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R o b e r t C l a r k

Going abroad

Ever since deregulation began, it's

been the dream of incumbent tel-

cos to take tbeir business abroad.

Wby not? Tbey're market leaders,

tbey have experience, expertise and

massive resources. As we know, many bave felt

tbemselves called to this grand project, yet tew

bave been chosen.

During the boom years, European and

American telcos leveraged their high stock

prices to take unsustainable positions in A.sian

carriers, virtually all of which bave been

unwound. Tbeir global alliances fared no bet-ter.

Incumbent teicos just don't play well away

from home.

It's partly cultural and, let's be honest, ego.

These are companies not used to playing second

fiddle, especially not in an emerging market.

It's also had to do with scale; boar ds accus-

tomed to dealing in billions of dollars get

impatient with minority stakes with net pres-

ent value of a mere $100 m illion.

Well, that was then. Today, telcos from

mature markets don't even have a lot to offer.Their stocks are well down, their engineering

strengths have been commoditized and their

brands have never counted for mucb out of

their domestic market.

But it seems teicos are figuring out to

expand abroad.

The Asian example is Singapore Telecom,

whose revenue is primarily derived from off-

shore. Over a decade, it's taken a measured

strategy of investing in mobile in Asean and

Australia. It's a focused .strategy of going into

familiar territories. And, because the company

is com mitted to those markets, it hasn't expect-

ed returns overnight.

Each of these took place only with the sup-

port of the respective governments, as you'd

expect in Asia in a sensitive industry (and it's

not just an Asian sensitivity). This has been

underscored by tbe Malaysian government's

continual refusal to allow SingTel to buy into

tbat market.

It's not rocket science, but if you w ere going

to prescribe a formula for offshore investment

by a telco, SingTel's approach is it. Companies

like Vodafone, FT Orange and Hutcbison 3have also worked by slowly growing a chain of

mobile operators.

ernment telco can

vaporize shareholder

value abroad, it 's

Australia.

Telstra isn't alone in

making bad investmentcalls. Although its off-

shore business goes back

to tbe mid-80s, it has

never been able to settle

on an overseas strategy

(at one point ludicrously

basing its regional officein Hanoi).

Its government shareholder and the politi-

cally-friendly directors appointed to the board

bave no appetite for the bard slog of Asian deal-

mak ing. The carrier ope rates in a toxic political

environment, with public opinion sharply

divided over whether it should remain in pub-

lic ownership. We'll see which way tbe new

CEO Solly Trujiiio takes tbe company.

There is a reason for tbese ruminations,

which is that China's four listed telcos bave

received a public push to go international.Lu Yang, deputy director of the Mil's

te lecommunicat ions administra t ion, last

month told a conference that the government is

"encouraging" the carriers to invest globally.

"It's part of our overall strategy," he said.

It's not certain bow much credence we

should give this. Government officials love to

make such meaningless expressions of support.

And in tbe same speech Lu also claimed tbe

government welcomed investment from for-

eign telco.s and promised "fair competition."

But nonetheless it's reasonable to expect the

two biggest carriers, Cbina Mobile and China

Telecom, will chase opportunities abroad, just

as the Chinese vendors bave. Judging by the

market rumors of China Mobile's interest in

the Ho ng Kong market, it's som ething investors

expect, too.

Ironically, it will be to tbese carriers' com-

mercial advantage that tbey are state-con-

trolled. This will set them up sweetly for deals

in politically-friendly markets in Asia, Africa or

Latin America, where their engineering and

business skills will be worth a premium.

So, politics still counts for a lot. But for tel-cos investing abroad for com mercial reasons, it

helps to be focused, and in it for tbe long- term .

If y o u w e r e g o in g t o

p r e s c r i b e a f o r m u i a

o f f s h o r e i n v e s t m e n t

a t e i c o , S I n g T e i 's

a p p r o a c h is it

Robert Clark is a Hong

based technology journ

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