Falcon and the Flag man: Flag Telecom is back in business with a new shareholder, a clean balance sheet and a fresh sales pitch. But, believe it or not, it is actually throwing a new cable, Falcon, into the water. Chief executive Patrick T. Gallagher tells contributing editor Robert Clark about why he believes there's a future in the capacity business and in the Middle East

Telecom Asia, April, 2004 by Robert Clark

Telecom Asia: A Lot of people, if not most people, have given up on the bandwidth business, but evidently not Flag or your new shareholder, Reliance. What is it that makes Flag so confident?

Patrick T. Gallagher: It's not an evolution, it's a revolution that's coming this decade and it's happening now already. Growth is coming through massively at this time. China is saying it's going to go from a require merit of 45 gigabits this year to 2,000 gigabits by the end of this decade. That's phenomenal growth, all on the back of broadband in its widest definition. So my first response would be, I can think of no better place to be than on the back of something that's going to be driven through so many avenues, so much growth. And it's also an enabler what impact it can have on you as a consumer or on your business. That's the first thing.

The second thing is Hag is a global company. We're not as susceptible to regional downturns and regional changes as a pure regional player can be.

So if Flag was purely a trans-Atlantic operator going from Europe into the US at the moment, I don't think you'd be talking to me because I actually wouldn't be CEO and the company wouldn't exist. But we're a global operator, and we actually touch all the main growth markets of the world, 75% of the world's population.

Also, our customers whether they're in China or in the US or Europe--want global access. They do not want to go across the water to their Local neighbor, they want global access, because all of them are benefiting from the global economy.

That is another reason why Flag is going to be one of the winners. Last and by no means least, if you start to Look at where there is still an under-supply in this industry, it very much in and out of the Middle East, in and out of India, and not in and out of China as such but connecting China to those growth markets.

And that's why we're building the new system [Falcon] that reaches other parts of the region, which have never been touched before.

There's plenty of growth, but that doesn't always translate into customers, does it?

Yes it does. We've got all of the top carriers throughout the world as our customers. Most of the top new players that have survived the trauma of the '90s and early part of this century are our customers. We've even got enterprises now that are actually buying and dealing in services of larger quantities of bandwidth.

I don't see that changing because one of the interesting things that's happened over the past three or four years--if you go back to the '90s, what were most of the global operators saying? It was about world domination, they were going to be ubiquitous, they were going to take over all these domestic markets, they were going to run these global systems.

People were making statements like, "there's going to be only five or three global carriers that are going to dominate this industry."

It was an ego-driven, world-domination, dog-eat-dog mentality where partnership and collaboration were seen as something of a sign of weakness.

It's now more about how we make sure we get a bigger slice of the market and get our services and products to customers.

But do you have the partners? Sure, you've got some major carriers as customers, but are they going to use your bandwidth in preference to others?

Yes, there are those [of our customers] who are true partners and those who buy from us on a purely commercial basis.

For example, in Egypt we work hand in hand with Telecom Egypt. Through Telecom Egypt we meet the needs of the 20-odd ISPs that are in Egypt, and as a consequence we carry 80% of Egypt's Internet traffic, which is a pretty good position to be in. But that's driven through partnerships.

We've just announced with Telecom Egypt that we're going to be its broadband partner for this decade. So we have various flavors of partnership.

To just come back to my earlier point, we had an industry dominated by global mania, which then flipped. You had all those players seeing their economic situation contract. A lot of them have retreated back into their home markets, and a lot of them now depend on the Flags of this world for their global connectivity that their local market and their local business desire.

In fact, I'm hoping that this century is going to be about collaboration and partnership because that is the basis on which investors and analysts, etcetera realize that is how value is created these days, rather than investing everywhere and being everything to everyone.

But there is no shortage of global carriers is there, or regional carriers for that matter? The markets are certainly well-served.

I'm going to ask you--what is a global carrier? There's absolutely no one. Global Crossing launched its ad campaign, "one network, one globe" or something like that. But they buy from us, which is great. We're very strong partners with them now. They're building on their core strength, which is their retail base, but they work with us on a global basis. I don't think there are global carriers around these days.