With year-over-year growth down at a miserable 12% for the 12 months ending March 1999 in a market where competitors such as BT’s Syncordia and ISP provider PSINet are enjoying growth rates of 27% and 110%, respectively, Racal Telecom is busy trying to turn around its fortunes. It has spent 10.2m pounds in an investment program and is budgeting as much again in the coming year as it recasts itself as diverse networking services company.
To front what looks like it is becoming an aggressive recruitment drive, last month it announced that it had successfully head-hunted a management team drawn from top-notch competitors such as BT Syncordia, Cable & Wireless and IBM Global Services. Martin Lea, managing director of Racal Telecom, reports that the top-flight recruits have been attracted by the opportunity to make their mark within an organization that is aggressively re-inventing itself. Lea added that the likelihood of Racal Telecom spinning off from its parent Racal Electronics Plc might well have been a consideration.
Management will be hoping to emulate the performance of its one-time sibling Vodafone that has seen a dramatic turn around since the business was successfully spun off from Racal. Lea declined to comment on the company’s target for revenue growth in the coming year. It is known, however, that the company intends its range of fixed-price, integrated IP-based services to account for over 50% of revenues by 2002. Racal Telecom reported revenue for the year ending March 31 1999 of 177m pounds.
Racal has been in the data communications market since 1988. In 1995 it acquired British Rail Telecommunications, the main telco provider to the UK railway network. Since then it has built a 7,000-km high capacity network based on SDH (Synchronous Digital Hierarchy) and DWDM (Dense Wave Division Multiplexing) technology with breakout points at more than 2,000 UK towns and cities.
Although Racal has a small presence on the continent, it recently won a three-year contract worth 750,000 pounds to supply the international laboratory supplies company of Fisher Scientific. The deal takes in provision of managed data services across 17 sites in the UK and continental Europe. The sites in Loughborough in the UK and in Belgium, Germany, the Netherlands and France will be linked over Racal Telecom’s existing European frame relay network.
Lea stresses that Racal’s near-term focus is on the medium-to-large corporate market in the UK. We want to build a substantial business in the UK before moving to the wider European market, he said. Its corporate client list at present is small but includes notables such as Zeneca, Heinz, NatWest and Camelot, the lottery operator for which it built and now operates a 25,000 terminal network.
Internet Quza, Racal Telecom’s ISP, which until recently has had free reign to develop its business, is to be integrated more fully into Racal’s Telecom Services division and will be become a core feature of the new portfolio. Data services that accounted for 60 to 65% of revenues for the year ending in March include a managed LAN interconnect service and remote access services using PSTN, ISDN and digital cellular networks. As part of its managed voice service, Racal Telecom will provide network facilities and all equipment to the desktop and, in tandem with Vodafone, a fully-managed cellular service. Its integrated IP service is a fixed-price package incorporating data, voice, internet access and video. The internet service includes hosting and transaction-based services. Racal Telecom believes substantial growth will derive from its international carrier services division, which provides broadband infrastructure leasing and wholesale services to other operators in the UK, US and Europe.
