SUNBIZ

ATH And Its Priorities In Fiji And The Pacific

  Fiji’s telecom giant Amalgamated Tel­ecom Holdings Limited is working to expand its Pacific footprint. The company says the “small” region of­fers many opportunities, despite the watch­ful eyes of foreign
25 Aug 2018 10:00
ATH And Its Priorities In Fiji And The Pacific
Amalgamated Telecom Holdings Limited chief executive officer and company secretary Ivan Fong during the group’s annual general meeting of shareholders on August 23, 2018. Photo: Ronald Kumar

 

Fiji’s telecom giant Amalgamated Tel­ecom Holdings Limited is working to expand its Pacific footprint.

The company says the “small” region of­fers many opportunities, despite the watch­ful eyes of foreign regulators who some­times deny it access to other markets.

The group has two major transactions lined-up in the year ahead.

The first is the takeover of American Sa­moa Telecom (AST) – trading as BlueSky Communications – that was first announced in 2016.

The transaction has been delayed by Amer­ican regulators. Once complete, it will cost ATH around FJ$167m.

The second is the integration of Fiji In­ternational Telecommunications Limited (FINTEL) with Telecom Fiji Limited (TFL).

The merger proposal has been conditional­ly approved by Fiji’s competition agency, as the group looks to consolidate its business in the face of competition from Digicel.

The moves represent ATH’s growing investment portfolio, which started with big-money acquisitions in Kiribati (ATH Kiribati Limited) and Vanuatu (Telecom Va­nuatu).

Consequently, the group reported that its expenses increased by 12.9 per cent.

This means shareholders, at $18,994,718.06, received fewer dividends than in 2017.

However, ATH’s share price on the South Pacific Stock Exchange has increased to $3.07 (Friday) from $1.78 in 2017.

Group chief executive officer and company secretary Ivan Fong says ATH is always looking for new sources of revenue.

Despite a consolidated net profit after tax and minority interest of $15.88m this year, Mr Fong believes ATH has no time to rest on its laurels.

The group is exploring opportunities in Samoa and the Cook Islands, Mr Fong re­vealed.

The Fiji National Provident Fund (FNPF) owns a majority stake (72.6 per cent) in ATH.

ATH has 100 per cent stake in FINTEL, TFL and Fiji Directories Limited, and also jointly owns Vodafone Fiji (51 per cent) with FNPF.

In Fiji Sun’s continuing series of inter­views with telecom carriers in Fiji, Mr Fong details the Group’s goals and priorities.

Mr Fong also talks about the TFL-FINTEL merger that is close to being finalised.Structure

Excerpts from the interview:

What are ATH’s immediate and future goals in the Fijian, as well as the regional market?

Within Fiji, one of the things we’ve an­nounced is the restructure of Telecom Fiji Limited and Fiji International Telecommu­nications Limited.

That will be one of the major exercises for us.

We are also constantly looking at the de­mand in the market in Fiji.

At the moment, there’s more demand for wireless broadband and for internet.

Interestingly enough, we reviewed video traffic online is growing and a lot of that is going through the fixed network.

Hence, TFL will look more at bringing fi­bre to the home; fibre to supply the other network providers as well.

From Vodafone Fiji’s side, we are looking at expanding the network further with our trials on 5G network.

Once the time is right, they will deploy 5G. Those are our goals in Fiji.

In the Pacific, we are in Kiribati, and Va­nuatu. Kiribati is moving ahead fast. They launched their 4G network about two years ago.

We are now in the process of talking with the World Bank, and the Government of Kiribati, for the servicing of all the outer islands in Kiribati.

Hopefully, that comes online.

It’s not a profitable business; but from a service perspective, it is one of our aspira­tions is to cover most of the population in the country.

We don’t want to be a carrier where you go in and only serve half the population.

In Vanuatu, we rolled out 4G in November last year. The teams have been focussed on that.

They are negotiating with the cable provid­er in Vanuatu to reduce the price of internet further.

These are things we are looking at doing in that market. We continue to look at the rest of the Pacific.

It’s a small region that represents big op­portunity, but it’s not every day that you get the chance to invest in a market.

It takes time and a lot of effort to get these things through and we’ll be working on them a lot more in the coming year.”

Why is the TFL-FINTEL merger and the acquisition of BlueSky taking longer than expected?

The BlueSky transaction we announced in 2016.

We are coming to September 2018 so it will be two years.

It’s just the nature of the United States ap­proval process from a foreign investment, security and telecommunications regula­tion perspective.

These are things we normally have to go through anyway.

What we have to do is find the best way to co-operate with the authorities.

We have to answer all of their questions and clarify any queries they have.

The merger with TFL is going through. We’ve discussed with the commerce com­mission who in principal are okay with the transaction.

They are waiting for the joint boards of all of the companies to sit and agree to the transaction.

Plus, the directors have to take the restruc­ture to the courts to get it approved.

Once it is done then it is a go ahead from there.

It’s just the administrative process of get­ting all the paper work together that’s left.

The commerce commission is looking at competition in Fiji.

For ATH, we won’t so much reduce com­petition but their concern is we could inte­grate the companies and pull some products of the market, that sort of thing.

They are looking for certain assurances. In principle, we’re okay with it.

But as you know, technology changes every day.

Sometimes new products overtake old ones.

There are certain things that you cannot predict for the future and we just have to make it clear with the commerce commis­sion that it is not caught in the process.

You don’t want to be stopped from bringing in a new technology in because you can’t re­move the old one, for instance.

I think this will go through in the next few months. We can’t exactly say when but right now we see no red flags.

What has ATH’s priorities been in recent years?

Early years was really about tidying up our local operations.

For instance, fixing up the operations of TFL, the FINTEL Kidanet operations – no we are looking at integrating that.

We’ve done quite a lot of that work so in the last two years, we have been looking at expansion in the region.

We are looking at transaction in Cook Is­lands, Samoa and American Samoa.

To be honest, we’ve put out a lot of EOIs in places like Solomon Islands, Vanuatu and Papua New Guinea and Timor Leste as well

But in transactions you work on prob­abilities. Not all of them are going to hap­pen.

One or two may come through and those are the things we will focus on.

How does your profitability and revenue trends compare with international benchmarks?

Our margins in the Pacific are quite high and still quite attractive.

Our revenue grew by about 15 to 16 per cent.

On the global chart, most operators are growing under five per cent revenues year-on-year.

In terms of profitability, we are sitting slightly on the high side of what most tel­ecom companies earn.

But that’s no reason to relax and say you are doing well because as the market be­comes more competitive, the margins will reduce.

You have to always look for new sources of revenue; new businesses and also try to expand your customer base – and those are the things ATH is looking at.

Not so much the revenue growth or prof­itability, we focus on the other things and then as a consequence we achieve growth in those areas.

Who do you consider as your major competitors?

For us, Digicel is the big competitor in the region.

But I wouldn’t say Digicel off the cuff, be­cause today, with the internet, anyone can compete with you for all types of services from anywhere in the world.

We’ve always had a concern, which you can see in the annual report, about over-the-top media services (OTT) traffic from Skype, Whatsapp, Viber (and more) which is seriously threatening our voice busi­ness.

That (voice) business is declining around the world.

But one of the things we saw in Fiji when we did some of our approval processes, in­ternet voice traffic is as high as nine times more than traditional network traffic.

I think that concern has eased for us somewhat.

It has overtaken voice but the companies are still holding their result.

The initial thinking was these guys (Whatsapp, Viber and Skype) will come and offer services for free and cut all the profits out of the business.

What it’s shown us is while more custom­ers will use voice services, there’s a lot of customers who will pay for value and quality as well.

What are some of the major investments you’ve undertaken recently and at what cost?

Every year, the Group invests in refresh­ing its networks and technologies so it’s not unusual for capital investments any­where from $40 to $80 million in a year.

The acquisitions we do, as I’ve al­ready said Kiribati was about AU$8m (FJ$12.34m); Vanuatu was US$28m (FJ$59.44m); if we get the BlueSky trans­action through, it’ll be about US$80m (FJ$169.84).

Each of the markets we go to, it’s usually an $80-$100m investment.

What about your return on investments?

From the shareholders side, they always expect returns to be higher.

But returns come in two ways. One is the dividend return; the other is the growth in share appreciation, which on the back of our investment strategy, has made the shareholders confident.

Our share price value has been moving significantly at $3.07 per share (on Thurs­day).

It is a good sign for us to show the share­holders that we agree with their strategy.

But obviously once they agree with your strategy, from management’s side we have to deliver.

In the future years, they would expect that to come back in the form of increase revenues, profits and returns.

Are there plans afoot for FNPF to takeover 100 per cent of ATH?

The discussions are up to the sharehold­ers as to how they re-structure, how they acquire or even FNPF potentially signing down some of its shares.

At the moment, there’s a high demand for ATH shares but there’s not enough stock on the market to actually meet the demand.

Some of the larger shareholders may consider whether they want to buy up or sell some of their shares.

That is a shareholder issues.

We’ve met with FNPF and they agree with our investment strategy.

In no way we see any possible re-struc­ture at FNPF that will conflict with or put at risk some of the investments that we have planned.

What are some major challenges in the markets you operate in?

Most of them are on the cost of band­width.

Globally, it’s still expensive.

But Fiji is cheaper compared to the rest of the Pacific. That’s challenge number one.

Challenge number two is that many mar­kets aren’t as developed as Fiji.

While you can invest in telecommunica­tions, some of them don’t have road, pow­er or water.

That means the priorities there will be different.

However, we see that telecommunica­tions can be a key enabler in accelerating all of that.

What measures are you taking to improve your network?

Our carriers are running regular net­work audits to make sure they minimise that risk.

In every network there will be outages.

At what point does it become unreason­able for consumers at the end of the day.

You don’t want your companies to be in that position.

But remember also, improving the qual­ity of service requires quite significant investments in your network.

For example, Fiji is limited by the fact that we have only submarine cable con­necting Fiji.

If anything happens to that cable, we don’t have a second option.

We could do satellite – and we’ve spoken to some satellite providers.

But there is no way they can provide the capacity to meet the demands of the Fiji market.

So there are some natural limitations.

We also have to ask how much a customer is willing to pay because markets like the US will charge more for the servicing of their customers.

But obviously with the kind of prices they charge, they can build more redun­dancies and gold-plate their network as well.

Do you think it is unreasonable for Government to fine mobile carriers for outages in their network?

From a regulatory perspective, even from a consumer and company perspective, it is good to establish benchmarks for where you want to be.

That gives some definition to all opera­tors.

Sometimes it is subjective as well as to what is acceptable and what is not.

I think once things like outages are de­fined, carriers will step up.

I think the move is okay.

There’s a lot of other things that need to be defined in the standards, but most countries have it so we shouldn’t be sur­prised.

But anything that becomes finalised has to look at what the market can afford.

It’s about setting the relatively and where you want to be.

Can customers expect prices to come down given the level of growth?

I don’t think that from a competitive per­spective prices are bound to decrease.

But what you find is that operators like Vodafone, TFL and even Digicel offer more to customers for the dollar they pay.

It’s a fact of business.

No company wants to make less revenue than before.

The way they try to guarantee is by tell­ing customers: you may be paying the same amount, but I’ll give you much more for what you gave.

Do you think there’s enough competition in the telecom market in Fiji, or is there room for one more player?

That’s up to the competitor if they want to come in or not.

I’d say Fiji is very competitive.

There are some markets in the Pacific that are too small for even two operators.

There are markets which have room for more than one competitor.

It’s really up to each person trying to en­ter the market.

Can they compete and can they provide a niche? It’s really up to them.

It depends on what they have to offer.

But if you come in without a proper strategy, don’t be surprised when the big boys make life very hard for you.

Do you have any closing remarks?

I think our reports were well-received by the shareholders.

They did notice our share price and it is vote of confidence for the company’s busi­ness plan.

But of course, they expect us to deliver re­sults in the future to match that.

Feedback: sheldon.chanel@fijisun.com.fj

 

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