& cplSiteName &

Could Tata Be Facebook's Next M&A Target?

Sarah Thomas
3/6/2014
0%
100%

If the prospect of a web company like Facebook using WebRTC to become a telco has the carriers worried, how do you think they'd feel about Facebook flat out buying a telco to compete? (See WebRTC & the Rise of the WebCo.)

They should feel real worried, because it's something Facebook might be considering -- if it's smart. Recently in his blog, BuySellBandwidth.com (subscription required), the industry analyst Sunil Tagare put forth the not-so-crazy idea that the social network buy Tata Communications Ltd. , the Indian fiber/subsea network operator and international Ethernet services provider that was recently a rumored acquisition target of Vodafone Group plc (NYSE: VOD). (See Beal's New Gig: Integrating Vodafone & Tata?)

It makes sense when you think about Facebook's goals, its recent WhatsApp acquisition, and Tata's assets. Tagare breaks it down well on his blog:

  • Tata is on the market, and with a valuation of $1.2 billion, it's chump change compared to the $19 billion Facebook paid for WhatsApp. (See Facebook to Acquire WhatsApp for $16B.)
  • Buying WhatsApp made Facebook the largest virtual global carrier, with 10 billion messages sent per day. When it starts offering free voice services this year, it will become the largest voice provider, too.
  • Tata also has the largest submarine cable footprint in the world, making it the largest provider of voice services with the lowest cost structure of any carrier in the world. Put the two together, and you have a compelling proposition both online and offline.
  • Finally, India is an important growth market for Facebook and just so happens to be where Tata has the largest footprint of datacenters, which would come in handy should the Indian government decide to require local storage of data in light of NSA concerns.

"Facebook has tried to buy submarine cable capacity -- in SJC -- and it knows how hard that has turned out to be," Tagare wrote. "Imagine if they have to build a global network from scratch! It's virtually impossible unless they hire hundreds of people and pretty much copy Google -- which will take ten years at the least." (See Facebook Invests in Subsea Cable.)

Tata is Facebook's readily available, low-cost path to global infrastructure. The idea of an acquisition isn't as crazy as, say, spending $19 billion on a chat app. Heavy Reading analyst Caroline Chappell calls the possibility intriguing. "Tata's global footprint is impressive, and as a new market entrant all-IP player, it is exceptionally lean from an operational cost perspective compared to most of its global competitors," she told us.

Should the operators be worried? I'd say they should be prepared, at the least. Anything can happen in the wireless market, and the barriers to entry are getting lower, especially for a powerful player like Facebook.

I think Chappell put it best when she said, "The day a major OTT player buys a carrier, the fireworks will really fly in the telco market."

— Sarah Reedy, Senior Editor, Light Reading

(17)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
JamesDennis
50%
50%
JamesDennis,
User Rank: Light Beer
3/7/2014 | 9:44:05 AM
Taking international bandwidth in house
Tata is a conglomerate can't see why it would start to break up, its been growing for since 1887, Tata group has a market cap of $112Bn in wide range of industries.

The value for Facebook could be

1) Taking international bandwidth costs in house

2) Further ties with carriers - (questionable added value)


You gotta ask, other than a actual new business spur, the prospect of synergies (always a questionable aspiriation) are limited.

Culturally chalk and cheese would understate the culture difference.

BuySellBandwidth
50%
50%
BuySellBandwidth,
User Rank: Light Beer
3/6/2014 | 5:54:43 PM
Tata is not a traditional telco
Tata Communications is not a traditional telco in the sense that it does not own the last mile.  It is in the intensely competitive wholesale carrier space and is the leading carrier's carrier of the world.  While it does have enterprise customers, it's backbone is the hundreds of carriers around the world who buy on their global network.

 

Yet, it has all the good things you want in a traditional carrier.  Like carrier licenses in 6 countries including one in India which is impossible to crack due to arcane regulations.

 

Also, Tata was created by buying VSNL, the traditional PTT from the Indian government.  Since then, Tata has managed to lay off 98% of the government employees and the new employees are professionals from the top institutes from around the world wherever Tata does business.

 

Tata is a Class 1 act.  Tata is actually a global company.  It is headquartered in Singapore and its top management is spread around the world.  It is also optimzed from a tax perspective with subsidiaries in zero-tax locations as is required to do business in this industry.

 

Also, Tata was smart to buy Teleglobe and the Tyco Global Network for pennies on the dollar in the telecom crash of 2000.  Because of this, Tata is the number 1 carrier in the world for voice -- by far.  The second largest wholesale voice carrier probably does half the traffic.

 

Tata has Tier 1 relationships with the major carriers of the world.  So it can carry data cheaper than majority of the carriers worldwide.  And because its back office is naturally in India, the network management is done on the cheap compared to most carriers in the world.

 

 

 

 

 
theschnack
50%
50%
theschnack,
User Rank: Moderator
3/6/2014 | 5:03:29 PM
Re: MInd-blowing but
As Mitch said - "telcos" are in the business of letting people "talk", whether anyone is on the receiving end, and communicate with each other across an increasing array of modes.  That's FB's ultimate core business as well.  A service / platform for people to talk, yell, communicate, emote, even listen and connect.
Sarah Thomas
50%
50%
Sarah Thomas,
User Rank: Blogger
3/6/2014 | 4:56:36 PM
Re: Dumb and dumber
I don't think this is the same as Apple becoming a telco at all, for all the aforementioned reasons. And, we're not talking Facebook becoming a tier 1 telco, but a communications provider, something it's already trying to do. Plus, if like Tagare suggested, the Indian government mandates local storage, that's pretty safe from the NSA. Not saying you're wrong and it will definitely happen, but I don't think it's outlandish by any means.
ScottEStewart0101
50%
50%
ScottEStewart0101,
User Rank: Lightning
3/6/2014 | 2:19:40 PM
Re: Dumb and dumber
I have to agree. This is an outlandish stipulation. It's the same "Apple's going to become a carrier" meme we've seen never come to pass. More importantly, people do not trust facebook as they once did. Any hint of Facebook becomming a tier 1 telco would cause global outrage for privacy oriented governments and businesses. They do not want Facebook controlling traffic across the globe, then handing it blankly to the NSA. Do you really think the government antitrust divisions would allow FB to be a social network, drone builder, and telco? In what world are we living in? We'd be way beyond Gault's Gulch. 
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
3/6/2014 | 1:30:02 PM
MInd-blowing but

This is mind blowing at first. But it makes sense.

Facebook's core business is a fad. People will always want to connect to each other, and will use the Internet as a channel for that for as long as anyone reading this remains alive. But I don't see monolithic social networks, with walls, and message streams, and friends lists, and games, and the other furniture of Facebook, lasting out the decade. They're this decade's version of the personal home pages (Geocities, etc.) of the 90s.

To survive for the long term, Facebook needs to see itself as being in the business of connecting people, rather than in the social network business. And connecting people is just the business the telcos are in.

DOShea
50%
50%
DOShea,
User Rank: Blogger
3/6/2014 | 12:19:18 PM
Subsea
Wasn't Google also rumored at one point to be interested in buying a submarine cable network because it was so frustrated by negotiations to buy capacity? And if Facebook does it, than why not Netflix, too, with some help from other investors. I don't know how realistic this is, but it is fun to talk about.

 
jhodgesk1s
0%
100%
jhodgesk1s,
User Rank: Light Sabre
3/6/2014 | 11:57:10 AM
Re: Facebook Wireless?
Caroline, agreed. Tata also has an IPX presence that would be helpful to deliver content. It's also a heavy user of managed services which simplifies the acquisition process and operation down the road.
C Chappell
0%
100%
C Chappell,
User Rank: Blogger
3/6/2014 | 11:47:38 AM
Re: Facebook Wireless?
And let's not forget there are telcos and telcos. Not all operators have the same culture and Tata has consistently proven itself to be more enlightened than most. Even ahead of its time in some respects - what other operator is trying to offer policy as a cloud service? I don't think the cultural rift is as extreme as some would portray it in certain telcos and while it's fashionable to laugh at Google's attempts to become a network operator, I wonder who will laugh last. 
Sarah Thomas
50%
50%
Sarah Thomas,
User Rank: Blogger
3/6/2014 | 11:28:50 AM
Re: Facebook Wireless?
Exactly, and the fact that WhatsApp is adding free voice calling in addition to its messaging platform makes it all the more attractive and plausible.
Page 1 / 2   >   >>
More Blogs from Que Sera Sarah
WiC congratulates the winners of our inaugural Leading Lights awards: Cisco's Yvette Kanouff, Zayo Group's Sandi Mays and startup Grid4C.
Leaders from Mellanox, Arista Networks, Syniverse, ECI Telecom and Cisco round out WiC's inaugural female tech pioneers of the year.
Women from AT&T, Ciena, Ixia, Zayo Group and Fujitsu make our shortlist for working to advance the cause of women in the next-gen comms industry.
Join WiC and Flex's Caroline Dowling for a live radio show on Tuesday at 12PM ET on how technology is powering the fourth revolution and to what effect in the future.
New companies with a focus on video graphics, smart grid predictive analytics and a quadcopter camera make up WiC's finalists for Female-Led Startup to Watch.
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
UPCOMING COURSE SCHEDULE
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
Wednesday, August 17, 1:00PM EDT
Using Open Source for Data Centers and Cloud Services
Roz Roseboro, Senior Analyst, Heavy Reading
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (0) comments


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (0) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
Verizon Sports Big Plans for Yahoo
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/26/2016
Light Reading Beyond
Steve Saunders, CEO and founder, Light Reading, 7/28/2016
Yahoo Signing Off in $4.83B Sale to Verizon
Mari Silbey, Senior Editor, Cable/Video, 7/25/2016
Are IP/Optical Integration Initiatives Moving to Silos?
Faisal Khan, Network Operator Technology Planning Dept., 7/28/2016
Ericsson Board Has Been Asleep at the Wheel – Consultant
Ray Le Maistre, Editor-in-chief, 7/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Animals with Phones
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.