Q&A: Masergy CEO discusses taking on telecom giants

Six-year-old service provider Masergy Communications, which offers global IP VPN, VoIP and Virtual Private LAN Services, can no longer be called a start-up. But it’s still a baby in the telecom industry compared to its main competitors. Network World Senior Editor Denise Pappalardo recently talked with Masergy CEO Barry Nalls about the company’s stability, how it remains competitive and what the carrier is most concerned about moving forward.

How is Masergy doing financially?

The company is EBITA [earnings before interest, tax and amortization] positive as of end of May. … Our fiscal year ends June 30 so we just started our 2007 and we will be free cash flow and net-income positive this fiscal year, probably midyear.

Are you considering an IPO?

It’s one of our exit options, for our investors. But we’re a couple of years from that.

Who are Masergy’s biggest competitors and has that changed?

Our competitors are all of the very large carriers, AT&T, Verizon Business, Sprint Nextel and British Telecom. It has changed because a lot of our competitors have gone away, been bought or merged. Just the quantity has changed, but we’ve always competed with the large carriers.

How is Masergy able to stay competitive when your rivals are all huge?

First and foremost, we have the most advanced suite of software services in the industry that allows our customers to do software analysis of their applications. They can do deep forensics of their applications. Another piece of our software allows them to make real-time control changes to the network. … We put a huge amount of process and design around enterprise-level customer service. We do not own an [interactive voice response] system. If you call in to Masergy you get a human being in the [network operations center]. …There are no dark spot in our network. You can have our service anywhere in the world, in any city in any country.

You don’t own networks around the world — how does Masergy reach any city in any country?

We purchase whatever services we need in those markets to get our customers taken care of. We have a team that buys from 60 different carriers from around the world.

But the standard offering is in 40 countries?

Forty today — we grow a handful of countries every quarter.

Have you seen any price increases since the major telecom mergers?

Not yet. Not that it won’t happen; we haven’t seen it. My impression is they are still trying to shake out some of the strategic decisions that affect pricing. And also, they have to sort out all of the regulatory and government requirements that they have to follow.

What are Masergy’s biggest challenges going forward?

Instability on a global political level does impact us because of the global nature of our business. It impacts our customers so it impacts us. It’s a major concern. To say the mergers aren’t a concern is a little bit trite. They are a concern just because of the unknowns. You don’t know where they’re going to put their investments or pull out investments. I’m more concerned about the wholesale side rather than the retail side.