RCom pegs revenue potential of its new 68,000 km Eagle submarine system at $1 billion annually

In line with Anil Ambani's plan for making the new Reliance Communications (Rcom) "India's largest B2B business", his company is betting big on submarine cables. Yesterday, RCom's wholly-owned subsidiary Global Cloud XChange (GCX) announced plans to build a 68,000-km undersea cable network at a cost of $600 million to carry data to Europe and Asia Pacific regions. Called Eagle, this will reportedly be the company's sixth submarine cable system, and is expected to treble GCX's revenue in five years. It will also increase its total capacity by 10 times as against the current capacity.

"We will be building the world's largest submarine cable, replacing our existing cable system," said Bill Barney, GCX chairman and CEO, who is also RCom's CEO. The proposed cable system, which will connect Mumbai with Italy to the West and Hong Kong in the East, is expected to be operational by the third quarter of 2020 and will have a revenue potential of $1 billion per year from 2025. According to media reports, the project's European leg will be completed first.

According to Barney, like previous GCX systems, the new cable will be financed by partners-possibly as many as 30-and the company expects to get over $700 million through such pre-sales, which is more than the project's cost. It has already tied up with six partners, including Alibaba, for the cable and raised $300 million in commitments, he added.

"The Cloud and Fiber initiative is our response to the key requirements in the global marketplace, driven by the explosive growth in Cloud and infrastructure programs by enterprises around the world," said Barney. The company expects a spurt in IT and telecom activity in the country over the next five to 10 years, which is why it is betting on the cable business.

Though RCom's enterprise business, including GCX, is still small-"only 10-15 per cent of the overall business"-it has done "very well in the past three-four years". The CEO added that "It will match up to not only with players in the Indian market but with overseas players as well...The challenge was we were actually setting up an enterprise business while we were taking down our wireless company...it's not easy." To remind you, late last month, Mukesh Ambani's Reliance Jio Infocomm Ltd bought RCom's wireless assets for reportedly Rs 23,000 crore.

The Eagle express cable system will create a NextGeneration IP and Cloud environment across the emerging markets corridor that encompasses the Middle East into Europe, as well as the large economies of China, India and Indonesia. Based on state-of-the-art 100G technology, the new cable network will be four/six fiber pair systems, with an initial design capacity of 12-24Tbps per fiber pair, using Next-Generation coherent submarine fiber.

GCX had first announced its "Cloud and Fiber Initiative" and plans for Eagle in November 2017. "Nearly half the world's population is reachable within a short distance from India's borders, giving India a strategic edge in the new digital era," Barney had said at the time. "The Cloud and Fiber Initiative levels the playing field for India's tech companies to compete in the new digital order and to play a pivotal role in the anticipated hyper growth of technology expansion across the Emerging Markets Corridor." He had also claimed that the Eagle would not only be the fastest Mumbai to Hong Kong route, avoiding the outage-prone Malacca Strait, but also the fastest submarine route between India and key technology centres across the Middle East and Europe.

RCom's latest move is certainly well-timed. According to Alan Mauldin, Research Director, TeleGeography, "Demand for international bandwidth connected to Asian countries is expected to increase over 10-fold between 2017 and 2023 and bandwidth linking Europe to Middle East and Asian countries is forecasted to increase seven-fold during the same period."

With PTI inputs