Deutsche Telekom

"Play is itself quite a story. I founded it in 2005 at a time when in my opinion the Polish telecoms market was badly run, being dominated by big European companies, each of which was having to deal with tussles between its shareholders. Vodafone had a dispute with its Polish partner that ended with its Polish operation being bought by Polkomtel; France’s Vivendi and Deutsche Telekom’s T-Mobile were fighting over their asset in Poland; and France Telecom’s Orange was having a problem with its local partner. We saw an opportunity for a fourth player to start afresh and try to capture market share, so we sneaked into the market by buying telecoms licences. We didn’t bother with 2G and decided to bid only for 3G licences. It was unheard of for a private equity company to buy licences without any experience in building the infrastructure. But we found Netia, a small fixed-line independent, to help us as a local player in the Polish market. We ended up outbidding 3, the mobile phone provider backed by Hong Kong’s Hutchison Whampoa. The key to making this work was getting funding, which we did principally from China Development Bank. We had spotted in our privatisation and tender processes for upgrading Bulgaria’s telecoms that the Chinese government has a long-term strategic plan to become a major player in telecoms infrastructure. We saw that the best kit was coming from Chinese subcontractors, so we went straight to them and found that they had big plans. We had big plans too and suggested that we work together, building a new mobile telecommunications infrastructure in eastern Europe’s biggest country, with a population of 40 million. The Chinese like to take a long-term view, so we signed a letter of intent in China at the same time as we were bidding for licences. I used the occasion of an official state visit from Iceland to China to get the deal rubber-stamped, and so in the Palace of Heavenly Peace in Tiananmen Square there was an official signing ceremony as the climax of the state visit. We signed a letter of intent to buy all the equipment from Huawei, which has since emerged from the shadows as a dominant player in global telecoms, and it lobbied China Development Bank to make its first ever major loan in Europe. In total, this loan amounted to more than $1 billion. I have a great picture of the deal being signed by us and Huawei with the presidents of Iceland and China standing behind. It was an occasion that I am sure went a long way towards getting China Development Bank’s support and resulted in Huawei sending an army of Chinese engineers to Poland, where they helped us set up the towers, transmission and other infrastructure from scratch. We entered Poland as outsiders and targeted the youth market. It was tough going for the first two years but our patience paid off, and after about four years we broke even. Today, Play is profitable and growing significantly. It now has more than 11 million customers and a 20 per cent market share…"

"Play is itself quite a story. I founded it in 2005 at a time when in my opinion the Polish telecoms market was badly run, being dominated by big European companies, each of which was having to deal with tussles between its shareholders. Vodafone had a dispute with its Polish partner that ended with its Polish operation being bought by Polkomtel; France’s Vivendi and Deutsche Telekom’s T-Mobile were fighting over their asset in Poland; and France Telecom’s Orange was having a problem with its local partner. We saw an opportunity for a fourth player to start afresh and try to capture market share, so we sneaked into the market by buying telecoms licences. We didn’t bother with 2G and decided to bid only for 3G licences. It was unheard of for a private equity company to buy licences without any experience in building the infrastructure. But we found Netia, a small fixed-line independent, to help us as a local player in the Polish market. We ended up outbidding 3, the mobile phone provider backed by Hong Kong’s Hutchison Whampoa. The key to making this work was getting funding, which we did principally from China Development Bank. We had spotted in our privatisation and tender processes for upgrading Bulgaria’s telecoms that the Chinese government has a long-term strategic plan to become a major player in telecoms infrastructure. We saw that the best kit was coming from Chinese subcontractors, so we went straight to them and found that they had big plans."

"Mobile telecoms was a sector I knew well, having grown Play, my start-up in Poland, into a top-four independent challenger brand, and although Chile was on the other side of the Atlantic, it did bear some similarities to Play’s Polish homeland. Both were Catholic cultures with a high degree of conservatism. Another element they had in common was their domination by international behemoths. While Play in Poland was up against France’s Orange, Deutsche Telekom’s T-Mobile and Polkomtel, whose Plus brand was 24 per cent owned by Britain’s Vodafone, Nextel Chile had to contend with Entel, the former nationalised Chilean telecoms company whose 127-metre Torre Entel literally towers over central Santiago. Entel controlled about 30 per cent of the Chilean mobile telecoms market. Then there were Movistar, owned by Spanish giant Telefonica, which held a market share of around 28 per cent, and Claro, part of the America Movil telecoms giant, famously fronted by Mexican billionaire Carlos Slim, which had 23 per cent. Nextel Chile had possessed about 2 per cent of the market as a total underdog, and even that was falling steadily. However, we had grown Play from nothing into the leading mobile telecoms company in Poland with a 27 per cent market share, and we saw a similar potential growth trajectory for this Chilean minnow. The financial elements of a deal had to be put together very quickly. We completed the whole transaction in about two months and it was only later that we learned how close Nextel Chile had actually been to bankruptcy wipe-out. We refinanced the company with $400 million of equity and $420 million of debt and set about finding a way to rebrand and reposition it as a vibrant independent challenger brand – a far cry from its previous image as a distant South American offshoot of a major US carrier."

"My vision was not coming together on the banking side, with analysts saying there wasn’t as much synergy in international telecoms as in pharmaceuticals, where you get real economies of scale. So I sold my Bulgarian and Czech telecoms investments within about ten months of each other. BTC was sold to the private equity arm of AIG, a US insurer, which popped out of the woodwork when I was expecting Greece Telecom, Deutsche Telekom or Turkish Telecom to buy it. Lehman Brothers advised us and AIG bought our 65 per cent stake for $855 million – far more than we were expecting. This sale wasn’t without complications either. Towards the end of the auction, I had lunch in London with Saad Hariri, the son of the late prime minister of Lebanon, and prime minister himself in 2009–11. He was the head of Oger Telecom, a Saudi/Lebanese company that owned Turkish Telecom, and he signalled that he was interested in buying BTC. I was keen and thought it would fit well with the group’s Turkish operations. Then AIG made a late bid and I was summoned to Bulgaria to see the prime minister. ‘We don’t want to sell to the Turks,’ he told me. ‘We want the Americans.’ I told him it was basically down to price, but the prime minister made it clear that I should bear in mind the time that might be needed to clear the deal, depending on who I chose. ‘Fine,’ I replied. And of course we sold to AIG. I have no regrets about that. We made almost €400 million profit on that deal."