My dear friend,

I am told that a wind of optimism was flowing on the Singapore recent conference. The Submarine Cable activity is expected to be high in the coming years. Good! In such circumstance some people do not understand why Nokia and TE Connectivity are trying to divest from this activity and also why nobody seems to be keen to take it over from them. I think that raising these questions just shows that the community gathered in those conferences is sitting far from some aspect of the real world. My question to them is: would you be keen to take a job in a submarine cable factory?

To produce turnkey submarine systems requires a large range of skills of very diverse nature! At least three set of capabilities, three very different cultures: cable, telecom equipment and marine works. Each of these areas requires significant investments in machines, ships and R&D. It is a hardware industry which is not very popular anymore! Top managers and investors want a simple structure, without heavy assets. The Soft, not the Hard!

But there is a more precise cause of the problem: the suppliers are not profitable anymore. The bottom lines are miserable! My dear friend, I know you are laughing at me!! But this is real.

In a first instance, the suppliers have managed to modernise their equipment and their process, and have been able to absorb and even propose significant price reduction. But limits have been reached there when the price pressure has not stopped under the GAFAM’s influence.

During the last two decades, the culture of “mere buyers” replaced the one of “mutual understanding” where a contract needed to be good for both parties. This is a mortal silly game!! Getting these very low levels of prices was absolutely not necessary to build an efficient global network. For the mere pleasure of playing tricky game, one squeezes the suppliers to the rock bottom for finally put in places too many, over designed and then costly cables!!

Some long-term vision would do good!

Jean Devos
AQEST Senior Advisor