Neven Dilkov, Neterra: A Highly Demanded Position

Author: Hristo Petrov
Credit: Forbes Bulgaria Magazine, issue 50, June 2021

Founded by Neven Dilkov, Neterra is large enough to operate on a large scale and small enough not to be a dominant player. This position gives the company a serious competitive advantage.

Dressed in a perfectly ironed white shirt, Neven Dilkov does not bother to define himself as an anti-system player. “I mean, we don’t like monopolies,” said Dilkov, the sole owner of Neterra.

“We do not like status quo, what we strive for is change. Any modification causes a system to crash. We live with the change and in this context, we are a generator of change and an antisystem player.”

It may be odd, as it is being said by a person who used to be a dominant figure in the developing Internet access market in Bulgaria during the mid-90s. Dilkov himself mentions it saying that in this respect his company is probably a “very systemic” player. But over the years, Dilkov has gained a reputation as a person who enters into partnerships but keeps his business under control.

Sofia Data Center – SDC Sofia (Photo: Neterra)

IP television could be described as the most popular service to Neterra’s end users. However, the main part of the company’s revenue comes from providing internet connectivity for telecoms, internet providers and other telecommunications companies.

“Neterra” is offering Internet connectivity to the global market through partner networks of local providers in different regions of the world. “We have developed the art to establishing work partnerships worldwide”, says Neven Dilkov.

The company’s revenue increased from €10.1 million in 2019 to €11.2 million in 2020. The plan of 52-year-old Neven Dilkov for the next three years is to double the amount of direct profit, which is the difference between revenue and direct off-net costs of the business, for all the Neterra group companies. He believes that his company has all the prerequisites to overfulfill this plan.

But he is also pleased with the current scale. When it comes to revenue, Neterra cannot be compared to any of the three mobile operators in Bulgaria. They are big. They are offering a wide variety of products to their end-users from SMS and voice calls to solutions for cyber protection.

However, being like the big operators is not his goal, as the bulk of Neterra’s revenue comes from providing services to the business. “We’re big enough to work on a large scale and small enough not to be a dominant factor anywhere,” he said. “This is a highly demanded position.”

The telecommunications business is an intriguing game. It was once a reserved field for the traditional telco mastodons. This has changed over the last decades. Internet company giants are entering the market and building their own networks. Newcomers like Facebook and Google are investing millions in laying submarine cables that carry Internet traffic around the world. Amazon, whose main business is online trading, is already generating around 12% of its quarterly revenue from its AWS cloud business. This is also the fastest-growing segment in Amazon’s business.

Dilkov knows that getting bigger is a natural state in business, especially when there are no factors to limit this growth. Therefore, he would be willing to consider splitting his company into separate, independent businesses should one day Neterra experience significant growth.

“Despite the presence of these global players who control a large part of the telecom market, the backbone of the market of every successful market is actually small and medium-sized operators,” says Dilkov. – They usually run and develop the market. If small and medium-sized telcos are missing, the situation is going very badly.”

Being small, Dilkov claims has another advantage. According to him, it is much easier for consumers to identify with an operator that is more focused on their interests. And he believes that Neterra is in this golden mean.

If you do not find the golden mean, says Dilkov, you lose focus. “The drift, the attraction of putting financial results above all else is becoming greater with the size of the company. For really large companies it becomes irresistible. Then they stop working for the interest of their customers and start using them just as a tool to earn money. Customers are not participants in its business model, as it is with a small, progressive, and developing company. It is getting too big and not being able to refuse to serve certain parts of society that do not share the same values. Then the values disappear and only the search for profit remains.

Stolnik Data Center – SDC Stolnik (Photo: Neterra)

Finding the golden mean, Dilkov builds a huge network of partnerships, providing access to networks around the world (Neterra also operates its own network). One of his more recent attempts to turn the partnership model into business is NetIX, a global Internet exchange platform established back in 2013, in which Internet service providers can exchange Internet access.

In 2019, Neven Dilkov went on a two-day business trip to Brazil, from which he returned with his first Brazilian client. A very good partner was also found in Brasil. Neven sees this as an achievement given the fact that thousands of ISPs operate in Brazil (although the bulk of the market is held by several large players).

A year later “NetIX” announced that they are adding two new points of presence (these are hubs where operators’ networks can connect directly) in Brazil. One of them is in Rio de Janeiro and the other one is in Fortaleza. “The whole operation was profitable almost from the start”, mentions Dilkov, claiming this project to be one of the most successful examples in the company’s history. To illustrate the different approach, we took in Brazil let’s say we went there and said: “We are Neterra and we are a standard telecom operator which is providing you with very good services and conditions” – we would have generated only a few yawns… What we said was: “We are NetIX, and we are the world’s first global internet exchange.”. That worked better.

The hunger for high-speed internet has led to a sharp rise in the number of internet exchanges around the world. In Europe alone, their number almost doubled in the last 10 years, reaching 255 at the end of 2020, according to the European Internet Exchange Association. Between January and December 2020, the speed of average peak traffic on European internet exchanges increased by 44%.

This situation could be explained by the pandemic and the increased internet consumption. Businesses and individual users need faster internet to find information and consume video content online. When we add the other services, such as IPTV, streaming events, etc., which are using the internet access as a ‘backbone’, it explains why ISPs are increasingly joining platforms like “NetIX”. “Everything started to return to the Internet,” says Dilkov. “… and we were born on the Internet, we are the kings of the Internet.”

In the early 1990s, Neven Dilkov studied computer science at the Tsinghua University in China, the Technical University in Sofia, Bulgaria, and then moved to the United States, where he graduated from West Virginia Wesleyan College. In 1995 he found a job at the Chicago company Strategic Technology Resources, where he worked as a software consultant. “It was a great job,” Dilkov recalled.

Although the USA was offering many financial opportunities, Dilkov decided to return to Bulgaria the following year. His plan was to produce consumables for cable TV in China, which were going to be sold in the USA. He attracted as a partner a classmate experienced in creating technologies for cable television. “We had a plan to take over the world,” Dilkov said. It failed in about two months. None of what we planned worked. “

Suddenly Dilkov, who was only 27 at the time, found himself unemployed in Bulgaria during a devastating economic crisis. Banks were going bankrupt, inflation was eating away at people’s savings, and Dilkov had no idea what to do. “I finally decided to do something I needed for myself.”

Back then, internet access was a luxury. The ISP business was just getting started and something as trivial as opening a website was only available to select people.

However, Neven Dilkov already had experience in using the internet. Back at his dorm in the United States, he used to connect over dialup to the global network and that is something he missed back in Bulgaria. He decided that selling internet access would be a good idea. He sold an apartment in his home city of Pleven and financed the purchase of a ground station, which provided a satellite connection between Sofia and Washington.

Sofia Data Center – SDC Sofia (Photo: Neterra)

Dilkov’s company “Spectrum PCT” quickly became a leader in the Internet supply. Dilkov claims that in 1996 the company supplied about 80% of Internet access in Bulgaria. According to him, every month the company’s turnover and capacity sold increased by 30%. “It was the romantic period of business,” he says. “We worked from 9 a.m. to 12 p.m., and we were the happiest people in the world.” The romance ended when Dilkov sold Spectrum PST to Teodor Zahov, who then developed it into one of the largest Internet providers, Spectrum Net. Zahov sold Spectrum Net to A1 in 2010. At the time, A1 paid a total of 72m euros for Spectrum Net and another major internet provider, Megalan.

Dilkov’s next step was to set up a company that built and maintained ground stations. Thus, it became a supplier for its former competitors – the budding Internet providers in Bulgaria. The new company was first named “Spectrum Link”, and later became “Neterra”. Building stations gave Dilkov the opportunity to work with a large number of market players – something he still points out as a key skill of “Neterra”.

“If we exclude the global telecoms, it is rare to find a segment in which one operator owns everything,” says Dilkov. “You cannot provide global services by buying networks around the world. If you want to provide services everywhere, you must work with other operators. “

His company began to build satellite stations not only in Bulgaria but also abroad. His decisive step in the development process of “Neterra” was in 2000 when the company opened its own data transmission center, Sofia Teleport. This allowed the company to provide connectivity for a much larger range of companies and mainly telecoms.

At that time, the competition in the telecommunications sector in Bulgaria was not that great. A significant part of the connectivity was provided by the former state monopolist BTC. Projects like Sofia Teleport were a breath of fresh air for foreign operators who were looking for a local partner to establish a presence. One of these operators was British Telecom.

In general, British Telecom was looking for a place to locate and use its equipment. Logically, a local telecom can provide such a place. After lengthy negotiations, British Telecom signed a contract with Neterra. This opened opportunities for Dilkov to find other major operators as customers.

Another segment for Neterra was IPTV. It launched its Neterra.TV service in 2004, which allowed Bulgarians to watch TV channels abroad. The product’s popularity was growing, and hundreds of thousands were using the IPTV abroad.

The great recession of 2009 did not affect Neterra initially. Business seemed unaffected. On the contrary: the company’s revenues continued to grow and in 2010 the company reported operating revenues of EUR 12.3 million.

Over the next few years, the trend reversed. Neterra’s revenue began to decline. In 2013 Neterra’s revenue was below €7.7 million (about 37% less compared to their revenue in 2010). This did not discourage Dilkov at all. He founded NetIX as an exchange for internet traffic in 2013. The company operates in the market of the so-called internet exchange points. They provide connectivity between the networks of different ISPs.

Without this connectivity, end customers of two different ISPs would not be able to connect and for example, send emails. In many cases, ISP networks are connected through many intermediaries. For instance, if you send an email to someone from a neighboring city, the message may go through a server in New Zealand before it reaches the final recipient, who is only 50 km away from you.

Internet exchange points allow providers to connect their networks so that they can communicate directly. For ISPs, the benefits are reduced costs and better Internet access. NetIX provides connectivity to more than 8,000 networks worldwide. The company’s customers, including ISPs and data exchanges, pay to access the network.

NetIX is one of the projects that Dilkov relies on the most for the growth of his business. He expects that NetIX will have “almost an explosive rise in growth” in the next couple of years. As the main advantage, he points out that NetIX has already accumulated a critical mass of companies in the network, which provides coverage to almost every corner of the world. He points out that NetIX’s strategy is to make money by selling large volumes on low margin profit.

Stolnik Data Center – SDC Stolnik (Photo: Neterra)

After so many years in business, the fact that Dilkov continues to act as an independent player seems remarkable. In recent years, the telecom industry has undergone a process of consolidation. This is also visible in Bulgaria, where mobile operators have consolidated the market for Internet access by buying larger independent providers, and the mobile operators themselves have changed owners several times.

For now, Dilkov is far from these processes. He prefers to have complete control over his businesses, although he does not rule out the possibility of selling one of them if he ever notices that he cannot manage it effectively.

Not that he has such plans. “Being an independent operator has a significant value for us,” says Dilkov. “If we were part of a large telecom group, we would not be in the position we are now: a stable, independent, full of energy telecom service provider worldwide.”

Virtual mobile operator

The business of virtual operators is to buy voice services from mobile operators and sell them to end customers under their own brand. This eliminates the need for investment in building your own mobile network, the value of which can vary between several tens and hundreds of millions of BGN per year. The initiative for their creation in Bulgaria was taken by Neterra and several other companies such as SKAT and Telekabel. Dilkov has been speaking publicly about the project for such an operator since at least 2018. But to date, he admits that it is difficult to predict when this idea may become a reality.