GTT Communications' business services growth may seem like an anomaly, but what sets the company apart from the pack is that unlike incumbent telcos such as AT&T (NYSE: T) and Verizon (NYSE: VZ) it does not have to deal with a declining TDM services base.
Speaking to investors during the Jefferies Communications Conference, Michael Sicoli, CFO of GTT, said that the lack of a legacy TDM base enables it to start with a clean slate of IP-based services.
"The market for what we sell and deliver is IP-centric services and the only customer we have doing TDM is the government," Sicoli said. "One of the big reasons why the incumbent telcos are not growing is because they are working off a legacy TDM base, but we don't have that."
In addition to providing IP connectivity, GTT has been expanding its base of managed services, including managed security, Wi-Fi, firewall, router and remote access.
"These are all things that are growing in the marketplace that the large incumbent players do reluctantly if at all," Sicoli said. "It's an ancillary business that's synergistic with access for multinational corporation clients that don't have the IT staff at every location and need another set of arms and legs to help them set this stuff up, monitor it and fix it when it breaks."
Likewise, all of GTT's voice service business is driven by IP-based services such as VoIP and SIP trunking.
"Again, IP-based voice is a growing business and we don't have a legacy TDM voice platform," Sicoli said. "As enterprises move to the cloud, as the demand for bandwidth increases, as the demand for security and private networks increases the market is coming right at what we sell and what we do well."
Part of GTT's success with its IP-based service set has been built over the past decade by making a series of acquisitions of other specialist service providers that have brought expertise in various service sets.
By purchasing companies like UNSi, One Source Networks (OSN) and MegaPath, GTT has been able to broaden its appeal to its MNC customers.
In particular, these purchases have enabled GTT to extend and upsell services to the branch offices of its own largest customers and those they acquired -- something it could not do before.
"We were mainly a big data pipe company prior to the UNSi, OSN and MegaPath acquisitions with big circuits between big locations and we had the IP transit network," Sicoli said. "When we layered in the managed services capabilities of UNSi we had the ability to say to customers 'would you like us to handle these additional locations for you' and previously we could not handle branch locations."
Sicoli added that by purchasing MegaPath, it can now upsell those existing customers access for their international locations, for example.
"MegaPath was primarily a branch network operator and did not have the big pipe and did not have anything outside of the U.S.," Sicoli said. "We go into the managed services customers of MegaPath and upsell them the headquarters, the Internet pipes, access and try to sell them international locations."
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