Anil Ambani’s Global Cloud to build major new submarine cable
17 Jan 2018
Global Cloud Xchange, the submarine cable and cloud business arm of Anil Ambani's Reliance Communications Ltd, is building a new underground sea cable system that will quadruple its data carrying capacity between Europe, India and Hong Kong.
The Eagle submarine cable system will connect India to Italy in Europe and Hong Kong in Asia-Pacific region, William Barney, co-chief executive officer of RCom, told reporters in Mumbai.
The 68,000 km undersea cable will be built at a cost of $600 million, to be financed by project partners. Barney said the project is expected to be operational by the third quarter of 2020 and will have a revenue potential of $1 billion per year.
Debt-laden RCom is looking to focus on its enterprise business after elder brother Mukesh Ambani agreed to buy its consumer-facing business including wireless assets.
''The full cost of the cable will be covered by pre-sales to customers and we have already pre-sold 50 per cent of the $600 million cost,'' Barney said. ''In fact, we may end up with $800 million in pre-sales.''
GCX will have five cable systems when Eagle gets commissioned by December 2020. It will replace some of the existing cable systems that will be nearly 30 years old by 2025.
The system, which will connect its base in India with Italy in the West and Hong Kong in the East, is expected to treble revenues in five years for its wholly-owned subsidiary Global Cloud Exchange, which is laying the cable, the company said on Tuesday.
GCX will be one of the largest revenue generators for RCom which will embark on a new business model once it completes the restructuring of the wireless business. Its revenue will more than triple to more than $1 billion once Eagle takes off, Barney said. It currently has gross margins of 80 per cent, and despite pressure on bandwidth pricing, hopes to maintain these margins, he added.
RCom has a total debt of Rs45,000 crore, including Rs20,000 crore in foreign loans and bonds. After failing to seal two deals with Aircel and Brookfield, Anil Ambani finally turned to his elder brother Mukesh for the wireless deal.
RCom will sell to Reliance Jio four wireless infrastructure assets for Rs23,000 crore. RCom said that after the strategic debt restructuring (SDR) exit, it will be transformed into a B-to-B (business-to-business) concern.