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Summary

Another step has been taken in the ongoing consolidation of the international voice market with the announcement of a five-year partnership between Deutsche Telekom’s (DT’s) International Carrier Sales & Solutions (ICSS) business unit and Colt Technology Services (Colt). Each company will carry and terminate its partner’s international TDM and VoIP voice traffic across its footprint countries in an attempt to remain competitive.

Economies of scale driving consolidation of international voice traffic

Although international voice traffic volumes continue to grow, intense competition is depressing revenues and margins. The growth of IP to carry voice internationally and the rise of OTT voice providers such as Mumble, Skype, and Viber are forcing consolidation of the market into the hands of a small number of international voice carriers. These large carriers, including BICS, iBasis, Tata Communications, and Vodafone Carrier Services, are able to secure better margins through their highly efficient systems and greater economies of scale.

In the face of this competition, many telcos have decided to outsource their international voice traffic to partners with better reach. The arrangement between DT and Colt illustrates this trend: by agreeing to exchange their off-net traffic, each improves its competitive position in key markets. Colt’s network footprint is focused on Western Europe and Japan. Following the integration of GTS Central Europe, DT’s global network is particularly strong in Central and Eastern Europe.

Both carriers will leverage each other’s ongoing investment in systems and infrastructure to benefit their enterprise and wholesale customers through greater efficiency and reach, without the need for additional capital expenditure. Although the initial agreement focuses on international voice services, the partnership has potential for greater collaboration in the development of new products and services and in securing additional business.

This deal is a direct response to the continuing consolidation of the international voice market. We expect to see more partnerships and outsourcing deals like this one in the coming months.

Appendix

Further reading

Carrier Services Units Come of Age, TE0012-000516 (August 2014)

On the Radar: Vodafone Carrier Services, TE0012-000507 (June 2014)

European Wholesale Market Share 2011–12: The Big Picture, TE012-000473 (January 2014)

European Wholesale Market Share 2011–12: The Detail, TE012-000473 (January 2014)

“Colt exits cut-throat voice trading market,” TE0012-000504 (May 2014)

The Future of International Wholesale Voice, TE012-000317 (November 2011)

Author

David James, Principal Analyst and Practice Leader, Wholesale Telecoms

david.james@ovum.com

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