In efforts to maintain growth as the Chinese economy begins to slow, APAC businesses have accelerated their internationalization efforts, viewing Europe as the next logical gateway for expansion.
While the EU has yet to see a deluge of new Asian entrants, there are a few pioneers paving the way for growing APAC businesses targeting the region. One such trailblazer is Chinese ecommerce site Alibaba. The company announced last July plans to set up its own data centre presence in Europe and the Middle East as part of a $1 billion expansion plan.
Asian expansion into the continent is being facilitated by two major trends in connectivity.
Submarine Cables are Facilitating Internationalisation
Markets across the globe are going to be more interconnected than ever before by the end of 2016 thanks to the introduction of new submarine cable networks. In particular, the AAE1 and SEA-ME-WE 5 cables will go live by year’s end, with both landing at Interxion’s MRS1 facility in Marseille. These cables will directly connect APAC nations, EU nations and an array of Middle Eastern and African markets – in some cases for the first time.
The added capacity brought on by these subsea cables will bring lower prices for connectivity and greater efficiency to users who join the consortium of companies purchasing bandwidth.
Many companies will be using these cables to increase the speed of taking data back home. Reliance Jio, an Indian 4G network provider, for example, has been working to bring widespread, high-speed wireless coverage to the country, and is poised to go live this year. Billed by its chairman, Mukesh Ambani, as the “largest start up in the world,” the company is already poised to have more than 2.5 million users, with an average data usage of 18.6 GB each, before its projected commercial launch in September.
While the company is already tapped into native content and data that will serve much of its Indian audience, establishing a presence in the EU presents an opportunity for Jio to further serve the many English-speaking users in its home market. To capitalize on this market, Jio established a point of presence (PoP) at Interxion’s MRS1 data centre by becoming a consortium member of the AAE-1 cable.
Unlike traditional undersea cables, the AAE-1 uses a carrier neutral data centre as a landing station rather than a telco-operated cable landing terminal, which gives businesses that lease bandwidth on the cable access to a host of connectivity providers and services. Traditional cable termination points used to be operated only by one telco that owned the cable infrastructure. This didn’t give users access to a colocation facility that could double as a PoP or access to consortium partners. By using the AAE-1 cable, Jio will improve access to English-language content from Europe that can quickly be transmitted over the 4G Jio network at home.
Asian Carriers are Joining the Move to Europe
Another trend is that while many APAC enterprises want to to deal with asian carriers in the EU to avoid language and cultural barriers to internationalisation.
In early June, China Telecom, the country’s largest telco operator, and Russia’s national telco Rostelcom announced an agreement to expand the Europe-Asia traffic transit system’s bandwidth by 200 gigabytes per second. Customers of Rostelecom and China Telecom will be able to rent optical channels with a capacity of 10 gigabytes per second between Europe and Asia as part of the new service. This will build on a well-established relationship between China Telecom and top-tier European business hubs.
While some APAC carriers have already been doing business in the largest EU business markets for years, they are now entering second-tier cities like Madrid, Marseilles, Vienna and Stockholm to expand their reach for their customers. An example of this is China Telecom’s partnership with Turk Telekom International in 2014, which enabled both companies to provide high-quality and reliable international telecommunications to Chinese enterprises entering Central and Eastern Europe, Turkey and the Middle East.
This Asian expansion into Europe in many ways mirrors the rush of U.S.-based companies that are already coming ashore to the EU. However, expect the APAC expansion to roll out on a much smaller scale given the regions nascent prosperity compared to the U.S. Thanks to a lack of overlap between goods and services between the countries entering the EU from the APAC and the Americas, there appears to be plenty of opportunities for all parties to thrive.