GTT to jump into SD-WAN fray this year, aims to gain 'by attacking the incumbents'

The CEO of GTT, a service provider focused exclusively on business customers, said the density of its broadband connections will enable it to quickly launch an SD-WAN service later this year.

Today, GTT has over 50,000 locations equipped with some form of broadband access service that it integrates into its global network backbone on behalf of its business customers.

Rick Calder, CEO, told investors during its fourth-quarter earnings call that the service provider has the right assets in place to quickly ramp up its SD-WAN offering.

RELATED: GTT’s Calder: AT&T, Verizon’s focus on media, mobile exposes new MNC opportunities

“We provide premise-based firewall and network-based firewalls and premise-based router services,” Calder said during the earnings call, according to a Seeking Alpha transcript. “We think we have all the building blocks and will be in the first half of this year announcing our formal SD-WAN offering as well.”

Unlike incumbent providers like AT&T and Verizon, Calder says that it does not have a large MPLS base that it’s afraid of cannibalizing.

“MPLS has been a relatively smaller part of our portfolio,” Calder said. “If SD-WAN is the so-called killer of high-cost MPLS, we have less exposure to that and much more to gain by attacking the incumbents.”

Broadening services portfolio

SD-WAN is just one of several new service capabilities that GTT is looking to add to its growing arsenal.

By purchasing Hibernia Networks, GTT can now offer business and even wholesale service provider customers wavelength and media services.

While GTT is still a nascent player in the optical transport space, Calder said that the service provider is seeing growing interest in its products. The service provider’s sale force is now pursuing opportunities for its new media and wavelength services.

“We have begun to see good cross-selling opportunities for Layer 1 optical transport,” Calder said.

GTT hopes to differentiate itself from the pack by offering a broad portfolio of services that includes an array of wide area networking (WAN) services, including Ethernet, MPLS, and virtual private LAN services (VPLS).

Additionally, GTT has a suite of internet services that range from high-capacity IP transit, dedicated internet access (DIA) to broadband internet and broadband wireless services to accommodate lower speed locations and branch offices.

“We absolutely are seeing cross-selling [opportunities] across the two segments,” Calder said. “Traditionally we've seen it between the wide area networking suite, the internet suite and the managed service suite.”

Besides WAN services, Calder added that the other emerging service opportunity is voice services. After purchasing Open Source Networks (OSN), GTT has been ramping up its cross-selling opportunities for SIP Trunking and hosted seats.

“The area where we still have tremendous opportunity is voice,” Calder said. “We have actually refocused some of our efforts around cross-selling voice, because every one of our client has the need and we are not as well represented as we are in the data services suite.”

More M&A coming

While GTT recently completed its acquisition of Hibernia Networks—a deal that gave the service provider a set of terrestrial and submarine cable assets—the service provider will continue to seek out deals in 2017 that can complement its asset base.  

In 2016, GTT made several acquisitions. The service provider not only completed the integration of OSN, but also acquired and integrated Telnes Broadband. It also completed two strategic customer base purchases: RealLinx and Yipes.

But GTT’s largest strategic acquisition was clearly Hibernia Networks. Having closed that deal on Jan. 9, GTT said Hibernia will be included in its 2017 results.

Calder said now that it is moving ahead with the process of integrating Hibernia into its own fold, GTT will look at other M&A targets.

“With our Hibernia integration on track, we are well-positioned to consider larger strategic acquisitions in the second half of the year,” Calder said. “Our funnel is strong and we remain focused on opportunities that are consistent with our strategy of expanding our global network reach and adding multinational clients and great talent to our team.”

At the same time, GTT is also keenly aware of the broader consolidation taking place in the service provider market.

In 2016, Verizon, CenturyLink and Windstream all made large deals to acquire large-scale network assets: Verizon completed its purchase of XO, CenturyLink launched a bid for Level 3, and Windstream expects to complete its acquisition of EarthLink soon. This effectively will consolidate six players into three.

Calder said that the rapid pace of consolidation of the large incumbent players could be an advantage for GTT.

“On the M&A environment, we actually think that puts GTT into a good position, particularly in the U.S. market,” Calder said. “We simply believe that there are fewer choices and we really have emerged as the best alternative to the incumbents and we see that our position strengthening over time.”

Calder added that “there are just simply fewer networks to represent for channel partners, particularly in the U.S. market.

For the fourth quarter, GTT reported $522 million in revenues, up 41% on a reported basis and up 13% on a pro forma basis. The company also delivered adjusted EBITDA of $125 million, up 62% on a reported basis and up 32% on a pro forma basis.