Letter to a friend from Jean Devos My Dear Friend, I was on my way to tell you in this letter that the submarine cable activity may have seen now the worse, and that one can hope that things will start to catch up somewhat. We have many signs of this. But today I am reading in my favourite economy newspaper that Alcatel chairman told the analysts “the submarine cable market is virtually dead,” and that “further costs reduction needs to be achieved in this sector.” Can we reconcile both statements?
My friend, as you know perfectly, everything takes time, even in our fast moving world! It takes time to admit the obvious, like a virtually dead market! When you have benefited for years of the beauty of a booming and then profitable activity, when such an activity is at the heart of your company culture and capability, I can understand that it is painful and time consuming to finally accept the reality. But the market has been clearly dead for nearly 3 years now, and it is hard to believe that costs have not yet been cut up to the rock bottom! 41
Does this Alcatel statement announce something else? Some other form of restructuring? It would make a lot of sense! The important point for the supplier industry is that the future market will probably be modest, nothing to compare with the last years of the last century! Something like 1 or 2 billion dollars a year globally, i.e. 50,000 kms of system length a year! Not enough for so many players, and more importantly, not enough for dedicated units. We may see tomorrow the big telecom equipment suppliers (Alcatel, NEC, Fujitsu and why not Lucent, Nortel, etc.) providing the “Network electronic and software”, and other companies providing the “submerged plant” portion. Two very different set of skills! The Japanese model, more adapted to the low tide period could finally prevail. So, my dear friend, yes, there is clearly going to be a future submarine cable market thanks to the wide band Internet. It will still takes several years before the thick traditional routes will need new investment, but in the meantime, India and China are clearly emerging, and represent more than two billion inhabitants! But this does not contradict the idea that the supplier industry needs some restructuring.
Jean Devos President AXIOM.