Rocom has filled its own infrastructure gap by signing a ground-breaking Virtual Network Operator (VNO) deal with Cable and Wireless that will enable it to deliver network services to the SME sector on a volume scale, with a radical new business model.
The deal is initially for three years and will also allow Cable and Wireless to target the SME customers it has had in its sights since repositioning itself as a channel-centric player. Rocom's Voice Network Director Paul McEwan said the concept for the new business model arose from a review of what customers were being offered by the reseller itself and across the entire ATC Group. "The only weakness we came up with was that we didn't have our own infrastructure, unlike Gamma or Thus, which meant that people could dismiss us as ‘only the middleman'," he said. "We weren't about to invest £1 billion in our own network and then go bust, so the alternative was to partner with someone who already has the infrastructure.
"When it came to choosing that partner, it couldn't really be anyone else. Rocom and ATC have a good, long-standing relationship with Cable and Wireless, and it was the perfect fit. It was looking to come back into the channel, and we had the opportunity to create the best interface to one of the best infrastructures in the industry, giving them access to markets that they aren't currently addressing."
McEwan said the negotiation process had been lengthy, but as Rocom dealers got early news of the deal during June, sales enquiries practically ‘doubled'. "We have tried to force the space, taking on the likes of Thus and Gamma who have had it all their own way, by turning network services into a volume market for the first time," he added.
McEwan said the proposed business model offers a significantly improved win rate and the prospective of improved revenues for the carrier and the service provider. Typically at the moment, he claimed, the usual larger reseller has a win rate of 1:3. Every £10 of reseller spend generates £3 of revenue - generally provisioned off and delivering a meagre £1 to each one without any ongoing customer commitment. Under Rocom's proposed model, the win rate will increase to 2:3, with every £10 of reseller spend generating £6 of revenue for the network service provider and, with the network 100 per cent provisioned on Rocom's VNO partner, £6 of revenue also going back to the carrier.
"This kind of volume has never been done in network services," said McEwan. "People just assume the ways things are is the way they have to be. But this is about the distribution of network services as a bona fide product - and other carriers don't have Servassure and Rocomex to complement the package. We're adding network services into the portfolio and it's going to be an exciting couple of years."
Cable and Wireless Sales Director of Partners, Matt LeMaire, suggested the deal would help to correct the perception that with large business users of telecoms services as its core customer base, the carrier is not interested in the SME market. "That isn't the case but at the same time, we don't have the skills and resources to target a market that some estimates value at £8 billion in the UK," he said.
"Now, we've relaunched ourselves and are talking about the Cable and Wireless channel again. We see big resellers as our route to the SME market and ATC/Rocom is an obvious partner because it isn't just distributing cheap minutes - they have a strong services attitude and a desire to work hard to make new technology and more complex solutions available."
LeMaire said the deal will allow Cable and Wireless to service the SME sector without needing to get physically ‘closer' to the sub-£10,000 deal reseller base that actually sells the services to the customer. "It's a very different market, with different habits and behaviours, and the resellers know that better than we ever will," he said.
The success of the partnership will be monitored closely with regular account team meetings, LeMaire added. Ironically, Rocom is launching itself as a Cable and Wireless VNO just as the carrier is closing in on acquisition target Thus. If that purchase goes ahead, it would effectively remove one of Rocom's main rivals from the landscape - a fact that Paul McEwan happily acknowledged. LeMaire commented that acquisitions are simply the sign of a consolidating marketplace.