastfewyearsMarketcapMarketcapUSDbillionsUSDbillions(Feb15,2001)(Feb15,2001)Source:Bloomberg,YahooFinancePrice/SalesPrice/SalesQwestMCI-WorldcomFoundedFoundedIPOIPO199819971997Viatel19911996MetromediaFiberNetw.19851999KPNQwest19991999Energis19931997WilliamsComm.19931997Equant19981998Level319981998GlobalCrossing19971998Colt19921996199750.416.014.111.410.910.57.26.85.60.164.73.925.68.544.00.29.616.31.36.144.025.6MAPRAC-TelecomITP02-01(America)6Servicescanbecategorizedintocarrier(Wholesale)andendcustomer(Retail)services•Duct•Darkfibre•Pointtopointlitfibre,e.g.,STM-1•IPconnectivity•ATM,FR•QoSguarantees...
