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Reliance Globalcom says that revenue for the three months to March 31 2009 was $US399m, a 23 percent increase on the prior corresponding quarter. "A clear trend has emerged among global organisations looking to secure savings in their network management, and this is reflected in the positive financial results of Reliance Communications," said Owen Best - president Asia-Pacific of Reliance Globalcom.
"By offering a full portfolio of IP MPLS, ethernet and [international private line] managed services, all through a single point of management utilising best-in-breed partners across 230 countries and territories in the world, our customers have not only reduced total cost of ownership of their networks, but increased functionality."
Reliance Globalcom claims to have signed several multimillion dollar contracts since the start of the year, and says these were "based on the completion of a detailed network capability and requirement consultation, and the provision of high bandwidth, scalable solutions entirely matched to the customers' evolving business needs."
Reliance acquired the former Vanco business in May 2008 . Vanco competed with global operators such as BT, AT&T and Verizon Business in the provision of global networks to multinationals by integrating services from multiple carriers rather than by having its own network. Its business model had been very successful and it was named by Frost & Sullivan as the most promising service provider of the year in Asia Pacific in 2007.
However it ran into cash flow problems that saw the value of its shares on the London Stock Exchange plummet and resulted in it being snapped up by Reliance Globalcom. Commenting on its demise, Ovum identifed a number of weaknesses with Vanco's business model that it said had contributed to the company's undoing.
Firstly, "Global network economics is based on scaling up networks massively through big contracts," said Ovum. "BT and AT&T have both done $1bn individual deals in the past year. Vanco only won its first $100m plus contract early 2007, after 10 years in the market. Its 'just in time' network model means by definition it is not scaling up fast, but it is incurring costs up front, and it is not clear that cash flow is keeping up."
Secondly, Ovum suggested that Vanco would have had difficulty keeping up with technical innovation compared with network-based telcos because it relied on the services they provide. Thirdly, Ovum contends that managed services are people reliant - requiring the management of local resource on a global scale. "Whilst technology and commercial management can be centralised, local resource will always be distributed and that requires people in numbers which Vanco could not provide."
Reliance Globalcom will not be constrained by these problems to anywhere near the same extent. It owns the worlds largest private undersea cable system spanning 65,000kms that it says "provides a robust global service delivery platform connecting 40 key business markets in India, the Middle East, Asia, Europe, and the US."
As part of Reliance Communications the flagship company of India's Reliance Anil Dhirubhai Ambani Group it is able to tap the huge financial resources of that company. The group boasts annual cash flows of $US3 billion, net profit of $US2 billion and zero net debt.
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