Turning a telecom tanker into a yacht

With the telecommunications sector entering a new era, Maltacom’s Group Chief Executive Stephen Muscat talks to KURT SANSONE about the recently-published half-yearly financial results and his vision for the company as it gears up to face competition

How do you explain Maltacom’s half-yearly reduction in profits?

When we publish our financial statements we publish both the Group’s performance as well as Maltacom’s individual performance. Our core operation, the fixed line telephony is still very solid. In fact, although we experienced a decline in fixed line traffic we increased our revenue from rentals. Maltacom has 205,000 subscribers, which form the basis of the company.

On the other hand, the Group results include the performances of the subsidiary companies, which, contrary to the mother company, all operate in a competitive environment. I would say that Go Mobile had the biggest impact on the loss of profit because it is a start-up operation.
When we published our financial results, Go Mobile had been operating for only seven months, which is not enough to recoup the heavy investment made in the company. One must not forget that the network was installed all over Malta even if the subscriber base was still being built up.

However, we also suffer from seasonality. Our financial year is a calendar year and the first six months of every year are not our best months. The 1.2 million tourists that visit Malta, which make an important contribution to the company’s coffers, mostly come during the summer months. In this sense we expect better results in the closing six months of the year.
Why has the bad debts provision shot up so substantially to Lm860,000 from the Lm40,000 in the comparative period last year?

The bad debts, which we fully provided for, are all pre-1997 debts incurred by Telemalta. This year we decided to write them all off. They are the result of companies and individuals that either left the island or died. The company does all it can to recoup outstanding amounts including taking legal action, however when there is no way to get your money back for whatever reason, the company eventually decides to write it off. This is what we did this year and hence the increased amount.

How is Maltacom going to react to the financial results?

Undoubtedly we will continue investing to improve our services. Our philosophy is simple: we have to be able to offer to who wants to communicate with whoever he wants in which manner he chooses.

Maltacom does not yet operate in a competitive environment. However, the large workforce will definitely be a problem in a liberalised field. What is the company doing to reduce the number of employees?

The company currently employs 1,300 people, which is a reduction of almost 500 over the 1998 figure. We have introduced a voluntary early retirement scheme amounting to Lm15,000 per worker. And I must say that most of the people that subscribed to this scheme were workers, which the company could have done without in the sense that most of them needed retraining. The company still has finances to cater for another 200 voluntary retirees.

Apart from that we are also streamlining operations and when people leave the company – through natural wastage – we determine if they need to be replaced with other workers or technology.

We have also redeployed people in the subsidiary companies after retraining them. In another case, workers formed the Pay Zone cooperative to sell pay phone cards, Easyline cards and Go mobile top-up vouchers.

Is there a target ideal workforce?

We have to see where the competition will lead us. A new competitor can offer just a particular service, or else offer a fully-fledged telephony service. This will determine how we reorganise our workforce. But there are also a number of dying grades because of technological advances.

Allow me to make this analogy. Maltacom resembled a heavy-laden oil tanker. Over the years we have managed to become a large yacht and the future may require us to become a fast speedboat.

What type of privatisation is envisaged?

That is the government’s decision. If government opts for a strategic partner, then he will give the company more clout apart from the added benefits of readily available marketing material and a critical mass that otherwise cannot be achieved in Malta alone. Training opportunities will also increase. However, the type of privatisation is and will always remain government’s prerogative.

Currently there are around 8,300 Maltacom shareholders on the Malta Stock Exchange. Three per cent of the shareholding is owned by the workers. We are accountable to these people.

For how long will Maltacom retain its 20% stake in Vodafone?

On this we are abiding by the directive of the Malta Communications Authority. However, the divestiture will take as long as is necessary. We want to get the best price possible for that asset - something which our shareholders expect. Meanwhile we have taken a number of steps to distance ourselves from Vodafone. We do not share information and we have not participated at any Vodafone meetings.

How is the digital TV experiment working out?

We have tested the technology and arrived at a point where we can transmit broadcast quality material from a server to a home user. The next big step is content. This is a totally new area for us but we are definitely moving along. Early next year we will start offering trials to a wider audience.

Are there any plans to expand regionally, possibly into North Africa, to increase the market share?

Do not forget that the Maltese market is not limited solely to the 380,000 people that live here. The tourists that visit us also constitute an important part of that market. Obviously if the number of tourists falls then that will affect us as well.

We have no immediate plans to open up abroad although I do not exclude having a point of presence in other countries.

Nonetheless, Maltacom already has minimal investments in international organisations such as Intelsat and Inmarsat. Furthermore, the Training College also offers training facilities to Commonwealth countries and we have recently reached an agreement with the ITU for distance learning.

Are there plans to increase local telephone pulse rates?

Local residential calls are very low while international calls are considered high when compared with similar rates abroad. We have to find the right balance. People cannot expect tariffs to always go down, but as a company we have to find a workable model. The tariff reduction campaigns on international calls that we conduct on public holidays are intended to test the market. The results will help us take decisions on international tariffs in the future.

Are you satisfied with the way Maltacom is progressing?

I am satisfied with what the subsidiary companies have achieved considering the competitive environment they operate in. However, there are some lacunas, which I would rather were not there.

In August along with their pay cheque, Maltacom employees received a no-nonsense letter from me. A client of ours had written in one of the newspapers complaining about the lack of service he experienced. I pointed this out to all the workers and reminded them that in a year’s time Maltacom will start facing competition. At present this client has nowhere to go except Maltacom for his telephone service. If the bad experience he suffered had occurred at a time when Maltacom faced competition we would have lost him forever. I was clear in my words. ‘This client is the one who pays us our wages at the end of each month. If we lose him, who will pay our wages then?’

Customer care has improved throughout the company, but unfortunately I cannot say I am totally satisfied with the attitude and enthusiasm of each and every employee.