“Why do you call it Turbidite,” I ask Bill Barney when we’re on a call to discuss the company he’s just set up. “A turbidite is an underwater landslide,” he replies from Hong Kong. He and his colleagues picked the geological term for the name of their new company.
“We think we’ll revolutionise the undersea cable industry.” It’s certainly a name that should give us journalists a way to write some eye-catching headlines: not necessarily in the way he wants if things got difficult.
Barney has been known to the industry for two decades, particularly in the Asia-Pacific. Until a year ago, he was chairman and CEO of Global Cloud Xchange (GCX), owned until early 2020 by Indian group Reliance Communications (RCom). He left when it was restructured. “I’ve had a year off, thanks to a noncompete clause. But I’ve been watching the telecoms industry for all 12 months.”
And that’s why, a full year later, he’s ready to emerge into the telecoms world again, as CEO of his new company. He’s joined in this by Wilfred Kwan, who was COO at GCX, and a former Morgan Stanley executive, Don So, who is head of business incubation for Turbidite’s main shareholder and will now be CFO.
One of the factors that fired Barney up during that year after GCX was the fact that the industry is dominated by five big companies — Amazon, Apple, Facebook, Google and Microsoft. I tell him it reminds me of the late nineteenth century, when US business was dominated by a few railroad, shipping and steel companies. “It’s been decades since you had such a concentration of companies,” he says. “And they’re all in the same sector.”
He’s not trying to undermine them, but he notes that the big five have largely ignored many markets, such as south-east Asia, the Middle East and Latin America.
These emerging markets have potential “not just for data centres but also for networks”, he says. And that’s his target. “Today there are about 600 orphaned data centres,” he says. In other words, data centres that are not part of big groups. Many of them are owned by local telcos, “and most are sub-10MW”, he adds.
Missed opportunity
Here is a missed opportunity, he continues. “If you look at the Asia-Pacific region, there is a huge number of people, especially 30-45-year-olds, who are underserved by infrastructure.” Not only are they underserved, but “they are the sweet spot” in terms of attractiveness to services, he adds.
As we all know, during 2020, while Barney was watching the industry and making his plans, the telecoms and data centre industry changed. “The entire demand curve has shifted, pretty much permanently. If we were looking for an underserved market, it’s even more underserved now.” We’re having this conversation over Zoom, and that just emphasises his point. “‘Zoom’ has become the word for making a video call. Zoom has done an amazing job.”
At the same time, pressure has mounted on the hyperscale companies that dominate the industry. We’ve seen Australia take on Facebook, and the EU take on all of them; and the US — well, we’ll see what the Biden government’s policy will be.
“I think it’s very likely that you’ll see pressure to keep data in markets, if not also to regulate these companies as broadcasters,” says Barney. “The easiest way will be to enforce national data protection laws.”
That, he feels, will open up a new business sector, with local data centres in each administration. “I think you’ll see two types of data centre at first. The hyperscale data centre and then the edge data centre.” The latter will be in city centres and will store local information.
“The hyperscalers will move to northern areas, the more efficient places, where you have power, and the edge data centres will be the operational data centres, with 50 to 100 racks.” Barney likens them to the random-access memory of a computer, while the remote industrial data centres will do the big number crunching.
Later there will be a lower level, “the micro-edge data centres, associated with towers”, but that’s not Turbidite’s market. “We will be a network of international data centres, in the Asia-Pacific at first and the Middle East: Egypt later on.”
Turbidite will grow by acquisition. “We’ll acquire three companies this year.” One he hopes to announce in early March “and the other two over the next few months”.
Where’s the funding coming for all of this? The founders have put some money in, but the big backer is New World Development, a 50-year-old quoted Hong Kong real-estate company, with interests ranging from healthcare and retirement homes, to hotels and jewellery shops. Among its other investments is K11, a group that runs high-specification, rather arty developments across southern China. Adrian Cheng, CEO of New World Development, is chairing the Turbidite board.
Beautiful smells
Turbidite’s headquarters are at North Point, an area of dense offices between Causeway Bay and Quarry Bay. There’s a focus on making it eco-friendly, says Barney. “Our new building has a turf field on the roof and plants growing on the side. We pipe beautiful smells into the elevators to create calming atmosphere. Every room has video. Everything has dual purpose – it’s a very hot-desking type of environment. People will largely be there for meetings. People have been hired and signed.”
The company is aiming to be “western friendly”, says Barney. “We’re making it easy for people on the West Coast to use our network. We want to make sure network and data centre issues are taken off their hands.” He is recruiting a sales force in Asia, Europe and the US, though there are no announcements yet.
“We’ll be in M&A mode in the first 12 months,” he adds, with “a focus on a lot of underserved growth. We want to focus on maximum eyeballs”.
Who does he have in mind? Without giving details, he lists a few of the projects he’s talking about in the early days. “There’s one set of assets spun out of a telco. Another is on a brownfield site,” he adds. “There’s a subsea cable landing station. There are not a lot of open ones around the world.”
The potential acquisitions “are in strategic locations. We have three deals in parallel. We’re building a franchise across a bunch of geographies”. That’s an interesting word, “franchise”. It’s usually used of companies that don’t 100% own all their outlets.
Barney confirms that ownership will vary between 100% and, “in one scenario”, 51%. “We’ll control every one.”
The industry is highly regulated, and often there are rules about ownership of businesses in the industry. Barney and the Turbidite team are working on different scenarios. “Usually you can buy land, but if you provide some services — cloud, cross-connect, IP transit — you have to have some local ownership.” He adds: “We will have partners. Some will be silent, and some more active.”
Turbidite will be building as well as buying. “We’ll do both. At many of the locations, we’ll acquire and then invest capex in them. We’ll be building.”
Why Hong Kong, given that this is a new company that could be anywhere in south-east Asia? Over the past year or two, we’ve seen a measure of investment shift to Singapore and Taiwan, for example, as there has been civil dissent across Hong Kong and as the China-US economic and cultural battle has raged.
This last year has directly affected the telecoms and data centre industry, and President Donald Trump’s administration clearly indicated Hong Kong, a special administrative region of China, was as hostile to it as is mainland China.
Famously, the Federal Communications Commission (FCC) last year blocked the Hong Kong part of a new cable connecting Los Angeles to Asia. Team Telecom — the telecoms security group set up in Washington in April 2020 by an executive order from Trump — said the last leg of the Pacific Light Cable Network (PLCN) should not be allowed to go into operation.
This section runs from Deep Water Bay in Hong Kong to Taiwan and the Philippines before continuing to the US. That bit of PLCN is still there, but dark.
But there were other moves — voiced in private conversations only — that showed Hong Kong-based tech and telecoms companies were considering their future in Hong Kong.
“It’s gone through a rough patch,” agrees Barney. “But Hong Kong is probably one of the most resilient cities in the world. It’s a financial centre, it’s diverse, it has a lot of energy and there’s a lot of talent here.”
But the US-China issue, I ask Barney, who is, after all, American?
“That will be solved, and it will be solved in Hong Kong,” he says. “I think at some point people will come to the table.”
The dispute has affected Chinese vendors, particularly Huawei and ZTE which are both based in Shenzhen, just across the border from Hong Kong. “They are the price leaders,” says Barney. The prices that telecoms operators pay would be much higher “without them in the game”.
