A renewed attempt to merge two local telco megapowers is now seriously being explored by their shareholders...
RIGHT: Ian Kyle, C&W's Fiji-based regional director for C&W in the Pacific.
by Dionisia Tabureguci
THE OPERATIONS of Fiji International Telecommunications Ltd (FINTEL) and Telecom Fiji Ltd (TFL) are currently tagged to come under one portfolio as talks, described as being “very delicate right now”, progressed into its first two weekends when this edition went to press.
At least one shareholder, UK-based Cable & Wireless plc (C&W), has indicated a desire to see this undertaking come to fruition because it believes merging the two entities would ease the currently complex nature of domestic and international telecommunication service provision in Fiji.
“The fact of the matter is that in Fiji, the current structure that we operate under is unusual to say the least,” said Ian Kyle, C&W’s Suva-based region director Pacific Islands..
“You would normally find in a territory that there would be a single national telco to provide telecommunication domestically and internationally. And normally, the common view is that a solid national telco is a good foundation stone for competition to be built on. The trouble is that in Fiji, there is a lot of sniping between everybody because everyone is in their niche part of the market. TFL runs the domestic, FINTEL runs the international, Vodafone runs the mobile. And because of its very nature, there’s a lot of suspicion if you like between TFL and FINTEL. It’s human nature but the fact of the matter though is that whether or not these companies are constructed in a single way, the effect is the same. The issues of communication across the board from domestic to international have all the same challenges—whether it’s one company or two.
“So it seems to C&W that it would be eminently sensible at a time of deregulation to think about consolidation because we can get lots of synergies, lots of efficiencies of scale.
“I mean there are just a lot of redundancies in the way these structures are set up.
“If we could get these companies together, I think there’s scope for making it more efficient as an end to end process,” said Kyle in an interview with this magazine.
C&W owns 49 percent of FINTEL’s issued shares while 51 percent is owned by the Fiji government, managed on its behalf by TFL’s parent company, Amalgamated Telecom Holdings (ATH). FINTEL and TFL have been exclusive international and domestic carriers respectively since 1989 until last month’s signing of a Settlement Deed to fully deregulate Fiji’s telecommunication industry.
The deed, a result of a five-day mediation process last November christened the Radisson Telecom Accord, saw the Fiji government issuing both companies a 15-year non-exclusive open license each in return for the premature ending of the seven years left in their exclusive licenses.
FINTEL’s exclusive hold on international access will expire 18 months from the January 17 signing and according to Kyle, FINTEL will use this time to pursue the merger.
“It is all very exploratory at this stage but what we will be looking at doing is taking FINTEL and TFL and joining the two together and calling it the National Telecom of Fiji or something like that,” said Kyle. “I don’t know what the name would be. That’s just an example. It might just remain TFL. But essentially, rather than having just one company that collects and hands off all the domestic (telephone traffic) to another company to do international delivery, if you combine those two companies into one, you would save a lot of energy.”
While the idea of a FINTEL/TFL merger has been floated for quite some time now, it wasn’t until after last month’s signing that it became a serious consideration for ATH and C&W.
ATH officials have been spending the post-signing weekends attending in-house executive workshops in which overseas experts were being employed to assist the telecom conglomerate rationalise its business portfolio, now that the three main companies under its wings have each been awarded a 15-year open license, effectively giving rise to a possibility of duplication of services, which will make business sense for ATH to avoid.
“The FINTEL/TFL merger is not a new issue,” confirmed Tomasi Vakatora Jnr, acting CEO for ATH. “We had been looking at it in the past but it is now being explored in light of the new industry environment. It has to be seen in a commercial perspective because you don’t go into something like this unless you can get something out of it. You only do mergers and acquisition for two reasons: either you are going to get more profits to pay more returns to your shareholders or your balance sheet gets stronger, adding shareholder value. Unless you add shareholder value, there is no point in doing it.”
While the business case is being explored, both entities at the outset would have strong points to add to each other’s operations should there be a merger.
In FINTEL’s case, it would be a relief, given its vulnerability right now.
“Well before and up until the Radisson Accord, and still, even after the Radisson Accord but less strongly, we felt that FINTEL needed to merge because it was probably, out of all the companies going into those discussions, essentially potentially had a lot to lose because it only had one little section of the market,” said Kyle.
“We’ve been quite open in our discussions with everybody on this merger although we have to say we are very pleased with the outcome for FINTEL with the Radisson Accord and the potential it now has to diversify and grow into something bigger than the niche operator it previously was.
“I think what the Radisson Accord has done to a large extent is make everybody aware of what the rules are now and how they can see their businesses going forward. But I have to say that from the C&W perspective, it doesn’t change our view. We still feel that it would be very logical for these two companies to join together.”
For TFL, it could do with FINTEL’s international experience, although it’s not ruling out doing international on its own. In any case, its relationship with FINTEL has been a major source of revenue and which has helped subsidise its provision of services to rural Fiji.
“It’s not easy to set up your own gateway because when you take calls overseas, you have to negotiate counter parties,” said Vakatora.
“You will have to negotiate individual agreements in each country you want to terminate your calls in. You would probably be setting up hundreds of agreements because of this, so it’s not a very easy thing. We therefore will have to look at the business case because there are costs involved. Alternatively, we could just go and deal with somebody who already has connections in other places and use their networks. Of course, FINTEL will have to be competitive after 18 months and if it does it at a good price, well then operators may still connect through FINTEL for international.”
But whether that would necessarily mean TFL would find the merger idea attractive can only be established in the coming months, as an announcement on it is being promised.
For FINTEL, should the merger talks collapse, the company is ready to go out on a limb.
“If the merger doesn’t go forward, I think we’ll ensure that FINTEL strongly develops into a multi-service company,” said Kyle. “We will use Kidanet strongly to go into the ISP market and become a vibrant ISP and VoIP provider. We’ve got permission to provide mobile MVNO (Mobile Virtual Network Operator) services. That’s another lucrative market that we might want to get into. More importantly, we have an open license, which allows us to provide alternative domestic and international voice directly to customers. So the potential service list for FINTEL has gone up a lot now, compared to what we were before.
“But if we do go stand-alone, there will be quite a re-learning process for FINTEL to deal with retail customers.”
---
This article appeared as: "Cable & Wireless reveals why FINTEL/TFL merger makes sense" in the Business Intelligence section of Islands Business Magazine, February 2008. pp: 50,51
RIGHT: Ian Kyle, C&W's Fiji-based regional director for C&W in the Pacific.
by Dionisia Tabureguci
THE OPERATIONS of Fiji International Telecommunications Ltd (FINTEL) and Telecom Fiji Ltd (TFL) are currently tagged to come under one portfolio as talks, described as being “very delicate right now”, progressed into its first two weekends when this edition went to press.
At least one shareholder, UK-based Cable & Wireless plc (C&W), has indicated a desire to see this undertaking come to fruition because it believes merging the two entities would ease the currently complex nature of domestic and international telecommunication service provision in Fiji.
“The fact of the matter is that in Fiji, the current structure that we operate under is unusual to say the least,” said Ian Kyle, C&W’s Suva-based region director Pacific Islands..
“You would normally find in a territory that there would be a single national telco to provide telecommunication domestically and internationally. And normally, the common view is that a solid national telco is a good foundation stone for competition to be built on. The trouble is that in Fiji, there is a lot of sniping between everybody because everyone is in their niche part of the market. TFL runs the domestic, FINTEL runs the international, Vodafone runs the mobile. And because of its very nature, there’s a lot of suspicion if you like between TFL and FINTEL. It’s human nature but the fact of the matter though is that whether or not these companies are constructed in a single way, the effect is the same. The issues of communication across the board from domestic to international have all the same challenges—whether it’s one company or two.
“So it seems to C&W that it would be eminently sensible at a time of deregulation to think about consolidation because we can get lots of synergies, lots of efficiencies of scale.
“I mean there are just a lot of redundancies in the way these structures are set up.
“If we could get these companies together, I think there’s scope for making it more efficient as an end to end process,” said Kyle in an interview with this magazine.
C&W owns 49 percent of FINTEL’s issued shares while 51 percent is owned by the Fiji government, managed on its behalf by TFL’s parent company, Amalgamated Telecom Holdings (ATH). FINTEL and TFL have been exclusive international and domestic carriers respectively since 1989 until last month’s signing of a Settlement Deed to fully deregulate Fiji’s telecommunication industry.
The deed, a result of a five-day mediation process last November christened the Radisson Telecom Accord, saw the Fiji government issuing both companies a 15-year non-exclusive open license each in return for the premature ending of the seven years left in their exclusive licenses.
FINTEL’s exclusive hold on international access will expire 18 months from the January 17 signing and according to Kyle, FINTEL will use this time to pursue the merger.
“It is all very exploratory at this stage but what we will be looking at doing is taking FINTEL and TFL and joining the two together and calling it the National Telecom of Fiji or something like that,” said Kyle. “I don’t know what the name would be. That’s just an example. It might just remain TFL. But essentially, rather than having just one company that collects and hands off all the domestic (telephone traffic) to another company to do international delivery, if you combine those two companies into one, you would save a lot of energy.”
While the idea of a FINTEL/TFL merger has been floated for quite some time now, it wasn’t until after last month’s signing that it became a serious consideration for ATH and C&W.
ATH officials have been spending the post-signing weekends attending in-house executive workshops in which overseas experts were being employed to assist the telecom conglomerate rationalise its business portfolio, now that the three main companies under its wings have each been awarded a 15-year open license, effectively giving rise to a possibility of duplication of services, which will make business sense for ATH to avoid.
“The FINTEL/TFL merger is not a new issue,” confirmed Tomasi Vakatora Jnr, acting CEO for ATH. “We had been looking at it in the past but it is now being explored in light of the new industry environment. It has to be seen in a commercial perspective because you don’t go into something like this unless you can get something out of it. You only do mergers and acquisition for two reasons: either you are going to get more profits to pay more returns to your shareholders or your balance sheet gets stronger, adding shareholder value. Unless you add shareholder value, there is no point in doing it.”
While the business case is being explored, both entities at the outset would have strong points to add to each other’s operations should there be a merger.
In FINTEL’s case, it would be a relief, given its vulnerability right now.
“Well before and up until the Radisson Accord, and still, even after the Radisson Accord but less strongly, we felt that FINTEL needed to merge because it was probably, out of all the companies going into those discussions, essentially potentially had a lot to lose because it only had one little section of the market,” said Kyle.
“We’ve been quite open in our discussions with everybody on this merger although we have to say we are very pleased with the outcome for FINTEL with the Radisson Accord and the potential it now has to diversify and grow into something bigger than the niche operator it previously was.
“I think what the Radisson Accord has done to a large extent is make everybody aware of what the rules are now and how they can see their businesses going forward. But I have to say that from the C&W perspective, it doesn’t change our view. We still feel that it would be very logical for these two companies to join together.”
For TFL, it could do with FINTEL’s international experience, although it’s not ruling out doing international on its own. In any case, its relationship with FINTEL has been a major source of revenue and which has helped subsidise its provision of services to rural Fiji.
“It’s not easy to set up your own gateway because when you take calls overseas, you have to negotiate counter parties,” said Vakatora.
“You will have to negotiate individual agreements in each country you want to terminate your calls in. You would probably be setting up hundreds of agreements because of this, so it’s not a very easy thing. We therefore will have to look at the business case because there are costs involved. Alternatively, we could just go and deal with somebody who already has connections in other places and use their networks. Of course, FINTEL will have to be competitive after 18 months and if it does it at a good price, well then operators may still connect through FINTEL for international.”
But whether that would necessarily mean TFL would find the merger idea attractive can only be established in the coming months, as an announcement on it is being promised.
For FINTEL, should the merger talks collapse, the company is ready to go out on a limb.
“If the merger doesn’t go forward, I think we’ll ensure that FINTEL strongly develops into a multi-service company,” said Kyle. “We will use Kidanet strongly to go into the ISP market and become a vibrant ISP and VoIP provider. We’ve got permission to provide mobile MVNO (Mobile Virtual Network Operator) services. That’s another lucrative market that we might want to get into. More importantly, we have an open license, which allows us to provide alternative domestic and international voice directly to customers. So the potential service list for FINTEL has gone up a lot now, compared to what we were before.
“But if we do go stand-alone, there will be quite a re-learning process for FINTEL to deal with retail customers.”
---
This article appeared as: "Cable & Wireless reveals why FINTEL/TFL merger makes sense" in the Business Intelligence section of Islands Business Magazine, February 2008. pp: 50,51
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