 KSA TV Europe and our live two-day events on 2023 predictions. I'm Jean-Marc Lim and joining me today is Claude Ashkar, founder, managing partner of Actal Consulting. Claude, thank you so much for joining me. It's a pleasure speaking to you. I've read a few of your pieces, so I know you are very good at what you do. Let's put it plainly there. Thank you, you're welcome. I wanted to pick your brains on the current state of the European data center marketplace because things have changed a lot in 2022. So I really wanted to I want you to give us a rundown of the current state before we then get into the main events of the year, but how would you describe the data center space in Europe today? Sure, yeah. No, first of all, thank you for the invite, Joe. It's a pleasure talking to you. And yes, but perhaps not in the direction that people would have expected them to change because they've changed for even more demand for data center, which is a good news for the industry. So the industry is healthy. That's the first thing the way I would describe it. There's lots of changes and we will get to talk about those lots of challenges, lots of but overall, the industry is healthy. Availability is in the low teens in the main markets of Europe. So because the demand from the main customers of the data centers, the hyperscalers continues to be robust. I don't think I've ever heard anyone describe the industry as healthy. That's quite refreshing because it's such a smooth word, but it is true. I know you mentioned the challenges, but without challenges also the achievements wouldn't be as big as they could have been. The challenges have been uniting the news for sure and we would get to those. We can't ignore them and we shouldn't. Yeah, yeah. And we have a lot, especially in Europe, especially around the energy and sustainability. So I mean, picking up on that then, would you like to go through some of the main events and conditions that have really shaped the marketplace today? I want to see that, I mean, like throughout the year, because we've had a lot of them in and out of the sector. Yeah, yeah, no, exactly. As I said, first of all, on the positive side, this continues to be continued growth from the main users, the hyperscalers continue to build. Availability is low, but that could be double-edged sword as well. Availability is low means there's less supply than expected and that could be because of the challenges that we're facing. So let's go into these headwinds. You know, maybe three categories. All of them are on the daily news, particularly in Europe where there is a war, a major war going on. So we have, but from the pandemic, we started with the first headwind, which is the supply change, supply change constraints, everything from ships to ships. So ships meaning cable laying ships for the submarine cable, which really carries all that internet traffic, which is stored eventually in data centers or communicating from data center to data center. So that's the first one that's really started with the pandemic when we moved from just in time to just in case as well. So the whole change into the supply change industry and its escalating cost. So that's the first headwind. This one is the inevitable one in Europe, everybody feels it, but across the world as well. In terms of cost in Europe, it's in terms of availability as well. It's the energy that I'm talking about. So the availability of energy and the data center industry is a big, big user of energy. We've seen implications on markets like Frankfurt, like Amsterdam, like London for sure, Dublin for sure. More and more, it's in the narrative. We haven't seen it yet impacting that much the data center, but it's something definitely to be aware of. And of course, we can't be completely talking about the energy without mentioning the accelerating quest towards renewable energy and other green energy. So yeah, the energy crunch is accelerating that effect. And the third one, of course, again, even more so in the daily news across the world is the inflationary microeconomic world in which we live, which has increased the cost of capital, which obviously increased for the data center industry the cost of building such heavy capex infrastructure. Okay, well, there's a lot of nice tech there. So supply chain, energy slash war and inflation. I mean, let's move with supply chain because maybe that's the thing that we can predict a little bit more in the near future as opposed to the other two. Wouldn't you sort of expect things to change a little bit? A lot people talk about supply chain will kind of get stabilized around 24, 25. So another maybe 18, 24 months for things to get a little bit back to normal or pre COVID conditions. You mentioned the ships, the cable laying ships. I mean, there is a shortage of them. There's a long being delayed until 24, 25 because there's no no ships to actually put them down. I mean, how do you expect supply chain issues to change over the next year and maybe a little bit forward as well? That's correct, Joe. I mean, supply chain is something that started with the pandemic. So it's been two plus years now that we've been facing it. And of course, we've been adapting to it. So perhaps the first one that we'll get out of compared to the other two headwinds that I mentioned as well. But it's still a significant factor today contributing to escalating costs of developing the industry, building new data centers. Yeah, which goes beyond borders in Europe because there's a lot of projects in Africa that have been delayed as well because of supply chain issues and transportation issues and all that. And then I guess, I mean, on the energy and inflation front, that's very dependent on how things also go, unfortunately, worldwide. And nothing, I don't know. I mean, it's hard to make predictions around that. But how do you expect the energy conversation to change over the next few months? We're just following the news on a day-to-day basis, really. And it looks like, whether it's from Europe or whether it's from the US, just as we speak today, it looks like the worst is behind us. But remains to be seen, but there's plenty of pain to come for the next year or so. Anyway, the days of, and I'm going beyond your initial question here, the free cost of capital, if I may call it that way that we've witnessed because of pandemic, the easing economic policies by most central banks around the world are over. So there is going to be a cost of capital. And that fed to a very, very intense merger and acquisition economic environment, which I don't think we're going to see extended at the same pace that we've seen in the past couple of years. So those days are over. And people are much more conscious and much more paying attention to NNA because of the increased cost of capital that's being factored into the equation. Okay, this is interesting because I was going to ask, so you think the big MNA headlines that we've had 10 billion, 12 billion, 13 billion, those days are kind of over, like all the platforms have been acquired. And then my follow up question to that would be, so are we going to see investors going more for the individual assets as opposed to full platforms? So are we not going to see, I mean, we had a line this week, for instance, buying and share data, whilst we always thought though data was going to be 100% acquired by someone and that ended up being just a share or a stock within the company. Are we going to see more of that as opposed to full platform acquisitions? Yeah, well, first of all, platforms, there is a finite number of such platforms. And as you as you mentioned, we've seen a record number of the big platforms being acquired. So the big getting bigger. So, you know, the 10 billion or so, we've seen a record number of those MNAs happening in this year. So there aren't that many mergers of platforms to take place. And in terms of individual data centers, those have also been acquired by the platforms, which then the platforms got acquired by new private equity or by existing private equity, just building up their footprint around the world. For example, there in the US, they're buying into Europe, et cetera, et cetera. So back there is as I'm continued to say that there is continued growth in the industry. So individual developers, you know, going and building new data centers and then joining existing platforms because it's tough to compete nowadays, when you're when you have an orphan data center in a single market. So you've got to join a platform just so that you meet the cost, your cost competitive and that you can attract the customers as well. So you need that economies of scale. So yeah, individual data centers can start that way, but eventually you're going to have to be part of a platform and those will continue to grow. Okay. Well, I was going to ask as a fun question, because there are still some acquisitions on the table that we're waiting to hear who's going to be the winner of the ones out there. Which one are you most excited about? I mean, there are, I don't know if you're putting me on the spot here, but I mean, of course, I think you're alluding to Global Switch here. Which affects, you know, a number of tier one markets in Europe, right? The black markets, you know, it's obviously blue chip, you know, assets in Asia as well, not just in Europe. So, you know, jury's still out whether there's going to be a deal there or not, because again, you know, unfortunately for Global Switch or, you know, the deal didn't happen earlier, right? So we're into this environment now when cost of capital is higher and therefore potential buyers are less able or less interested in paying the same amount of dollars that they would have earlier in the year. It's no longer making sense for them. It's interesting. Sometimes it's a bit of a dangerous game of the let's wait and see what better comes forward. And sometimes it pays off. I mean, I think Digiplex was one of the cases they paid off, waiting and prolonging it a little bit, but maybe this will change in the next few months. But then speaking again of the next few months, I mean, let's talk about you now. So what are you going to be focusing on going into 2023? Because there's definitely no shortage of work. Right. Yeah. Yeah. I think, you know, I've been making the case of we're moving to a post hub era. So if you look at Europe, hubs are, you know, the flat markets are hubs, you know, Frankfurt, London, Amsterdam, Paris, Dublin, Madrid, you know, you keep adding more markets. And as you keep adding more markets, you can't possibly have every market being a hub, right? So otherwise, it's no longer a hub. But that's the trend. So we're going to this trend is going to continue in Europe and around the world. And that's also driven by the fact that subsea cables are going and reaching more and more point-to-point connection, no longer necessarily going through a hub, but reaching, for example, from a tier two, from secondary, let's say, market in the US to a secondary market across the Atlantic into Europe, as opposed to really going from New York to London or thing like that. So we're going to see more and more data centers being developed in secondary markets. And that will lead also to new opportunities for us working on because the hubs have been there for a good reason, because they're well-served, first of all, by, you know, good, you know, stable policies and clear policies, but also good ecosystem for creating the environment for developing of data centers, including power availability of power, energy and availability of connectivity, which is we haven't talked much yet, but this we at Actel are increasingly starting to be involved with this year. And I believe next year we'll see even more work as we move into new markets, there's going to be scrutinizing more connectivity. When you're going and building data center number, you know, 100 in a city like London or Frankfurt or whatever, you don't worry too much about connectivity because, you know, it's there. It's an established hub, but you know, when you're going into a new market for the first time, that's something you're going to scrutinize. And then site selection is going to be very, very important because, you know, some sites will be more serious. And then it depends on what type of data centers you're building, whether it's hyperscale or whether it's edge, different types of connectivity are required. So all of that work on the network side is going to keep us busy, I believe. In addition to, you know, edge data centers, we're going to see, we started to see, it's not something that's going to start next year, but it's going to, we're going to see more and more into that over the coming years, complimenting cold storage hyperscale data centers further away, perhaps, from the main centers. Yeah. It's a very exciting period. And I mean, the use cases are going to come out of all this. I'm more excited about the use case that we can even think about the things you can even dream about what the next generation will create with all this infrastructure that's being put on the ground now. But Claude, just to quickly finish as well. So how can people reach out to you and find out more about what Actile Consulting does? Give us a bit of the contact details. Oh, I mean, you know, Actile Consulting is a 20 year old company that's been founded operating globally. We work in technology, not just data centers. So that's why we can see the full telecom, we work in 5G, we work in fiber, terrestrial, subsea, do some work in cybersecurity, et cetera. So best way to reach us is on our website, actileconsulting.com, or we're on LinkedIn as well. Okay, sounds good. Well, Claude Askar, thank you so much for joining us. And thank you to our viewers for tuning into JSA TV Live. Don't forget to check out social channels for more content. Until next time, happy networking.