The path to growth
As convergence of technology brings diverse sectors together and creates new opportunities, strategist Deepak Padmanabhan explains to The Times Business how Dubai is adding value through the synergy of international networks. Deepak Padmanabhan is...
As convergence of technology brings diverse sectors together and creates new opportunities, strategist Deepak Padmanabhan explains to The Times Business how Dubai is adding value through the synergy of international networks.
Deepak Padmanabhan is diplomatic when he admits he has often been accused of thinking faster than he can talk, and hopes one can follow his train of thought. Though the observation, as one is soon to discover, is not totally out of place, the lucidity and coherence of the thoughts expressed are indeed stimulating.
Mr Padmanabhan is one of the leaders responsible for creating and building the Dubai Internet City and Dubai Media City as TECOM Investments' chief strategy and business development officer. He is now the chief executive officer of Emirates International Telecommunications (EIT), a joint venture between TECOM Investments - an operating company of Dubai Holding - and Dubai Investment Group, one of Dubai Holding's financial investing arms. Mr Padmanabhan also sits on the board of both Go and SmartCity Malta. EIT owns 60 per cent of the shares in Go. That is his Malta connection.
EIT was established in 2006 with a very specific mission: to move beyond Dubai and invest across the telecom value chain in other markets. In terms of diversification strategy, EIT was seeking to invest in both developed and developing countries and looked for either established incumbent companies with strong market positions or "challenger" companies already on a growth path.
Incidentally, this was the time when the Maltese government is believed to have left its business card in Dubai. The Dubai model was clearly a successful one. With what Malta had to offer, would it not be possible to replicate some of this success here?
Dubai, of course, followed up the lead and quickly realised the potential of what Malta was offering. The country was well and truly "on the radar" when strategic investments out of Dubai were being considered.
One particular project that was thought to be a good fit was the new ICT cluster model that Dubai wished to replicate outside the United Arab Emirates.
At the time, Maltacom was also going through its privatisation exercise. This fitted into EIT's strategy of investing in incumbent companies which had potential for further growth and modernisation. For Malta, it was being at the right place at the right time.
"We consider ourselves strategic rather than financial investors, in the sense that we are not after an immediate financial or cash payback. We have the stamina and patience to stick with an investment until it grows and transforms into a more profitable business that creates more value in its own market as well as fits in within our value chain.
"Given this long-term approach, we see the countries where we make our investments as partners - this implies a learning curve for us as we have to understand them and their culture, too. On the other hand, once we see that a country is prepared to do business with us, we are prepared to make multiple investments there, so that the relationship develops into a win-win.
"Malta matched a lot of our investment criteria and seemed ideal as a base for us in this region, enabling us to roll out our strategy of multiple investments in a region like the Mediterranean. Multiple investments in a region bring in economies of scale and are conducive to growth.
"Once a transaction is completed, we bring about the transformational changes that are required, and monitor and manage the progress of each project. In order to grow in a sustained manner, we take root together with our business partners and create synergies even between our own investments.
"This kind of synergy, one of the pillars of our strategy, is already at work with our investments in the Mediterranean region, through our connection with Interoute, the next generation pan-European network operator," he says.
Referring to the Maltacom acquisition, Mr Padmanabhan is categorical that nobody did anyone any favours in the deal. "We were by far the highest bidders; apart from that we had a transformation strategy and a plan which could turn around Maltacom from a strong but stable incumbent into a company with a dynamic growth model and brighter prospects."
An incumbent requires strategic transformation in several areas, including modernisation from commercial, financial and technological perspectives, says Mr Padmanabhan. "When you acquire a company, you inherit a legacy. At this stage, you assess what you have, what is being done and how, and if that can be used to take you where you need to go."
As part of its transformation, Go has embarked on 35 projects grouped into a number of strategic initiatives spread across all aspects of the business. Investment in 3G services and restructuring of the organisation by consolidating business among the group's subsidiaries are steps which Go has taken to meet competition challenges.
Genuine quad-play companies are uniquely placed to offer an integrated package of services, from internet to TV, and fixed and mobile telephony, he says.
"This process, which we have put in motion to turn Maltacom around into Go, was not just a rebranding exercise but a much more deep-rooted transformational change from a mentality of just dealing with subscribers to one of serving customers. To achieve this we have built on what was already there: the people, their energy, the company's reputation and reliability.
"In fact, at this transformational stage, we continue to invest in capital expenditure to upgrade the infrastructure, which is in excess of 17 per cent of revenues per year. This is way beyond industry benchmarks of 12 per cent capex investments in typical incumbents. These investments will create opportunities for the company, its shareholders and its customers, by bringing in the latest technologies and services to Malta.
"We have also added the knowledge and expertise we have acquired through our international network, to bring the best practices, the standards, the benchmarks for the delivery of services and products. The other elements of our strategy will ensure that the company heads for long-term growth rather than merely achieve budgets.
"Dealing with human resources during a transformational phase requires a lot of care. As you improve technology and take the business into new areas, the mix of skills and competences required also changes. Flexibility and retraining therefore become strategic priorities. People may need to increase their competence in other areas where they can be deployed and make a significant contribution to increase productivity levels.
"We have found that this is the situation with many incumbent companies undergoing transformation in technology-led industries. Apart from redeploying existing staff, such companies may also need to bring in new and additional human resources.
With regard to labour unit costs, Mr Padmanabhan says these are fair in Malta. "If you want to get the right talent, you need to pay the salaries dictated by the telecom industry, which in Malta's case are neither high nor low, just fair," he says.
As incumbents face the challenge of growth, the corporate culture also needs to adapt and change, from top to bottom, he says. "The reality is that, typically, one needs to move away from a mentality of merely collecting money from subscribers, to a more marketing-led, customer-oriented approach to achieve growth targets. Employees need the motivation and expertise to be able to attract and serve customers," says Mr Padmanabhan.
And growth is a basic business necessity, he adds. "We are in Go to expand it until it achieves its potential and delivers higher levels of returns, which would be beneficial to all stakeholders. Before we can grow it as fast as we'd like to, we need, however, to complete the transformational phase and ensure that all is in place for when we change gears.
"Some of the growth we are seeking can be achieved organically, that is by doing more of what the company already does and by doing it better. The acquisition of assets (inorganic growth) will be the other driver for its growth. Fortunately Go is in a position to take advantage of opportunities that could maximise its potential, thereby deploying its financial resources strategically.
"We have entered into this investment for the long term and therefore prefer to reinvest its excess cash wisely rather than distribute it among shareholders, which would be a short term and one-off benefit.
"By investing in growth-oriented assets in international markets, Go can overcome some of the limitations of the economies of scale of the Maltese market."
Which brings one to the acquisition by Go and EIT of 21 per cent of Forthnet, a leading Greek telecoms and internet operator listed on the Athens Stock Exchange.
"At the EIT level, we would not normally have invested in the Greek operation as it does not meet our investment criteria by virtue of its small size. Such an opportunity makes sense for an operating company such as Go, as it presents a growth opportunity with a moderate level of risk, within Europe's regulatory framework.
"As it happened, another related opportunity was on the table as Forthnet was vying to invest in the television sector which would have entailed a more significant investment. This is why EIT decided to invest with and support Go in Greece."
Mr Padmanabhan adds: "As customers needs evolve, and technology evolves, we need to keep up with the rhythm. Malta has a savvy, price-conscious customer base which makes it an ideal incubating test market. We can introduce and concept-proof new initiatives and technologies given the size of Malta. In this case, Malta's scale works to your advantage and you might benefit from new technologies and market innovations earlier than others."
Clearly, the path to growth is not without its challenges but, with the sort of vision and energy that Mr Padmanabhan has outlined for Dubai and EIT, Malta has identified the right partners with which to go down the exciting path to the future.
Deepak Padmanabhan is diplomatic when he admits he has often been accused of thinking faster than he can talk, and hopes one can follow his train of thought. Though the observation, as one is soon to discover, is not totally out of place, the lucidity and coherence of the thoughts expressed are indeed stimulating.
Mr Padmanabhan is one of the leaders responsible for creating and building the Dubai Internet City and Dubai Media City as TECOM Investments' chief strategy and business development officer. He is now the chief executive officer of Emirates International Telecommunications (EIT), a joint venture between TECOM Investments - an operating company of Dubai Holding - and Dubai Investment Group, one of Dubai Holding's financial investing arms. Mr Padmanabhan also sits on the board of both Go and SmartCity Malta. EIT owns 60 per cent of the shares in Go. That is his Malta connection.
EIT was established in 2006 with a very specific mission: to move beyond Dubai and invest across the telecom value chain in other markets. In terms of diversification strategy, EIT was seeking to invest in both developed and developing countries and looked for either established incumbent companies with strong market positions or "challenger" companies already on a growth path.
Incidentally, this was the time when the Maltese government is believed to have left its business card in Dubai. The Dubai model was clearly a successful one. With what Malta had to offer, would it not be possible to replicate some of this success here?
Dubai, of course, followed up the lead and quickly realised the potential of what Malta was offering. The country was well and truly "on the radar" when strategic investments out of Dubai were being considered.
One particular project that was thought to be a good fit was the new ICT cluster model that Dubai wished to replicate outside the United Arab Emirates.
At the time, Maltacom was also going through its privatisation exercise. This fitted into EIT's strategy of investing in incumbent companies which had potential for further growth and modernisation. For Malta, it was being at the right place at the right time.
"We consider ourselves strategic rather than financial investors, in the sense that we are not after an immediate financial or cash payback. We have the stamina and patience to stick with an investment until it grows and transforms into a more profitable business that creates more value in its own market as well as fits in within our value chain.
"Given this long-term approach, we see the countries where we make our investments as partners - this implies a learning curve for us as we have to understand them and their culture, too. On the other hand, once we see that a country is prepared to do business with us, we are prepared to make multiple investments there, so that the relationship develops into a win-win.
"Malta matched a lot of our investment criteria and seemed ideal as a base for us in this region, enabling us to roll out our strategy of multiple investments in a region like the Mediterranean. Multiple investments in a region bring in economies of scale and are conducive to growth.
"Once a transaction is completed, we bring about the transformational changes that are required, and monitor and manage the progress of each project. In order to grow in a sustained manner, we take root together with our business partners and create synergies even between our own investments.
"This kind of synergy, one of the pillars of our strategy, is already at work with our investments in the Mediterranean region, through our connection with Interoute, the next generation pan-European network operator," he says.
Referring to the Maltacom acquisition, Mr Padmanabhan is categorical that nobody did anyone any favours in the deal. "We were by far the highest bidders; apart from that we had a transformation strategy and a plan which could turn around Maltacom from a strong but stable incumbent into a company with a dynamic growth model and brighter prospects."
An incumbent requires strategic transformation in several areas, including modernisation from commercial, financial and technological perspectives, says Mr Padmanabhan. "When you acquire a company, you inherit a legacy. At this stage, you assess what you have, what is being done and how, and if that can be used to take you where you need to go."
As part of its transformation, Go has embarked on 35 projects grouped into a number of strategic initiatives spread across all aspects of the business. Investment in 3G services and restructuring of the organisation by consolidating business among the group's subsidiaries are steps which Go has taken to meet competition challenges.
Genuine quad-play companies are uniquely placed to offer an integrated package of services, from internet to TV, and fixed and mobile telephony, he says.
"This process, which we have put in motion to turn Maltacom around into Go, was not just a rebranding exercise but a much more deep-rooted transformational change from a mentality of just dealing with subscribers to one of serving customers. To achieve this we have built on what was already there: the people, their energy, the company's reputation and reliability.
"In fact, at this transformational stage, we continue to invest in capital expenditure to upgrade the infrastructure, which is in excess of 17 per cent of revenues per year. This is way beyond industry benchmarks of 12 per cent capex investments in typical incumbents. These investments will create opportunities for the company, its shareholders and its customers, by bringing in the latest technologies and services to Malta.
"We have also added the knowledge and expertise we have acquired through our international network, to bring the best practices, the standards, the benchmarks for the delivery of services and products. The other elements of our strategy will ensure that the company heads for long-term growth rather than merely achieve budgets.
"Dealing with human resources during a transformational phase requires a lot of care. As you improve technology and take the business into new areas, the mix of skills and competences required also changes. Flexibility and retraining therefore become strategic priorities. People may need to increase their competence in other areas where they can be deployed and make a significant contribution to increase productivity levels.
"We have found that this is the situation with many incumbent companies undergoing transformation in technology-led industries. Apart from redeploying existing staff, such companies may also need to bring in new and additional human resources.
With regard to labour unit costs, Mr Padmanabhan says these are fair in Malta. "If you want to get the right talent, you need to pay the salaries dictated by the telecom industry, which in Malta's case are neither high nor low, just fair," he says.
As incumbents face the challenge of growth, the corporate culture also needs to adapt and change, from top to bottom, he says. "The reality is that, typically, one needs to move away from a mentality of merely collecting money from subscribers, to a more marketing-led, customer-oriented approach to achieve growth targets. Employees need the motivation and expertise to be able to attract and serve customers," says Mr Padmanabhan.
And growth is a basic business necessity, he adds. "We are in Go to expand it until it achieves its potential and delivers higher levels of returns, which would be beneficial to all stakeholders. Before we can grow it as fast as we'd like to, we need, however, to complete the transformational phase and ensure that all is in place for when we change gears.
"Some of the growth we are seeking can be achieved organically, that is by doing more of what the company already does and by doing it better. The acquisition of assets (inorganic growth) will be the other driver for its growth. Fortunately Go is in a position to take advantage of opportunities that could maximise its potential, thereby deploying its financial resources strategically.
"We have entered into this investment for the long term and therefore prefer to reinvest its excess cash wisely rather than distribute it among shareholders, which would be a short term and one-off benefit.
"By investing in growth-oriented assets in international markets, Go can overcome some of the limitations of the economies of scale of the Maltese market."
Which brings one to the acquisition by Go and EIT of 21 per cent of Forthnet, a leading Greek telecoms and internet operator listed on the Athens Stock Exchange.
"At the EIT level, we would not normally have invested in the Greek operation as it does not meet our investment criteria by virtue of its small size. Such an opportunity makes sense for an operating company such as Go, as it presents a growth opportunity with a moderate level of risk, within Europe's regulatory framework.
"As it happened, another related opportunity was on the table as Forthnet was vying to invest in the television sector which would have entailed a more significant investment. This is why EIT decided to invest with and support Go in Greece."
Mr Padmanabhan adds: "As customers needs evolve, and technology evolves, we need to keep up with the rhythm. Malta has a savvy, price-conscious customer base which makes it an ideal incubating test market. We can introduce and concept-proof new initiatives and technologies given the size of Malta. In this case, Malta's scale works to your advantage and you might benefit from new technologies and market innovations earlier than others."
Clearly, the path to growth is not without its challenges but, with the sort of vision and energy that Mr Padmanabhan has outlined for Dubai and EIT, Malta has identified the right partners with which to go down the exciting path to the future.