The Telikom merger: What’s behind the decision

GYNNIE KERO talks to Kumul Telikom Holdings chairman ANDREW JOHNSON on the reasons behind the merger of three state owned telecommunications companies.

Q: Why the merger?
JOHNSON: What we are really doing integrate is create a much stronger organisation (Kumul Telikom Holdings) that can compete effectively. We are restoring the business to what it should have been years ago. But there is a lot of restructuring involved as well. Kumul Telikom Holdings will have two retail businesses, a fixed business and a mobile business. Fixed business – media business like EMTV & FM 100. And we will combine our assets and our people.

Q: Explain the integration of bmobile-Vodafone into the mobile arm of Telikom.
JOHNSON: We are actually building a new combined Kumul mobile business and we just draw elements from there. There’s T4G (Telikom 4G) , the bmobile side is 2-3G. We are actually building a new business with combined assets, but the hard assets like mobile towers and the soft assets like 7000 distribution points around the country will take a lot of work to do. All of those assets is going to this combined business process.
How long it will take, it will take till this time next year, partly it will just take that long, we want to drive this fast but we don’t want to be disruptive of people, our customers and with Apec coming along I don’t want to do anything in terms of physically combining the two networks I don’t want to do something in October which completely shuts down the network, the whole bmobile core.

Q: What impact will this have on jobs?
JOHNSON: Couple of things. There has been some downsizing as the business hasn’t performed. And frankly, it is hasn’t been performing for a lot of years. The way that the management has responded, the simple way is get rid of people. The right way is basically to build a better business. And we are in the business of building a better business anyway rather than the cost cutting business because cost cutting is not a long term strategy.
If we are going to build what we are out to do, which is the No.1 telecommunications company in PNG, we are not going to do it by getting rid of talented people. And, in fact, I am keen on bringing back some of the talented people who have left.
Now, the next one is that, there is an expectation that we are a state-owned enterprise that everybody’s job is guaranteed for life. Thirty years ago, state-owned enterprises had a monopoly position and they had a right to exist and basically, there was enough money to pay everybody and put up the prices to break even every year.
The fact is that we are competitive environment, we can’t do that. So, we’ve got (unless the government is prepared to continue to subsidise the SOE or allow them to drive up their price) and you allow them to do that with PNG Power or water, you can’t do that in telecommunications.
We do accept the fact we can’t look after our people if we do not have a successful business.

Q: What about the wholesale business?
JOHNSON: DataCo will be genuine wholesaler, selling international and domestic capability. The Coral Sea cable is the centrepiece of the wholesale business. The Coral Sea will … (have) massive capability. It comes out of an agreement between Prime Ministers (PNG and Australia) Peter O’Neill and Malcolm Turnbull last year. We have been negotiating the details. The cable should be live by November 2019. It will revolutionise telecommunications in PNG.

Q: At the moment, there are different SIM cards for bmobile- Vodafone and Telikom subscribers. What happens after the two sister communication entities are integrated?
JOHNSON: We may at some stage re-issue them SIM cards. To be honest we are still working out the mechanics.

Q: We realised some bmobile- Vodafone workers have already moved over to the Telikom Rumana Building. What’s the transition period?
JOHNSON: Transition period will be done before the year ends. We have physically moved people into Telikom Rumana.
Overtime we run out of the lease in the bmobile building which runs out in March next year, everybody will be in the Rumana building.
We own the Rumana building we don’t own the other one. Probably keep the DataCo people physical separate because we want to keep the DataCo wholesale image separate. Saves us a bit of money having all not in a rental property but at the same time, DataCo is a small entity I’d rather spend the extra money and have them in a standalone business.
Q: What happens to the Vodafone brand?
JOHNSON: Once again, to be decided. We have to look at the pros and cons. There’s a lot of benefit, working with Vodafone we save so much money.

Q: I understand the chief executives of Telikom PNG and bmobile- Vodafone are currently on acting basis. What will be the structure like when they go into Kumul Telikom?
JOHNSON: Still a work in progress.

Q: The unions were jumping up and down about job security. Did the management of the respective organisations do a good job explaining the situation?
JOHNSON: Could have been communicated better, yes.

Q: With SIM card registration, will it impact on your market share when deactivation kicks in?
JOHNSON: I see there is opportunity for us. Anything that disrupts the marketplace is good for the challenge. That’s why, as I said earlier, we want to rapidly get through the transition process.

• Andrew Johnson grew up in the bush of Western Australia. He spent a number of years in Europe and North America, primarily in the aerospace industry. In the past 15-16 years, he’s largely been in the telecommunications industry. He first arrived in PNG in the 1970s. He owns two telecommunications businesses in Australia.
  He has business interests in PNG, but nothing to do with telecommunications.