Diversification is a search for fools’ gold – Colt CEO

In an industry that has seen money been thrown around like confetti in a bid to diversify business models, Colt has bucked the trend and simply said no.

With its 25th birthday just around the corner, you could forgive the company for looking back on yesteryear and wondering whether its life choices were the most sensible. We all do it, but that is not to say the company is not in a good position, it currently employs around 4,000 people worldwide and brought in revenues of about €1.5 billion in 2014 – the last time the company was public.

Since then there have been a number of changes. CEO Carl Grivner was brought in to steer the ship at the beginning of 2016, and brought with him somewhat of a radical change; the business is de-diversifying. “We were a perfect example of a company which was chasing too much,” Grivner told Telecoms.com.

“We were into the IT services business a couple of years ago. We were one of those who used the logic that IT companies will make decisions based on their IT services, their data centres and their network, and they’ll all be a single decision maker. That’s not the way the world ever was or is.

“We were trying to do everything, and it was hurting us. We were chasing fools’ gold.”

Grivner’s approach is simple. Do one thing, and do it very well. While everyone else in the telco industry is seemingly on a quest to launch as many different services as possible to recoup profits margins which have been savaged by the overwhelming wave of OTTs, Colt is focusing solely on the network and connectivity.

Although it may sound backward, Grivner’s approach does make sense. In recent weeks’, we’ve seen the problems some diversification can cause, and Arcep, the French regulator, has also weighed into the argument, claiming the money being spent on content is removing the focus from the core business and, quite frankly, the reason telcos exist; to provide connectivity.

Successful diversification is, of course, possible, just look at Microsoft or Google. The former has diversified to make it one of the most important companies in the world, and the second has done so to continue a pattern of tremendous growth. However, Microsoft’s diversification was done over the course of a couple of decades, while Google’s is underway knowing that it has a core business which is going to guarantee billions.

The problem with telco diversification is that they are being forced to do so. It is a diversify or die situation. There isn’t a luxury of confidence or time to test the water, a telco’s CEO has to do something new, and something quickly, or it won’t be long before a replacement is found. This forced diversification can lead to overspend, bad decisions and a negligence of the core business.

“We privatized in January of last year,” said Grivner. “We were listed for many years and I think that also helps us, as being a public company, you become dictated by the end of the quarter and your financials. It changes decisions which we make to ensure we’re keeping the shareholders. Now I can go to the board, lay out a plan and come to a decision very quickly.

“We don’t have the same pressures that our competitors are facing. We are private, which means we don’t have to live quarter to quarter. We can make decisions which are more of benefit to the longer ambitions and interests of the company.”

At the core of these long-term ambitions is a network which will be receiving a lot of attention over the next few months. The last twelve months has seen the team debate and devise a strategy to take Colt back to the challenger brand status, a mind-set which Grivner feels the business lost in its search for diversified revenues. The result of this consultation period is a €500 million investment over the next three years to build the Colt IQ network.

Grivner told us the new network will be operational by Q3 of this year, and will be driven by software-defined networking technologies.

SDN is another area which has been discussed widely in recent years, though the buzz has seemingly died down a little bit. According to Grivner, the Colt IQ network will be built for intelligence, and the start-ups of today and tomorrow. The corporate line here is that Colt wants to cloudify the network.

While the enthusiasm of Grivner cannot be called into question, it does sound like the same corporate spiel which every telco comes out with every couple of months. The main difference here are the customers the team are chasing.

Alongside the investment, Grivner said the sales team will also be doubled to chase some of the worlds’ hardest to find and reach customers; start-ups. Most telcos would differentiate customers on the size of the business, but Colt is targeting the biggest consumers of bandwidth in the industry. These organizations do not have to be thousands of employees, it could be no more than a dozen, but what they need to be are bandwidth hogs. On average they consume more bandwidth per person than other organizations, and they are hungry for more.

The theory here is finding the next Facebook or Salesforce. Grivner highlighted that the dominant companies of tomorrow, will likely be companies which we have never heard of today. If Colt get in on the ground floor with these organizations and develop a strong relationship, the rewards could be major.

A good example of these bandwidth hog customers is the Berlinale Film Festival. It’s a festival which only lasts 11 days, but in that time shows more than 400 films, attracts more than 300,000 fans and consumes more than a petabyte of data. The digitization of the cinema industry has seen a huge demand for data, and Colt are more than willing to help. They also like bears. Check out a few of the pictures of our trip around Berlin this week. They definitely like bears.

Although the data hungry and greedy customers may be difficult to find for the moment, they are worth looking for according to Grivner. With the introduction and gradual roll out of technologies like 5G and IoT, new organizations are going to appear, and they will grow fast. And as they grow, so will the appetite for bandwidth. Colt will, in theory, ride the start-up wave to glories.

So it’s a simple strategy. Do one thing, but do it well. And target the right guys, not just the big ones.

The Bears of Berlin