In 2005, Dutchman Martijn Blanken and his wife gave up their jobs in the Netherlands, picked up their children and hopped on a one-way flight to Australia.
“We wanted to see what it was like to live and work outside of the Netherlands,” says Blanken, now group managing director of Telstra’s global enterprise and services business.
“We have moved house several times since then, but have never looked back.”
And the same could now be said for the Australian operator itself, which is embarking upon its own voyage of discovery with its largest acquisition to date - the $697 million deal for Pacnet.
Blanken played a critical role in this market-altering deal. “I oversaw the negotiations, the internal presentations to the Telstra board, and was involved in the final negotiations,” he says. “It was a fascinating process.”
It was no secret that Pacnet had been on the lookout for a buyer for some time. The operator had developed Asia’s largest privately-owned subsea cable network, but struggled to ever fully monetise it. In 2012, PT Telekomunikasi Indonesia pulled out of a $1 billion deal for the company. Why then did Telstra decide to make a move?
“The first reason is the acquisition was very much in line with our strategy to grow our business outside of Australia,” Blanken explains.
Pacnet’s substantial customer base, comprising 220 carriers and 2,400 enterprise customers, will bump Telstra into a prime position in the Asia-Pacific market. Inheriting a 46,000km subsea cable network in the region, Pacnet’s assets combined with Telstra’s existing infrastructure in Asia-Pacific will create a leader in the field.
“We have a pretty decent submarine cable footprint in the region, but with Pacnet’s combined, we will have by far the largest print,” Blanken says.
Moving into leadership position
Pacnet focussed heavily on technology advancements in 2014, launching a landmark SDN platform in February and adding NFV features in July, radically changing the way it can provision and manage its network services.
Telstra has made clear its intentions to pursue opportunities in cloud computing, unified communications, managed network services and security services, and Blanken expects the Pacnet acquisition to further its efforts in these areas.
“Pacnet is also a pioneer in the area of network-as-a-service offering,” he adds. “This network service fits very nicely with the elastic cloud computing services that many customers are now consuming.”
Pacnet has a number of data centre assets in the region, and Blanken says its seven Tier 3 data centres – two in Singapore, two in Hong Kong, one in Australia and two in China – were of particular interest to Telstra. As were Pacnet’s operations in China.
The Australian operator has been active in China since 1989 and now has offices in Beijing, Shanghai, Guangzhou and Hong Kong. “Pacnet is one of the two foreign telcos that owns a licence to provide IPVPN and data services in China,” Blanken says.
Pacnet Business Solutions (PBS) was the first foreign-owned telecoms joint venture in China to secure such licences, allowing it to offer three value-added services – internet data centre, internet access and store and forward services – in 13 provinces across the country. PBS could help cement Telstra’s presence in China further and enable it to compete better with national rivals.
Blanken says that the final and perhaps most important reason for the transaction is the cost and revenue synergies between the two companies.
“Both Pacnet and Telstra are perceived to be challengers in the market, but the two entities combined are clearly a leader in the Asia-Pacific market,” Blanken says. “Some customers have an explicit strategy to deal only with leaders in a particular domain, and it will now be a lot easier for us to do business with those customers.”
In what is expected to be an 18 month process, Telstra will merge Pacnet with its international business unit, which is already worth approximately $800 million per year, and serves multinational corporations and international carriers across the industry.
“The Pacnet brand will retire, it will cease to exist, and it will all convert to the Telstra brand,” Blanken says. Retiring the Pacnet brand wasn’t an easy decision and the deal also had its complications: “Pacnet’s owners were part of an equity firm, and they did not necessarily have the same interests as Pacnet’s board members who were looking more at the long-term interests of the company, so it was a fun balancing act,” Blanken explains. “It added an extra dimension to the transaction because there were three shareholders, not one, but there was no resistance.”
The integration process will pose new challenges. Telstra, for example, is likely to consolidate the large number of combined PoPs the transaction will create.
“You do not need 10 PoPs in Singapore,” he says, and adds that they will also look to merge vendor contracts and simplify their overall and combined network infrastructure; all of which will result in a notable cost reduction. The deal was completed on April 16, 2015.
A global entry point
The Pacnet acquisition is just one highlight of Telstra’s very busy 2015. Already this year, Telstra has launched a PoP with Datamena in Dubai, secured a $12.5 million partnership agreement with Allianz Insurance, joined forces with technology firm Aspera for the launch of a joint media networking solution, and acquired UK health analytics firm to name but a few milestones.
On the day of interview, Blanken also revealed it is to acquire Globecast Australia; a media service provider for broadcasters in Australasia. Globecast Australia provides direct-to-home satellite transmission and IPTV managed services, IP streaming and encoding, global satellite monitoring and disaster recovery.
“This is very much an acquisition to support our growth internationally even though it is an Australian operation,” he says. “It will basically be integrated into our international business and is designed to support global broadcasters to move content from one geography to another over our networks and platforms.”
Blanken says that additional acquisitions can be expected from Telstra in the next 18 months. “We are constantly looking for companies that can help augment our capabilities and drive further skill,” he adds. And where better to look than what is fast-becoming the global hub for innovation – Asia-Pacific.
“Asia in general is becoming more and more the motor of the world economy,” Blanken enthuses. “The expectation is that by 2020, over 50% of the world trade will happen intra-Asia.” And with that, Blanken believes, comes an increasing need for communications capabilities. “We want to be part of that growth story,” he says.
In many countries across Asia-Pacific, the quality of services being offered is not at the same level as those in more advanced economies, and that makes it an attractive market for Telstra as it opens the door open for additional growth.
One of the challenges, however, is that the region is not a homogenous market; consisting of 54 countries each with its own culture, and rules and regulations.
The key to navigating this market, Blanken believes, is ensuring that you have a strong local presence. “You cannot run an Asian business out of Australia, and that’s why our headquarters are in Hong Kong,” he explains.
“We have a presence in 24 countries at the moment and we are constantly expanding, not just in Asia. We have opened shop in Dubai and we have a hired a few people in Europe as well; in Sweden, the Netherlands, Germany and France.” He explains that an important part of Telstra’s customer base is multinational corporations with headquarters outside of North America, Europe or Australia. Telstra leverages its capabilities in Asia to support the Asian operations of these customers.
Chiefly cultural
When he first moved to the Southern hemisphere, Blanken worked for the Asia-Pacific arm of US-based software company Openwave. And during his overall tenure in the telecoms market, Blanken has lived and worked in a wide range of countries and regions across the globe, including South America, South Africa and Australia, as well as other parts of Europe and Asia. “I think the telecoms market is one of the most dynamic industries out there, I actually struggle to think of one that is more so,” he says.
Blanken says that this comes from the rapid change in technology, highly complex regulatory environments and the intense globalisation of its customer base which needs constant support. “It is a very fast-changing and rapidly evolving market that continually provides opportunities, and that really appeals to me,” he adds.
Blanken’s role is a truly global one, and it is only natural that he has a deep interest in and respect for different cultures. “No matter what you read in books, I have learned that two things are really important; being humble and being transparent,” he says. “If you have a good sense of humility and you try to understand before you are being understood, that helps you to be successful no matter what country or culture you are working in.”
And given his sizeable geographic jump from Europe into Asia, it is a good job that Blanken highlights travel as one of his passions outside of work. While flitting between customers, staff, partners and regulators across the globe, Blanken is sometimes able to take his wife and three sons with him. “I am extremely fortunate to be able to give my family and my children the chance to experience different cultures at a young age,” he says. “I think it is extremely valuable.”
