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Fragmented market for $1 trillion worth of telecoms business sales
11 July 2012
Provision of telecoms services for the world’s biggest companies is remarkably diverse. A survey carried out exclusively for GTB by BackChannel shows that the world’s biggest 500 companies do not concentrate their custom on a few key operators, and the operators themselves work in a highly fragmented market
Nearly 60% of the IP services that AT&T delivers worldwide
go to US-based customers. Of the world’s large
operators it is one of the most focused on its home market
— only one percentage point above China
Telecom’s focus on China for the IP services it
Both companies, this exclusive survey appears to show, have a
long way to go to spread their business away from their
respective home markets.
By contrast NTT Communications provides slightly more services
in the US than it does in its own home market of Japan. And
AT&T’s great rival in the US corporate
business market, Verizon, provides a relatively modest 35% of
its IP services to the US, 65% in the rest of the world.
Both these companies appear to have achieved the aim —
mainly through mergers and acquisitions — of making
themselves less reliant than others on the country they call
This report is published in full, with tables and
charts, in the free iPad edition of Global
Telecoms Business. Or you can download the
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Overall, though, data from UK-based network and service
analysis company BackChannel, carried out exclusively for
Global Telecoms Business, show that the world’s
market for IP business services is remarkably fragmented.
In two of the world’s biggest markets, the US and
the UK, no one provider has more than a 10% share of IP
services. In the UK, 12 companies share 48% of the services,
with many more competing for the other 52%. In the US, there
are 13 companies — from AT&T with 9.3% in the lead
to AboveNet with 2.7% — that share 63% of the
This survey, carried out exclusively for GTB and published here
for the first time, uses BackChannel’s own
in-house search engine technology to discover the use of IP
services among a sample of over one million organisations,
including companies, public utilities and agencies in more than
180 of the world’s 196 countries.
All of these organisations are owned by companies in the most
recent Fortune Global 500, published by Fortune magazine in
July 2011 — a list BackChannel used as the most
readily available directory of the largest businesses in the
Together these companies employ over 50 million people and have
revenues of over $24 trillion. Importantly for GTB readers,
those companies are spending nearly $1 trillion a year on their
telecommunications services. Yet there is remarkably little
information about how they are spending that money.
An IDC survey of the people directly responsible for buying and
managing communication assets — IT executives and
managers — showed that 40% said they did not know
their company’s total annual expenditure on
Yet the average Fortune 500 company, according to a separate
survey by the Aberdeen Group, is spending 3.6% of its revenue
on telecommunications — and 3.6% of that total $24
trillion revenue is $864 million.
Half the industry’s revenue
According to Gartner the total revenue of the global
telecommunications industry was $2 trillion in 2009 —
so it looks as though the Fortune Global 500 companies account
for almost half the industry’s total billing.
The US, Japan and China between them are homes to the
headquarters of 265 of the 500 companies. Most of the rest are
based in Europe, with only 60 based in the rest of the world.
BackChannel used its technology to look legally at the
identifiable IP-based services that these 500 companies and
their subsidiaries worldwide consume. The company, based in
Cambridge in the UK, discovered 64,500 IP services delivered to
the Global 500 by 556 service providers. (Including, it should
be noted, a few providers that in this fast-moving industry
have recently merged or changed name.)
The survey analysed the data in six key ways:
What the survey does not show are analogue services such as
traditional voice. It does not show services carried on private
circuits — such as those connecting a data centre via
metropolitan fibre. It does not show mobile services.
- IP services by customer country;
- Service provider regional presence;
- IP services by country by service provider;
- IP services by service provider by country;
- IP services by service provider by customer;
- Sector presence of ISPs.
And it does not differentiate the value of those services in
terms of how much the corporate customers pay their service
This special report shows a first-level analysis of the data
but it is possible to organise the data in a number of
different ways, including the analysis of companies, services
and service providers by geographic region, by sector, by
turnover, by number of employees or by stock market
North Atlantic concentration
Looking at the distribution of companies that commission or use
the IP services we can see that while service consumption is as
globally distributed as the businesses themselves the provision
of services is strongly biased towards the US and Europe,
including the UK.
Businesses headquartered in the US account for 27% of the
Fortune Global 500 and 29% of the IP services detected by
BackChannel. But outside of the US, companies in Japan and
China — 26% of the 500 — seem not to be
reflected in their share of the IP services consumed.
This apparent weighting towards the North Atlantic appears to
relate strongly to the high level of business traffic between
the huge financial centres of the US, the UK, Germany and
France. These major commercial operations seem to dominate much
of the world’s IP traffic — perhaps
because European companies adopted IP-based services ahead of
much of the rest of the world.
UK companies — and UK subsidiaries of US companies
— have tended to take up IP standards ahead of
businesses in other parts of the world.
This North Atlantic strength is shown again in the distribution
of operators that provide these IP services to the Fortune
Global 500. Fully 44% of the services detected by BackChannel
in this survey were delivered by US providers. UK, German and
French telecoms operators delivered a further 26% of the 64,500
services that BackChannel measured.
That means that operators based outside those four countries
share only 30% of the IP services delivered to the Fortune
The business is hugely fragmented, the BackChannel survey
shows. The company analysed in detail the data for customers
headquartered in six countries — Brazil, China, Japan,
Russia, the UK and the US.
The UK is probably the most fragmented of those six, with 12
companies sharing 48% and all the other providers in the market
dividing the other 52% of the services between them. And the UK
is also distinctive for the share held by non-UK providers in
the business: BT comes top with 10% and Cable & Wireless
Worldwide — soon to become part of Vodafone —
has 5%; but foreign operators Verizon, Rackspace, Level 3, NTT
and AT&T are also among the biggest in the UK.
Corporations in the US, Japan, Russia and China, by contrast,
are much more loyal to their own countries’
providers. In the US the biggest non-American provider is NTT,
way down the list with only 3.5%.
In Japan Verizon is the biggest non-Japanese supplier with only
3% of IP services. The Japanese market is dominated by Japanese
providers, the BackChannel survey shows.
In the same way, China Telecom and China Unicom have more than
half the Chinese market between them. And it’s a
similar story in Russia and Brazil, with a few local providers
taking the biggest shares.
The US is a more competitive market than China, Russia or
Brazil, but the competition is largely restricted to local
BackChannel thinks that the UK is different from the others
because in the 1990s it was a landing point for US-based
providers that were taking their first international steps and
because the UK was itself an innovator of small, independent
One of the most advanced was Pipex, founded in 1991, which
after a series of takeovers became part of Worldcom MCI
— itself absorbed into Verizon in early 2006. Six
years after that deal, Verizon is the second biggest provider
of IP services to Fortune Global 500 companies in the UK,
according to BackChannel.
And this diverse history also gives Verizon a much more
international spread than most other operators. True, 35% of IP
services provided by Verizon are directed to US businesses
— but the UK, France, Germany and Canada are also
important to the company.
In many countries — Japan, China and Russia among
others — the big local telecoms operators tended to
dominate internet service provision. Verizon does well in all
three of those: the figures show that it is the biggest foreign
provider in Russia, with a 6% share of services, in Brazil with
5% and in China, with a 4% share.
Past mergers account for Cable & Wireless
Worldwide’s large market concentration in the UK
— where the company absorbed Energis, Thus (formerly
Scottish Telecom) and Demon Internet, one of
Pipex’s early partners and rivals. Customers in
the UK account for 42% of the IP services provided by CWW, says
This is a bigger UK focus than shown by incumbent operator BT,
for which 30% of IP services go to UK-based customers. The US,
Germany, Spain, France and Australia are also important to BT
— showing that the company has a considerable global
spread in its customer base.
Home market focus
China Telecom, on the other hand, is hugely focused on Chinese
customers: 58% of the IP services checked out by BackChannel
stay within the country. AT&T has an even greater reliance
on its home market, the US, with 59%.
By contrast Japanese operator NTT — whose subsidiaries
include US web hosting company Verio — is rather
similar to BT in the spread of its business worldwide: 30% of
services to Japan, 29% to the US, 8% to the UK and 5% to
Two giant companies, Aviva and Linde, take their IP
services from a
remarkably diverse range of suppliers, the survey shows
BackChannel then analysed the survey results in another way
— by picking two large diversified companies, Aviva
and Linde, and looking at which companies provide them with IP
Aviva is a UK-based insurance company, the sixth largest in the
world measured by net premium income. It has around 43 million
customers in 21 countries, and 36,000 employees. It was created
by mergers in 1998 and 2000 which brought together Commercial
Union, General Accident and Norwich Union.
Linde is a German industrial gases company, with 50,000
employees, which over the past few years has absorbed rivals
L’Air Liquide, BOC and others. It includes
manufacturing, production and distribution.
Though both companies have strong central management functions,
the surprising revelation from BackChannel’s work
is that both have an extraordinary distribution in IP-based
telecoms service providers.
The biggest provider to Aviva is NTT, followed by CWW, France
Telecom-Orange and Easynet. But Aviva has seven other providers
supplying 2-3% of IP services each, including Bharti, KPN,
Sprint and BT. A total of 11 companies provide only 38% of
services, with a huge number of suppliers of the other
Linde’s biggest provider is Verizon, followed by
Deutsche Telekom and Colt. Five other companies provide 4-5% of
IP services each to Linde, including AT&T, BT and China
Telecom. A total of eight telecoms companies provide 39% of IP
services to Linde, with BackChannel recording the other 61% of
services as coming from "other" suppliers.
According to BackChannel — run by experienced telecoms
and finance professionals Steve Barnett and Nick Hutton
— this diversification in service provision is highly
typical of the market. "It’s no great surprise
that CIOs cannot keep track of what is where," says Barnett,
not specifically referring to either Aviva or Linde.
This applies to telecoms service providers as much as to
corporate customers, he adds.
"There is minimal information even in the company itself as to
who is buying what from whom, how it’s performing
and when the contracts are due. There is no view of the
competitive landscape except what they have built up personally
and that can all change the instant there is an acquisition or
an employee pushes off."
Barnett notes that a typical international telecommunications
service provider will divide its sales operation into global
accounts, major accounts, large enterprise accounts and so on.
But even though they are providing advanced technological
services, often "they have no tools except spreadsheets,
Salesforce and their individual experience", he notes.
And complexity is compounded in large diversified international
businesses. They may aim to concentrate their telecoms
contracts on one or two large providers — so that they
can use their strength to get the lowest prices for the best
possible quality of service — but it’s
rare that they achieve that goal.
Which means that every year the world’s 500
largest companies spend almost $1 trillion on
telecommunications services — possibly half the
telecoms industry’s total billings — and
there is remarkably little information about where it all goes
and about whether these large customers are getting the best
Global Telecoms Business plans to continue to work with
BackChannel to deliver trustworthy and testable information on
where corporate customers’ money is