FLAG to double in size

Monday, 24 September 2007 01:00  |  Michael Schwartz

Flag Telecom’s major turnkey contract will be worth US$1.5 billion to Fujitsu. When complete, the new Next-Generation Network cables will almost double FLAG’s global network from 65,000 km to 115,000 km. Proof of its significance lies in the fact that it will connect five out of six people in the world today and over 60 countries contributing 90% of the world’s GDP.

The project - the world’s largest IP network over submarine cable systems - is to be completed by fiscal year 2009-10. At this point there will be capacity to carry 2.5 billion simultaneous voice calls, 300 million simultaneous web chats, and 52 million simultaneous video chats.As part of its global role, FLAG’s NGN (a multi-terabit, new generation DWDM submarine cable system) will combine with Ethernet services in the US via through Yipes (an organisation set to be acquired by FLAG) to be at what it describe as the “forefront of global data communications.”

There is, without doubt, a demand for this form of enterprise and investment: the NGN will deliver the platform to meet the growing datacom requirements of over 200 international telco, content and Internet Service Provider customers of FLAG, 1,000 enterprise customers of Yipes, and 850 out of 1,000 corporate entities in India through mother-company Reliance Communications. And it is Reliance which will also benefit as it enters the US$90 billion global market for enterprise and institutional data services.

Anil D Ambani, Chairman of Reliance Communications, is optimistic: “At the beginning of the year, we announced our US$1.5 billion global expansion of FLAG’s Global Next Generation Network over the next few years. Today’s announcement is a major initiative in that direction. Worldwide the global market for enterprise and institutional data services is a US$90 billion market. With completion of the NGN cable, FLAG will be the only service provider to reach over 60 countries on a privately owned cable system coupled with the technology leadership to deliver broadband multimedia communications. We are poised to achieve leadership in global data communications, leveraging Reliance Communications’ strength as India’s largest integrated and fully converged communications service provider, Yipes’ leadership in fast-growing Ethernet services in the US, and FLAG’s leadership in global data services.”

The contract and its background

Reliance Communications acquired FLAG Telecom in January 2004. Since then FLAG has invested over US$500 million in expanding its network: finance has come entirely through cash flow generated from FLAG’s operations. FLAG has consequently been able to introduce higher-value-added products, including IPLC, VPN and Ethernet services. As a result of these latter initiatives, FLAG has in turn been accelerating the growth of its revenues and increasing its margins.

FLAG has always claimed to play a pioneering role in the global telecommunications business, starting with FLAG Europe Asia, the world’s longest and first privately funded undersea fibre system commissioned back in 1997. In 2006, FLAG commissioned Falcon, the first private terabit cable system connecting all the countries in the Middle East and India to the rest of the world.

So how does FLAG’s NGN fit in? It involves the construction of four new systems across the Mediterranean, East Africa, Asia and Pacific regions. The extensions of each system will be finalised over next few weeks based on ongoing discussion with landing parties in each country.

In short:

• FLAG NGN System 1 is Asia-based, running from India to Hong Kong with potential interconnection to Thailand, Malaysia, Singapore, Indonesia, Vietnam, Philippines, and Cambodia;
• FLAG NGN System 2 covers Africa, as it runs from India to Kenya with initial potential extensions to South Africa and Reunion and further potential extensions to Mozambique, Tanzania, Madagascar, Mayotte and Mauritius;
• FLAG NGN System 3 is centred on the Mediterranean: Egypt will be linked to France with potential extensions to Syria, Greece, Cyprus, Turkey, Malta, Libya, Tunisia and Italy.
• Finally, FLAG NGN System 4 will bridge the Pacific, from Japan to the US West Coast.

FLAG has awarded a Supply Contract to construct the systems across Asia and the Mediterranean (Systems 1 and 3) to Fujitsu. FLAG has also awarded Fujitsu a Letter of Intent to construct the systems in the East Africa and Pacific regions (System 2 and 4). The Letter of Intent is a precursor to the Supply Contract to be awarded at a later date.

Under the terms of the Supply Contract (won in open tender) Fujitsu, already a supplier to FLAG Telecom, will manage all areas of the cable build, including installation, commissioning and testing. The initial system build will span over 10,000 km and offer significantly more high-quality capacity in the region to help address the growing traffic demands from the accelerating take up of broadband and multimedia services.

Hiroaki Kurokawa, President & Representative Director of Fujitsu Ltd., said: "We are very pleased to participate in this new project with FLAG Telecom contributing to the global deployment of NGN. Building on our track record in jointly constructing submarine cable system together with FLAG Telecom, we are confident that our close partnership will deliver an equally successful project this time. Leveraging cutting-edge Fujitsu photonic technology, we aim to contribute to the global roll-out of NGN and thereby enable users around the globe to fully enjoy the benefits of advanced broadband communications.”

And the future?

FLAG’s NGN is expected to further accelerate the company’s growth. Customers today are, for example, focused on meeting demand in their home markets. With NGN, FLAG will be best positioned to meet customers’ global connectivity requirements. Customers will be able to seamlessly connect to more than 60 countries through FLAG.

As part of the NGN, FLAG is overlaying an all-IP enabled network and data centres to deliver advanced new-age services such as Application and Content Delivery. FLAG’s customers will be able to access these state-of-the-art services over the FLAG network. FLAG also predicts that its customers will save the millions of dollars per annum required to otherwise develop and deploy these services.FLAG will not only provide these services but manage them through its Global Network Operations Centre located in Mumbai, India.

* FLAG Telecom, a member of the Reliance Group since early 2004, has an established customer base of more than 200 leading operators, including all the top ten international carriers. It owns and manages an extensive optical fibre network spanning four continents and connecting key business markets in Asia, Europe, the Middle East and the USA. FLAG also owns and operates a low-latency global MPLS based IP network, which connects most of the world's principal international Internet exchanges.

** Reliance Communications Limited, founded by the late Shri. Dhirubhai H Ambani (1932-2002) is the flagship company of the Reliance Anil Dhirubhai Ambani Group. Whose current market capitalisation totals over US$40 billion. Net worth of the company is in excess of US$10 billion, cash flows are US$2.25 billion in all, while net profit tops US$1.5 billion. There is zero net debt. Reliance owns and operates the world's largest next-generation IP-enabled connectivity infrastructure, comprising over 150,000 km of fibre-optic cable systems in India, USA, Europe, Middle East and the Asia-Pacific region.

*** Headquartered in Tokyo, Fujitsu Limited reported consolidated revenues of US$43.2 billion for the fiscal year ended March 31, 2007.

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