Peter's Way

Having assumed the position of CEO of Batelco last June, Peter Kaliaropoulos brought with him an ambition to take the kingdom's incumbent into new geographic and vertical markets. A little over a year on, he has the notch of having acquired Jordanian mobile operator Umniah on his belt, and he tells CommsMEA how he believes he paid a fair market value for the operation, and is still in the search for further opportunities.

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By  Alex Ritman Published  September 5, 2006

|~|Peter-Batelco200.jpg|~|Peter Kaliaropoulos has assembled a team he believes has enough experience of competitive markets to help Batelco identify further opportunities.|~|About a year ago, when CommsMEA conducted Peter Kaliaropoulos' first detailed business interview as the CEO of Batelco, he said that he had not been at the company long enough to ascertain why Batelco had not followed, or led even, in the regional expansion that has intensified in the mobile telecoms space in the past three or four years. Today, almost 15 months into the job, Kaliaropoulos believes he has a better grip on the possible reason. “I think the answer is simple to us now, given 12 months of hindsight,” states Kaliaropoulos. “I believe the previous management team of Batelco had no experience outside Batelco and outside Cable & Wireless, and the guys running this company were engineers.” Having spent much of his career working in competitive telecoms markets around the world, Kaliaropoulos is in no doubt that the competitive pressures present in the modern telecoms industry globally leaves little room for network- rather than market-focussed strategies. “I believe the previous management team did not have enough understanding of competitive markets. Today, with the changes I have made to the team, I have 225 years of competitive telco experience and related IT industry experience,” Kaliaropoulos explains. He is wasting no time in tapping into the rich knowledge pool he has assembled. Batelco is set to launch HSDPA commercially before the end of the year, and continues looking to drive further cost savings out of all of its day-to-day operations. “We have made the decision that by year-end we will roll out wireless broadband, not just 3G. So we will announce very shortly the fact that we are migrating to 3.5G here in Bahrain. We are just finalising negotiations with the successful vendor.” And unlike back in 2003 when Batelco's plans to launch 3G commercially appeared to be driven more by the desire to beat new entrant MTC-Vodafone Bahrain to the title of the region's first operator to launch 3G services, Batelco's move to HSDPA appears to be a shrewd and pragmatic one, based squarely on business imperatives. “The other reason that we are migrating to 3.5G, other than to improve 2G call quality is that there's debate here in Bahrain that two WiMAX licences will be issued and Batelco may not be allowed to bid for one,” Kaliaropoulos reveals. “Unfortunately that was the recommendation from the regulatory advisory panel earlier this year. If Batelco does not have a WiMAX licence and my competitors do, I need to have the ability to offer broadband very quickly to different parts of the kingdom where I don't have a fixed network, and the only alternative I have is to use HSDPA for broadband to customers and compete against WiMAX.” Away from home, Kaliaropoulos is generally satisfied with the amount his company recently pledged in order to acquire third-placed, but rapidly growing GSM operator Umniah in Jordan. Batelco also owns Batelco Jordan, an individual licence holder, meaning that it can offer all other telecoms services other than mobile. The acquisition of Umniah, thus offers strong synergies for Batelco's fixed and mobile ambitions in the kingdom, though the two entities will continue to be run as two separate entities. Some analysts raised concerns about the price Batelco offered to pay for the 96% stake in Umniah — totalling US$415 million in all, though Kaliaropoulos is confident that he gained the best value possible for his money. “Did we want to pay that price? The answer is no, I want to pay the lowest available price, but the company was not for sale at a lower price than what we negotiated. When we started negotiations, the asking price was about US$130 million more than what we finally agreed on,” Kaliaropoulos says in his no-nonsense manner. “There were people competing to buy this, offering deals we believe were US$80-100 million more than we offered.” ||**|||~||~||~|Kaliaropoulos points to the scarcity of assets as one of the main factors driving up valuations across the region and he says it was Batelco's strategic intention to avoid being forced into an auction for Umniah, which would have in all likelihood driven the price up even higher. We would have paid more if it was an auction situation. I am being very pragmatic — I paid market value. Is it more on the high side? Time will tell,” Kaliaropoulos suggests. Given that Umniah operates as a private company, there was no onus on the company to produce detailed financial performance, and as a result, its operational performance has remained a shady area for analysts to observe. “I cannot comment on whether it is cashflow positive or not,” says Jawad Abbassi, general manager and founder of Amman-based telecoms research outfit Arab Advisors Group. “I'm sure it' not profitable yet.” Kaliaropoulos has a different, inside view of Umniah's state of operational financial health. “The company was initially planning to have 100,000 customers in the first 12 months. The company was planning four or fives years later to have the kind of P&L and the number of customers (that it had at the time Batelco acquired it),” he points out. “I can categorically state that the company, and not just in the last month that we have been managing it, does produce a profit. It is already profitable on a monthly bottom line basis, on a full basis, not just EBITDA.” What gives Kaliaropoulos much of his enthusiasm with respect to the Umniah acquisition, is that he is a real believer in the business that the operator has created and the prospects of that business going forward. He explains that the ARPU level that Umniah enjoys is “the healthy double-digit ARPU of second and third mobile carriers.” He also believes that the fundamentals remain in tact and that it's a different business model, which is run very lean and mean. “Umniah created a new marketplace in Jordan that people had ignored — high volume, lower ARPU per customer. As a result of that, we picked up what we believe to be a good company with a customer base, which will give loyalty because Umniah's customers are receiving tremendous value, compared to the two existing mobile operators.” The man credited with being behind much of Umniah's vision and strategy is its managing director and former shareholder, Michael Dagher. Formerly CEO of market leader Fastlink, Dagher has agreed to continue leading Umniah until the end of the year, at which point a position on a re-constituted board of directors at Umniah is his should he wish to assume it. “The other matter (apart from the offer to have Dagher stay on) is that the price reported has not been fully paid, it is based on achieving certain objectives, so we hope they over-achieve to pay them more, but if they under-achieve we are not paying the US$415 million.” Another, smaller investment is in the pipeline, according to Kaliaropoulos, in a significant market, articulating Batelco's strategy to seek out investments related to broadband and mobility. “We are not going to be paying the billions of dollars for a licence, we are looking for hundreds of millions or tens of millions opportunities to acquire companies in full, or controlling interests, so that work is continuing,” Kaliaropoulos reveals. “I hope that within three-to-four weeks I will be able to announce another minor acquisition in a very significant market for one of those two high-growth products (broadband and mobility). It contributes to the bottom line and gives us new addressable markets.”||**||

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