COLT Completes NGN Rollout with Brand New Long-Haul Network

| June 22, 2009 | Business Telecom Services - Europe | Competitive Update

| Analyst: Dustin Kehoe

Current Perspective: Positive
Vendor Importance: High
Market Impact: Low

Event Summary

June 22, 2009 -- COLT Telecom has upgraded its long-haul network and can offer WAN Ethernet and Wavelengths now to 10Gbps consistently across eight countries with plans to complete roll-out to 13 countries in Q3 2009. The new platform is based on Infinera’s Digital Optical Networking system. The addition of the long-haul capabilities provides the last pillar of COLT’s NGN platform which consists of the Nokia Siemens Multiservice platform and Sonus Networks softswitch architecture to provide application enablement. (See: COLT Announces NGN Vendors and New Multi-Service Platform Strengthens Portfolio, July 15, 2008).

Analytical Summary

• Current Perspective: Positive on COLT Telecom for completing its next generation network and for introducing new long-haul capabilities for its WAN Ethernet and wavelength services across Europe using the Infinera platform because the company will now be able to offer new data services up to 10Gbps using a single vendor and management platform. It also offers a number of advantages such as faster provisioning, improved latency at the equipment level and above all a solution that can be deployed from a lower cost-base.

• Vendor Importance: High to COLT Telecom because the company needed to install a new long distance platform to offer high capacity data services across its footprint giving customers better guarantees on available bandwidth which was a problem in the past. It was also important for introducing a single management system across its network, offering customers more redundancy via protected services, and higher SLA metrics. These are very strong talking points to key customer segments, such as the financial institutions, that place a lot of importance in these areas.

• Market Impact: Low on the European data communications market because there are many competitors offering high-speed data links for Ethernet and wavelength services. COLT will be more competitive on price, but also on a number of SLA metrics (latency and provisioning times) which could force competitors to respond. Also by offering protected links, some competitors that are secondary suppliers to COLT may be nudged out of the contract now that the company can offer route diversity on a standard basis.

Competitive Positives and Concerns

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Recommended Vendor Actions

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Recommended Competitor Actions

• Incumbent providers such as BT, Orange Business Services and Deutsche Telekom should also be looking to revamp their Ethernet services portfolio to offer a 10Gbps speed over the WAN on an international basis. BT, for example, does not have these capabilities outside the UK and this is important for staying competitive with the international market.

• Competitors should be aware that the new Infinera solution has enabled COLT to offer high-speed data links at a significantly lower cost-base from its previous solution based on Nortel equipment. While it is unlikely that COLT will attempt to lower its prices, competitors should see NGN strategies as a means of sharpening competitive advantages in similar ways to COLT. Without considering an NGN strategy underscored by some investment, it will be difficult to continue to compete in the high-speed data services market in the long-term.

• Sourcing the same equipment from Infinera can potentially give competitors a like-for-like competitive response to COLT, thereby eliminating in one stroke any claims of competitive differentiation on COLT’s part.

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