Private purse-string benefits: Alan Lowe, CEO of Intetroute, argues that private backing has assured the future properity of the pan-European carrier - View From the Top

Telecommunications International, August, 2002 by Mathew Secker

A company that has all the advantages of private support but still run as if it were a public company. This -- according to Alan Lowe, CEO of Interoute -- is a significant reason for why the pan-European carrier is destined to prosper.

"Due to being a private company, we are in a very privileged position because we're not harmed by the drying-up of equity from the public markets," says Lowe. "But it's important to note that we still run Interoute with the same business practices as if we were publicly quoted. We do this because we have to report to our private shareholders and demonstrate that we're doing everything correctly. And I believe that we must be - otherwise they would not hove stayed with us."

Lowe was appointed CEO of Interoute (with James Kinsella promoted to executive chairman) following the 'elevation' of the previous chairman and CEO -- Ohad Finkelstein -- to the board of directors in June this year. Interoute states that Finkelstein will continue to play a 'key strategic advisory role' within the company.

"This move was made due to Interoute entering into a new phase of its growth where it is transitioning from a construction' period to a 'services' stage," explains Lowe. "Following the completion of the 'construction' phase, a new senior management team with the right skill-set to lead the company towards being a product and service-driven company was required."

Interoute is owned by a number of internationally-based shareholders. The molar one is the Sandoz Family Foundation -- one of the world's largest private family organisations. Indeed, it committed close to US$1.2 bn ([euro]1.2 bn) in one fell swoop back in 1997 and has kept the money flowing. But the organisation was actually founded several years earlier as a pre-paid calling card business with the stock de-listed in June 1998 as the carrier's restructuring got underway. Interoute now has 18,000 kilometres of fibre between 48 cities throughout Europe, known as the i-21 network.

Lowe paints out that the backing of Sandoz means that the company can take a long-term business strategy approach. "Sandoz's background is primarily from the pharmaceutical industry, where all investments do not come into fruition within a year," he argues. "Due to this, they do not expect short-term returns from the telecoms industry either and so Interoute has been able to plan its business for the long-term. I think that this is vital if you are going to succeed in the present climate."

He also believes that Interoute can directly benefit from consolidation within the pan-European carrier market. "We gain if a direct competitor goes to the wall because their customers -- who have been badly burnt as a result -- become considerably more selective with their carrier choices." Interoute has already offered a rescue package to KPN Qwest users and is beginning to see those customers migrate onto its network.

Lowe considers that Interoute's position in the European carrier marketplace is now assured, thanks largely to the present state of the industry. "Due to the downturn, 12 years of de-regulation has almost been overturned in the past 12 months," he argues. "Because of this, we are now one of a small band of players left and are consequently well placed to succeed."

He further argues that Interoute has a significant advantage over its remaining -- primarily PTT -- rivals. This is because it is a new alternative carrier that can fully embrace optical networking without having to worry about legacy equipment and can expand in a depressed market when most others can't due to its private financial backing from Sandoz.

The company is also expanding its interests into MANs. "We are moving into this space as we are trying to provide a more seamless end-to-end proposition for our customers," he says. "This way, we can reduce the dependency that we have with other operators and provide much better SLAs as a result."

It has additionally opened-up new sales offices in the US, which are aimed at making potential customers in that market more aware that 'if they do require a pan-European network, they can do it very cost-effectively through using Interoute's nodes'. "But we're not looking to extend our network reach into the US market for the foreseeable future," says Lowe.

Meanwhile, Interoute's new CEO is keen to point out that the carrier's profile has been purposely low until now. "We made a conscious decision two years ago to not make a lot of noise and be in people's faces while we're still building our pan-European network," he says. "But now that we have, we intend to raise our profile by showing that we are completely ready for business."

A moderate profile -- according to Lowe -- was vital during the company's network rollout stage. "After all, customers can be as selective as they want to be. Because of this, we have to ensure that we have the best QoS [and competitive prices] around before we launch a full commercial service."

He further states that Interoute has been gaining customers even before its pan-European network was fully rolled out, but the company 'didn't make a song and dance about it' because it doesn't have a share price to maintain.