A lot done, more to do might be a suitable slogan for Three Ireland, the 3G mobile phone operator owned by Hong Kong-based conglomerate Hutchison Whampoa.
Results published by Three last week show its revenue rose 16 per cent in 2012 to €174 million while its market share grew 1.3 percentage points to 9 per cent.
It's the dividend of a sustained campaign to poach customers from rival operators, particularly Vodafone and O2. Ironically, the recession is pushing value-conscious consumers into the arms of Three, which is in the vanguard of mobile operators pushing down prices.
But the mobile phone company was still loss-making as it entered its eighth year of operation here. The pretax loss last year was about €30 million, to add to the €507 million in accumulated losses up to the end of 2011.
Sitting on a sofa close to his desk in the company's impressive open-plan offices close to the Gaiety Theatre in Dublin, Three chief executive Robert Finnegan shrugs off the losses, preferring to highlight the fact that the company was "Ebit [earnings before interest and tax] breakeven" in 2012 for the first time.
Perfectly coiffed and dressed in a grey suit with a pink shirt that has its top two buttons open, Finnegan prefers to describe the losses as “investments” and talks about it being a “long-term game” for the company, sponsor of the Irish soccer team.
He highlights how Hutchison Whampoa recently agreed to spend €105 million for 4G licences here, a signal of its long-term intent in Ireland. But Three won’t make a profit for another year or two, he says.
“We are continuing to invest in the market and we see significant progress in the business. We are at Ebit breakeven at this point and that’s a major milestone. If you look at some of our competitors, they’re actually going backwards. We’re going in the opposite direction.
“Hutch are long-term players. The business has almost doubled [up 78 per cent] over a two-year period in one of the worst recessions we’ve ever seen. You can’t argue with that. Yes, of course they would have liked to see the business grow faster and get a return earlier but they’re very happy with where we are at the moment.”
Finnegan also notes that Vodafone and O2 (owned by Spain’s Telefónica) acquired existing mobile businesses in Ireland and built from there while Hutchison decided to grow organically, having launched here in July 2005 after securing a 3G licence.
Not that Three hasn’t tried to acquire here itself in a bid to gain scale. Last year it tried to gatecrash Eircom’s examinership with a €2 billion cash bid to rival the debt-for-equity swap that the telco’s lenders had tabled.
Three’s advances were rejected by Eircom’s examiner and the High Court declined to intervene on the matter.
Finnegan rejects the suggestion that Three left it too late to get in on the action at Eircom.
“I wouldn't say we were late to the party,” he says. “We waited until the debt was at an appropriate level and the purchase price was at an appropriate level. Eircom was being touted around before the examinership with a debt level of €3.3 billion. And the price being looked for at that time was around that level. It wasn’t worth that in any way shape or form.
"Most telcos have a debt-to-Ebitda level of two times. That's sustainable. Eircom's at the time was about six or seven times. It was ridiculous."
'Viable alternative'
Finnegan says Three had a "viable alternative" to offer Eircom from the bondholder-led deal that ultimately succeeded.
“We were prepared to pay €2 billion in cash and invest a further €1.5 billion to €2 billion in infrastructure over a three-year period. We’ve got experience of running operations such as Eircom in many markets.
“That's history, that’s done, that’s dusted. Eircom is set on its way now and I wish it good luck.”
Would Three/Hutchison be interested in having another cut off Eircom?
“At this point in time, Eircom is water under the bridge. If it does come again then we’ll have a look at it. But it’s a year on and the business [Eircom] is deteriorating at a very fast rate. It has a crumbling infrastructure and it’s got competitors that are snapping away at it and taking its business. It would have to be re-looked at in a very different light.”
From time to time, mobile rival O2 Ireland is also rumoured to be up for sale, although Telefónica has publicly denied this. Would Three be interested in acquiring O2?
"I think they [Telefónica] have made it perfectly clear that the Czech Republic and Ireland are two non-core markets for them and, over a period of time, they will look to divest," he says. "Overall, Telefónica has a high debt level and has indicated to the market that they will sell [assets].
"I'm not aware of it [O2 Ireland] being on the market right now but it wouldn't surprise me if, at some point in time, it did become available. We would look at any opportunity but all of these things depend on the value."
Consolidation
Finnegan is certain that consolidation will take place in the Irish telecoms market and says Three will be a "consolidator".
Consolidation of a sort has already taken place, with Three and Vodafone agreeing a network sharing agreement last year via a joint venture. This allows them to develop and share costly infrastructure and is a more cost-efficient way of building networks, especially with 4G just around the corner.
“This will give both parties value,” is Finnegan’s assessment.
He claims Three got a “great result” from the 4G auction process last year. The next generation of mobile technology will be faster than 3G and bring greater capability to handsets.
“It won't just be about access to the internet, or to voice or texts. Your phone will become your wallet as well,” he says.
Finnegan joined Three in December 2005. Having trained as an accountant, his first proper job was in Waterford with Irish Leather, which was in major financial trouble at the time.
“I found myself at an early age in front of boards making presentations, etcetera. It was very demanding.”
He moved to Procter & Gamble in the UK, where he spent about six years before switching to Allied Domecq, where he worked as a finance director in its international business.
His life might have taken a completely different direction in 1984 when the central midfielder trained for a spell with London football club Queens Park Rangers.
“I played a lot of football when I was younger. One of things you had to do back then was, in the evening, you cleaned the boots of the senior players. I said: ‘Forget about that.’ I was happy doing what I was doing with P&G.”
Out of the blue, he got an invitation in 1992 to go work in Hong Kong with Hutchison. "I went for five years and stayed for 10," he says.
His roles included a period as chief executive of its Watson’s beverage division, a company employing 3,000 staff and with annual turnover of $200 million. He also developed Hutchison’s water business in Europe under the Powwow brand, which was sold subsequently to Nestlé for $545 million. This deal meant Finnegan’s stock was high with his Chinese bosses, which was why they turned to him in 2005 to run Three Ireland after it had made a sluggish start here, even though Finnegan had left Hutchison in 2003 and was in “semi-retirement” in Ireland.
How do Chinese companies compare with their western counterparts? “Great,” he says without hesitation.
“With Chinese companies, they are very much about trust and loyalty. It’s very results-driven but also very decentralised. Decisions are made locally. The resources are given to the local management and they are expected to deliver the results. There’s no buck-passing.”
Hutchison has deep pockets and Finnegan says it is interested in investing in Ireland if the right opportunity arises, citing State-owned energy company ESB as a potential target if it "becomes available".
Hutchison was involved with the project to build a new seaport at Bremore, Co Louth, when relocating nearby Dublin Port was speculated. The recession meant the project has been shelved.
Might Finnegan fancy running a company such as ESB if Hutchison was to open its chequebook.
“I can't speculate on that. My interest at the moment is on building Three. I'm happy doing what I'm doing.”
