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Karl Thedéen, CEO of Transmode, on the vendor behind Europe’s biggest mobile backhaul contract
14 February 2012
There were two surprises when mobile infrastructure company MBNL awarded a £100m backhaul contract: the operator and the vendor. Karl Thedéen, CEO of equipment company Transmode, explains the background
Karl Thedéen: the Virgin Media deal for MBNL may be
Europe’s biggest mobile backhaul contract so far
A relative small Swedish company with roots supplying the cable industry is at the heart of a contract won in 2011 to deliver the packet optical backhaul for the UK’s biggest mobile infrastructure provider.
Transmode, headed by Karl Thedéen, is the equipment provider that Virgin Media Business — the enterprise services offshoot of the UK’s biggest cable TV provider — is using to supply the backhaul to MBNL, which provides shared infrastructure for the mobile operations of Everything Everywhere and Hutchison’s Three.
It was a surprising award at the time: BT Wholesale is still a key supplier to MBNL and was keen to point out that it did not bid for the new contract. Virgin Media’s main business is providing entertainment and broadband to millions, and its business arm is mainly focused on serving enterprises. It was not previously known for competing in the backhaul market and this win was seen at the time as audacious.
Transmode was initially focused on the metro and regional markets, says Thedéen, but has been moving its attention to cable operators — hence the Virgin Media connection — and alternative operators.
The deal, worth about £100 million over eight years, is a substantial one for Virgin Media, and will also be significant for Transmode. “Our turnover was over $100 million in 2010,” says Thedéen, reporting “very solid profitability”. The Virgin Media business will be worth about $22 million to Transmode, and deliveries started in the third quarter of 2011.
The company was founded in 2000 by two ex-Ericsson people. “It had a bumpy start but managed to stay alive,” says Thedéen, another ex-Ericsson executive who joined in 2007. The company is mainly owned by venture capital funders, but was listed on the Stockholm stock exchange in May 2011 at 53 kronor a share. The price in early February 2012 was 70 kronor.
It is based in one building in Stockholm. “Everything is here,” he adds: all its R&D is in house to keep costs down. But the market is global.
“Cable is still a very interesting market in Europe and its very big in the US,” he says. Among Transmode’s early customers were NTL and Telewest, the UK cable companies that merged in 2006 to form Virgin Media.
Most of its customers are in Europe, with about 13% in the US, though “growing very fast”, with a tiny fraction in the Asia Pacific region. “We have the same products across all regions.”
The backhaul market started to pick up in the mid-2000s, but the Virgin Media contract is the company’s biggest in the sector so far. “It may be Europe’s biggest mobile backhaul contract so far,” says Thedéen, though he concedes that there are probably unannounced in-house contracts that are bigger — Deutsche Telekom backhauling T-Mobile in Germany, for instance.
MBNL was initially set up by Three and T-Mobile as the first shared infrastructure company in the UK to run the base stations and the backhaul for their 3G operations. When Deutsche Telekom and France Telecom merged their local operations, T-Mobile UK and Orange UK, into Everything Everywhere in 2010 the infrastructure company expanded its operations to include them too.
Everything Everywhere is now the biggest mobile operator in the UK, ahead of Telefónica O2 and Vodafone, but Three UK is the smallest. Together, though, they create a substantial business for MBNL.
Under the new deal, Virgin Media Business will establish 14 regional aggregation networks across the UK which will bolster MBNL’s bandwidth capacity. The initial deployment stage will give MBNL ethernet service at one gigabit a second.
Mobile operators are striving to look for ways to deal with mobile data surge, as the mobile data traffic is expected to expand 33 times over the coming ten years.
Thedéen says: “This is going to be a wholesale market. No one fixed operator can do all the base stations. Virgin Media is very competitive and this contract is very strategic for them.”
Though Virgin — dating back to the Telewest and NTL days — was a long-standing customer, “this was a totally new solution with ethernet cards”. Transmode had to compete against two world-scale vendors for Virgin’s business. “We had a better synchronous ethernet solution,” he says. “If you don’t get that you don’t get the mobile backhaul to work.”
The deal had to be approved by senior executives of Three and the partners in Everything Everywhere, he adds.
And what’s the future for Transmode, having won this significant deal? “We have €21 million in the bank and no debt,” says Thedéen. “We’ve been cashflow positive for three years. We are one of the best capitalised companies in telecoms. This is a huge market and our main strategy is to grow organically.” GTB
Further reading from Global Telecoms Business:
UK networks to use Virgin backhaul 06 Sep 2011
Sharing's caring in network consolidation 01 Oct 2010
Business complexity challenge to network sharing 01 Oct 2010
NSN to expand T-Mobile/3 shared network 19 Apr 2010