“Nossa!”

Melita employees would do well to learn this word – meaning “Wow!” – and a few other words of Portuguese as they may have much more to do in this country than they expected.

This is one of the unexpected outcomes of Melita’s recent sale, announced last December, to Apax Partners, a French private equity firm, and Fortino Capital, a Belgian venture capital company, for an undisclosed price.

Melita gave little information about the bids, and CEO Andrei Torriani only smiled when asked.

“Let us say that there was substantial interest,” he said, noting that this was a vote of confidence for both the company and for Malta.

“The bids came from a multitude of investors, ranging from big telco groups, investment groups and private equity investors to private investors, coming from diverse geographic areas spanning from North America to Asia.”

The ultimate decision was clearly about price but he stressed that Melita also wanted to find “a fundamental understanding of where the business can go”.

Apax was an obvious choice. It has a track record of over €2.5 billion worth of investments in 200 companies and, over the years, it invested – and exited from – 20 telco companies, with another 15 currently invested in.

“They recently invested in a cable operator in Portugal and there has already been some discussion on how the model we built here can be exported to Portugal and potentially other markets. I think that is quite exciting for Malta, for Melita and for its employees… I foresee that there will be Maltese spending some time in Portugal and vice versa,” he smiled.

The eventual sale of Melita was always on the cards, par for the course where private equity is involved as they tend to liquidate their investments between five to eight years down the road when the investors’ funds – often pensions – need to be paid out. The most important point, for Mr Torriani, is why the investors would have been interested in Melita, a company founded 23 years ago by entrepreneur Joseph Gasan, who is till now still its chairman. The telco went through a slump at one point but this year it is expecting €31 million in earnings before tax, up from €16 million seven years ago.

“That is one of the reasons for the high level of interest, especially from private equity groups. They looked at what we are doing in Malta and saw it as the model of the future for telecommunications.”

The model he talks about is based on the latest telco buzzword: convergence

“Essentially all telecommunications traffic is becoming IP focused – going over broadband – and the successful telco providers are the ones able to transform not only their networks but also the services they deliver, in a way that makes cost-effective sense for the customers,” he said.

I foresee that there will be Maltese spending some time in Portugal and vice versa

“Melita has a role to play in that process of moving services online. First thing we need to get right is the end-to-end delivery of services with a network to support it. This is why we made major investments in our billing and CRM capabilities in the last three years. We had some hiccups but people are beginning to see the tangible benefits, getting control of their services with the app that we rolled out last year for self management,” he said, adding that the new shareholders would also be aligned with this strategy.

Melita will also remain focused on the data colocation centre in Madliena, which is nearing capacity in its current format – but which has space to expand. Mr Torriani revealed that a major bank recently moved there, using it to connect with its operations across other European countries.

One area that is also on the horizon is business services, which Melita already offers but believes it could expand, leveraging the new shareholders’ experience.

“This is very exciting for Melita and Malta. It will help push forward the government’s initiatives to cement Malta’s standing for e-commerce and ‘Smart Island’ strategy. It will bolster efforts to diversify and be less reliant on the sectors that got Malta to where it is now,” he said.

Of course, convergence is not only about the future but the present.

One of the most visible aspects of this has been streaming, with Netflix’s decision to offer its content across Europe changing the pressures which until now led so many consumers to seek illegal ways to access content.

Melita, which has its own movie channel, was not in the least concerned about the competition. Why should it have been? If it has its eye on broadband demand, then it suits it to have more and more people using broadband – and it has always tried to position itself as the provider with higher and more reliable speeds. The emergence of a legal way to access content means that Melita can now work with Netflix directly, although he did not give many details, beyond saying that they had been talking to them for over two years.

“We are working with Netflix in terms of investment that Melita will make in additional capability to deliver its content in Malta.

“We will make the hardware investment for them and they will monitor the end usage,” he said, pointing out that Melita already works with content delivery networks to host the most popular content in Malta.

“This improves the quality of service tremendously and helps us to save on the cost of international carriage of that traffic. At the end of the day instead of spending on the route to bring that here, we can invest in the network capacity to support growing internet habits.

“Broadband usage is growing 50 per cent per year, a very dramatic increase. The average Maltese user in Gigabyte terms consumes roughly two to three times the usage in the US and four to five times that in the EU.

“A lot of that unfortunately is through illegal services. There is no morality judgement from our side. But clearly we cannot work with illegal providers the way we can with Netflix. The people that are calling themselves service providers are essentially overpromising what they can deliver. They can be cut off from the source of content at any time.

“Also, there are factors that inhibit them from offering a good quality service. For example, streaming services and peer-to-peer files are predominantly hosted outside Malta. So when a lot of people are trying to use all these services all at once, there is an issue as the networks are generally in places that do not have the infrastructural capacity.”

What impact will Netflix have on Melita More, its movie channel? He said the channel would continue but that it will require a re-think. “As a distributor of content, which is what we are, it forces us to take a look at Melita More and try to enhance the offering so that it does not duplicate what is available, because the Netflix library is quite vast – even though not all of it is available here yet.

“They were also hampered by studio licensing and so on, just as we were. But Netflix pledged to rectify this in a very short space of time and I expect them to expand the content rapidly over the next year or two.

“What is exciting is the European Parliament directive that by, 2017, geoblocking will be gone. For consumers this means they will be able to access anything there is online within the EU without blocking of transmission. This means you will be able to subscribe to sports streaming, Amazon in the UK and so on: there might be some restrictions but it will enable things that were never possible before.

“That is great for us as it means that all the investment we made in convergence will open it to a wider context. People will no longer have to look for alternative means to get content. I predict very openly that within two years a lot of companies who call themselves service providers will not have a business case,” he warned.

For this to happen, consumers would have to give up the receivers and boxes they bought to access illegal or irregular content – but he insists that many of them are inferior and uncertified.

“The streaming products – set top boxes – are often not tested by any EU body. That is important as many of these boxes operate on protocols that are very aggressive. Many take as much capacity as they can and operate continuously, using capacity whether you are watching it or not. Factor in that we find many of these devices are infected with malware running in the background – exposing the people using these services to theft of their personal data as well as slowing down their connections.”

One way for Melita to benefit directly would be to incorporate IP features into its own boxes, which he announced was already being done.

“I don’t want to give too much away but it will mean more access to more video services, and more providers outside the Melita family. We already have a library of video, even though it is more limited than we want, a wide array of channels that people can watch anywhere – thanks to the high speed Wi-Fi network. They will improve and that is where the investment from the new shareholder will take us forward,” he said.

One of the key selling points remains speed and Melita intends to roll out new packages in the near future which will match its customer segment profiles for broadband use, ranging from higher use to casual use.

“In 2014, we rolled out 250 Mbps, and we will in the very near future offer 500 Mbps nationwide. You would be surprised by the amount of demand – predominantly from businesses.

“We take the speed for granted but Malta has overtaken many of the member states and we are up there with the Netherlands in the top tier. That is great for consumers and for attracting business to Malta. It is a competitive advantage just as the tax advantage is,” he said.

At present, the bottleneck is not the offering but the devices involved, from modems to phone sets, which will be upgraded soon.

“The chips in the modems we installed two years ago had a limit of 70-80 Mbps. The new generation modems can support up to 500 Mbps and in a laboratory up to 1 Gbps.”

“Nossa!” indeed.