Columbus Communications Capitalizes on Exploding CALA Telecoms Market

zhen they flew to the Caribbean islands back in 2004, the founders of Columbus Communications had only a few million dollars in the bank.  But in the world …

zhen they flew to the Caribbean islands back in 2004, the founders of Columbus Communications had only a few million dollars in the bank.  But in the world of telecoms (an industry renowned for mega-wealth, think Carlos Slim, and mega-losers like Bernie Ebbers), fortunes can be created in surprisingly short periods of time. Fast forward nearly eight years and Columbus is a carrier that is flying high across the Caribbean and now into Central America.  Just about every telecom carrier in the region is a client and Columbus is now worth an estimated $2 billion. At the heart of its success is a sub-sea fiber optic cable network that it built linking the Caribbean with Central America and the United States. Columbus founders – Brendan Paddick and John Reid – were running Persona Communications, a wireless carrier, in rural Canada before they moved into the Caribbean. All they planned was to wire up the scattered islands just the way they wired up the scattered rural communities in Canada.

But getting the service off the ground remained a challenge because they had to buy bandwidth from local telecom companies at an exorbitant price. “The prices we were being quoted were so staggering that we would tongue-in-cheek quip that we should simply build our own systems,” Columbus founder Brendan Paddick recalled in an interview with a Canadian paper.

This realization changed the course of their future. In 2004, Columbus received a license from the Jamaican regulator to build a submarine cable network to link the country with the outside world.  But the Bahamas, the country where Christopher Columbus first landed, stood in the way.  They were unable to obtain a telecom license and also prevented from purchasing bandwidth from local telecom companies. Finally, they decided to purchase the New World Network, a providers who was unwilling to lease capacity.

Thus, Columbus became the owner of Americas Region Caribbean Optical–ring System (ARCOS)‚ a $450 million undersea broadband fiber–optic cable network. ARCOS is 8‚600 km in length and connects the United States with Central America‚ South America and the Caribbean. In other words, ARCOS connects the United States with the Bahamas‚ Turks & Caicos‚ Dominican Republic‚ Puerto Rico‚ Curacao‚ Venezuela‚ Colombia‚ Panama‚ Costa Rica‚ Nicaragua‚ Honduras‚ Guatemala‚ Belize‚ and Mexico. Columbus Networks has extended its services to Ecuador and El Salvador.

Turning Competitor into Client

“We are not competing with the telecom carriers you are talking about. They are our clients,” Paul Scott, President and Chief Operating Officer of Columbus Networks, told to NSAM in an interview last week.

It seems turning a competitor into a customer is the basic strategy of the company, because almost every telecom giant in the region is a client of Columbus. From Telefonica to America Movil, from Cable and Wireless to Digicel, many telecom carriers in the region lease telecom capacity on Columbus network.

In 2008, Columbus bridged a fiber link between Colombia and Florida, thus opening a new gateway for the Caribbean and Latin American region into North and South America. “Basically they have very little competition. If there is anyone who can compete with the Columbus in the region, it would be the International Wholesale Services Division of Spanish telecom giant Telefonica,” says Gina Sanchez, a telecom analyst with research firm Frost and Sullivan in Colombia.

In most of the Caribbean countries, Columbus provides digital cable television, broadband Internet and digital landline telephony under the brand name FLOW and corporate data services under the brand, Columbus Business Solutions. “But they get much of their money from renting out their IP capacity to local telecom service providers and they appear to be using this profit to purchase their competitors one after another,” she said. Columbus also acquired Karib Cable, Telefonica Corporativa in Honduras, Telebarbados and Tele-St. Lucia over the last few years.

Last week, billionaire investor and cable TV pioneer John Malone bought a 20 percent stake in the Columbus. In an event organized to announce this investment, the Columbus’ founders said they would use the money to ‘fund the potential future acquisitions’. “We have budgeted close to US$200 million to further invest in 2013 with a huge focus on cloud-based services,” said Paddick.

Columbus and the Caribbean

The endless expansion of the Columbus has clearly brought down broadband prices in the Caribbean countries, which not to long ago were dominated by the UK’s Cable and Wireless, which held a monopoly in most of the Caribbean islands. “We are going to invest $50 million to roll out optical cable network in Barbados,” Scott said.  The broadband infrastructure, according to Scott, would strengthen the hands of a large many enterprises, including outsourcing service providers in Barbados that has recently announced its plans to stimulate growth in its offshoring sector.

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Today, Columbus’ submarine fiber optic network spans 18,000 km and, in addition, it owns 21,000 km terrestrial fibre and coaxial network. The company has employed 1,900 plus people and a client base of 500,000.

“The first Columbus invasion led to…… a lot of stuff we have had to deal with over the six intervening centuries, like slavery and the exploitation and exportation of our natural resources. But Columbus Communications is offering only the positive side,” notes Patrick Hoyos in his column in Barbados’ newspaper The Broad Street Journal.

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