ATH chief Lionel Yee talks about the future, state of the industry and responds to criticisms

Dev Nadkarni

Lionel Yee...telecom stocks have been depressed ever since the Internet bubble burst.

On the eve of the seventh anniversary of Fiji's largest traded public company, Amalgamated Telecom Holdings (ATH), chief executive officer Lionel Yee speaks with our senior editor DEV NADKARNI on his impressions on the last seven years, the state of Fiji's telecom industry and its future. He also addresses some of the criticisms he and the company have faced over the years.


What have been the highlights of ATH's first seven years?

I think we have pretty much achieved what we set out to do. We are the largest traded scrip on the stock market and have been paying reasonable dividends to our shareholders.

Of course, the public doesn't see us a growth stock but that is in keeping with telecom companies throughout the world -telecom stocks have been depressed for sometime now, ever since the Internet bubble burst. Investment bankers don't put money in the telecom sector anymore.

I'd say we've stood our ground, showed good corporate governance and tried to be an example of what a corporate entity should be: take care of shareholders' interest as the primary objective. In that sense I think ATH has done a service to the investors and the people of Fiji.


There is a perception that you are a monopolist and have tried to block the deregulation of the industry.

No I am not. The government had a choice while restructuring telecom and they chose the monopoly model. The Rothschild report, one of several reports that were presented before restructuring, had given five scenarios. One of them was to give Vodaphone the ability to provide international services.

This was based on models in many other countries where the domestic and international service providers, if distinct, were merged as part of the restructuring. This would have merged Telecom and Fintel. Vodaphone would have been the competitor. A competing service would have been in place right then. But the government chose the monopoly option. If I was in that seat, I would have chosen the other option but that's not my call.

That was the government's prerogative and they had every right to make the decision they made. I had no role in it. ATH is a creation of the government -they created it and sold it. I happened to be in the picture at the bidding process and making the paper company a reality and later making sure that the company produced results for its shareholders. As CEO of ATH, my primary focus has been the interest of the company's shareholders -as is always the case with CEOs of public companies.


Shareholders' interest is one thing. ATH also presides over companies that charge their customers one of the highest tariffs in the world. Now isn't this solely because these companies are protected as monopolies? Aren't the people of Fiji justified in feeling betrayed being charged such high rates?

To begin with, ATH is only an investment vehicle and is not involved in either the operations of the companies it has invested in or the tariffs. In any case, the tariffs were controlled by the Prices and Incomes Board and are now looked after by the Commerce Commission on which even the individual service providing companies have no control. Also, this pricing structure was set before the restructuring.

Having said that, it is true that our long distance and overseas tariffs are high. But on the other hand, our line rentals are the lowest in the world. This skewed tariff scheme has long needed correction and efforts are underway to rationalize this with tariff by rebalancing. The public wants lower call rates but would not like higher line rentals.

This is simply not possible. Rebalancing will have to be done. In fact, rebalancing is a pre-requisite to the deregulation of the sector. It is a perception problem. People think nothing of using their mobile phones or sending text messages at 50c apiece but at the same time don't appreciate that they can speak for unlimited lengths of time on a local call for 12c or stay connected to the Internet for several hours at 12c.


Critics point out that you are not in favour of deregulation that is ultimately expected to usher in competition and bring telecom prices down.

As the CEO of the largest traded company, I am responsible only to shareholders. I have to ultimately look after their interest as the CEO.

That's my prime task. It is up to the Commerce Commission and the regulators to determine prices. In fact we are working with the government on the deregulation roadmap.

Our only concern is that if deregulation is done without proper milestones and benchmarks, shareholder value in ATH will be eroded and that's a bad thing not just for the shareholders but for the people of Fiji as a whole, because it will affect the development of the capital market which is very important for growth. Erosion of shareholder value is something no CEO worth his salt will ever put up with.


Speaking of shareholders' interest, you also own shares in ATH. Does that not bring an element of personal interest in all this?

In the beginning I invested only to demonstrate to the public that I believed in ATH. What good is a company if its CEO does not trust it with his investment?

That was my only intention. But that was misread in some quarters and the view that I am working in my personal interest was sought to be advanced.

I was very disappointed with this and at one point stopped my personal investment in the company.


What are your specific concerns about deregulation?

There is no problem at all in bringing in competition. But there has to be a level playing field. For example, Telecom has a universal service obligation (USO).

The access deficit contribution is $ 45 million. This is mainly because of the cost of providing the last mile of the service particularly in the remote areas of Fiji and even uneconomical urban areas. In the fairness of things, any new entrant must share this burden with Telecom.

That done, it remains to be seen how much prices would come down by allowing competition who will be expected to bear the access deficit contribution with Telecom as part of the USO. It is not as simple as the popular perception goes as regards the notion that competition will make services cheaper. Some things will indeed become cheaper but others will be dearer.

For example, international rates will come down but access rates to remote areas will probably go up unless alternative cost-effective technologies are employed or other sources fund it.

So what we are saying is that there has to be a clear, practical roadmap, one that will be fair to all including ATH-held companies and we are willing to work with the government on this. We are not asking for any special favours other than the regulatory framework to be fair to everybody.


When will this roadmap be in place?

Sometimes, we wonder if communication is high up on the agenda for the government. We feel that there has to be more focus, effort and resources committed to the effort.

Any delay in the deregulation process sends out the wrong signals to investors everywhere. Matters like these must be treated with seriousness. It should be encouraging to investors. The government announced that it will sell about 3 percent of its holding but it is too much stock for the local market to absorb.

It would be a good thing to list ATH on the Sydney and Auckland stock markets. In matters as complex as these, government action has to be proactive. Take the example of broadband in the US.

Despite private players, it has not taken off as spectacularly as it has in South Korea where the government has worked hard to implement policy. But now we are looking at timelines which will bring action in the current year.


In the meantime is there no choice for Fiji's telecom and Internet customers but to continue to suffer high tariffs and indifferent service?

The public's expectations have to be met and better managed. All this talk about monopolies and the delay in regulation has made our companies an easy target for criticism and Telecom Fiji has unfortunately become the whipping boy.

They are the ones that are least supported and pushed around although they did the most for Fiji. Our service standards have to be matched with international benchmarks. The service side makes people frustrated and that has to be tuned up to win back support. Telecom Fiji happens to be our public interface and faces the most flak.

In recent years, they have worked hard to improve their service profile and it has certainly got better over the years but they bear the brunt of all the criticism. There is a change management programme in progress at the moment and services will hopefully improve even more. Tariff rationalization proposals are also underway.

Internet access rates have recently been brought down by 40 percent. The ISP (Internet Services Provider) will soon be opened up. But there is only so much that the company can do. There are other agencies involved. As far as criticism, there is a need for us to say our piece in a responsible way.


How do you view the future?
Telecom is a complex business anywhere in the world. Over time, the way the industry is run has undergone change because of a number of factors.

Managing contradictions among interest groups like government, politics, investors, employees and customers is a difficult task but it has to be done.

I would welcome a workshop involving all stakeholders to consider how deregulation can best be done. Whenever a roadmap for a complex issue is planned, it is best that an independent entity does it after consultation with all stakeholders.

In an exercise such as this, no group will get all that they want. Everyone will get some of what they want. But that will be for the general good of all.

That is something I would like to see happening.

-----

Related stories: Telecom Fiji's uphill task.
Broadband at long last?