The Leading Lights of Telecoms - New T&T
Six years since its inception, New T&T (www.newtt.com), a subsidiary of Hong Kong’s Wharf Group, still has to contend with customers who mistake it for Japan’s NTT (www.ntt.com). An aggressive re-branding scheme may well do the trick, but the company, known for its laidback corporate culture, would rather funnel its energies to a much bigger aim, that is, to win the local fixed-line game and live up to its claim of being a “threat to the incumbent”.
Four months ago, New T&T announced that it is finally making profits after six years in the business, interesting news in an industry where most players are struggling to keep afloat. New T&T director for consumer market, Tony Cheung, shares how a shift of focus keeps the company growing in Hong Kong.
Which areas of your business require greater attention next year? Why?
Fixed-line business will continue to be our major focus because it’s our core business and it brings better contribution to our revenue and better ROI. We are proud to be hiring; expanding at this time when other companies are forced to lay off people.
Who are your main technology/equipment partners?
Nortel, Cisco, and Lucent.
Can you give us an indication of the Asia-Pacific telecoms scene in 2002. What do you expect it to be like?
The uncertain economic climate means there will be cutbacks on many ventures, which means another year of challenge for equipment manufacturers. I see new operators doing much better than incumbents next year as they are in a position to provide a choice to consumers and to the business community. And that’s a choice not just in terms of price, but also of products, service, and support.
New T&T posted a strong growth on 1H’01 and expects to break even in a year’s time. How was this possible?
When the IDD market was liberalised in 1998 and an unlimited number of players were allowed in, by paying a HK$750 (US$96) licence fee, we realised that IDD, which contributed 90% to our total revenue, would not be as profitable as it was before. It would force operators to operate below cost, at cost, or even drive them out of business. We made a net revenue of HK$460 (US$59) million for 1H’01 which is more than 40% growth over the same period last year.
We expect to break even in a year’s time, barring the effects of the current global economic and political situation.
What sort of investments did the transition from IDD to fixed-line business call for?
We had to expand our fibre-optic network, expedite the programme to acquire more fixed-line customers, and instead of promoting just voice service, focus on business and data market.
We spent over US$3.2 billion over the last six years, mostly on fibre optic network and switching equipment. We also put some investments in international connectivity. As you may well know, we are part of the consortium that owns the Japan-US Submarine Cable System and we bought IRUs for SE-ME-WE3 and Level 3’s Tiger cable, which links Asia to Japan and the US.
What have you reaped, and expect to reap, from these investments?
In 1998, we have about 50,000 accumulated lines; now, we have installed over 200,000 lines across the whole of Hong Kong and part of the Kowloon area. We have over 30,000 Internet subscribers to date and our strategy that gives free Internet connection to residential fixed-line subscribers works well because many people are encouraged to try our fixed-line service.
We have around 25,000 wholesale and retail fixed-line corporate customers and they collectively contribute 70% of our turnover. We have captured 30% of IPLC business in Guandong province, which is Hong Kong’s biggest market for IPLC.
We are confident that our investments in submarine cable connection will greatly enhance our international connectivity and data service portfolio.
In six years, the company has been aggressively engaged in price war for IDD service to China. How do you manage to bring the price down and why do you have to do it when it hardly makes money?
We’re the only local fixed-line operator that has direct connection to the three licensed international carriers to China, and this is a big boost to our international calling market. Since 90% of outgoing international minutes are into China, the direct connectivity to the area brings the cost down. Our China Call Forwarding Service, which we offered last month, is being offered at HK$0.27 (US$0.034), that is about 98% lower than conventional roaming charge, and possibly the lowest roaming charge in the world.
We remain active in that business because we wish to build loyalty among IDD patrons and hopefully get them to try the other services we offer.
That’s almost free of charge, how do you manage to do that?
We basically use our IDD platform to simulate a roaming service, bypassing the mobile operators through the use of our outbound IDD into customer’s prepaid or subscription-based SIM card in China. It is a very fast-moving service that was ‘copied’ by other providers.
You recently launched Internet data centre (IDC) services. Why now, given the Hong Kong IDC business is not doing very well?
We have been offering carrier-grade facilities management services to international carriers since 1996. What we are doing now is simply reaching out to MNCs and SMEs.
We are aware of the oversupply situation in the IDC industry, that is why we are going slow—we’re starting off with just 20,000 sq ft floor space, with a HK$50 (US$6.41) million investment, and will take it from there.
You also announced a deal with the Hong Kong Exchanges and Clearing Limited (HKEX). Can you tell us more about it?
It is a major deal in our data business where we will set up high-speed Frame Relay network connecting HKEX, the holding company of the Hong Kong’s stock and futures exchanges with about 6000 brokers. We have invested over HK$100 million (US$12.82 million) for the system alone and are going to build and maintain the platform with our technology partner, Nortel.
Insiders thought that New T&T will have a joint bid with its sister company i-cable in the recently concluded Hong Kong 3G auction. Why did you not apply for a licence?
We thought that in the 3G space, people will compete in terms of content and not in access or pricing. The idea of an MVNO where we shall provide application and special data that end-users will be willing to pay for is a good business proposition and we are looking to serve both the consumer and corporate network.
Frost & Sullivan’s take on: New T&T
New T&T is the telecoms subsidiary of the Wharf Group—one of the largest conglomerates in Hong Kong with businesses in real estate, telecoms and logistics sectors. New T&T is the second largest fixed-line telecoms operator in Hong Kong. The service offerings of New T&T include an array of voice and data services, IDD, tele-housing, ISDN, ESCON fibre, and global conferencing.
New T&T has been a very aggressive competitor in the international long distance telephony services market. The company has also joined the fray in the data centre market, investing over US$6 million to set up its iDatacentre in Sep 2001.
The company’s key focus has been on corporate customers and has successfully secured key accounts for its business telephony and data communications services. Its strategy in setting up the data centre is to leverage this customer base for services such as co-location, IP bandwidth and managed services like corporate firewalls.
New T&T also has ambitions of making global footprints. It has invested in the submarine cable linking Japan and the US. Its other joint-venture efforts include an alliance with FLAG Telecom and Level 3.
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