TeamTalk boss on the changing telco environment

Q and A interview with Team Talk CEO David Ware

David Ware started Wellington-based mobile radio company TeamTalk in 1994. The privately owned business is now an ISP through its subsidiaries Citylink, Araneo, and the impending acquistion of Farmside for $42.1 million (subject to shareholder approval in December). The group employs around 100 staff, mostly working out of Wellington. Sim Ahmed talks to Ware about his company, New Zealand telecommunications, and where he sees the industry evolving.

Why did you start TeamTalk?

I wanted to wear jeans and t-shirts really. I wanted to work with all my friends at a telecommunications company that kept all of its promises.

That’s how TeamTalk started, the first dozen or so employees were my personal friends. This was my chance to do something good, and I needed people I could trust and who were also good at what they do.

The telco industry landscape has had some major changes in the last three years, with the demerger of Telecom and Chorus, the government broadband projects, and now the sale of TelstraClear to Vodafone.

There was a period in the late 1980s when telecommunications was deregulated in New Zealand, the industry went through a massive change coming to terms with that. Some of it was successful and some of it wasn’t.

The industry was frozen up until recently. I think we’re in another period of change, and it will take the next two or three years for everybody to come to grips with this new environment.

What are you doing to make sure your business will be on the winning end of this change?

The industry is heading towards commodity companies. They will try to dress it up, but it is heading towards a volume game where only the biggest players will win.

What tilts the playing field even further in those guys favour is the Ultra Fast Broadband deployment and the Rural Broadband Initiative.

What I’m focusing on is those little niches. I think businesses will need to get big, get niche, or get out.

This includes mobile radio which is our niche, the stuff we’re doing with Citylink, increasingly it will be about bringing combinations of fibre and wireless solutions.

Hopefully with Farmside it will be rural. Rural is a very unique market, people there approach the world in a different way to those in Auckland. They have different expectations of their suppliers. We’ve got plans to build applications specific to the farming community.

How do you think the $300 million Rural Broadband Initiative being rolled out by Chorus and Vodafone will affect your rural business?

It’s both a threat and an opportunity. The threat is a lot of [rural] customers are on satellite and they’re going to migrate onto RBI, we could lose some customers to Telecom and Vodafone.

I expect the vast majority of the 15,000 [Farmside customers] to migrate with us.

How has the UFB affected the rest of your business?

Citylink is the business that’s been the most affected, theoretically. There’s already lots of fibre in the Wellington CBD, it’s been that way for the last decade. The competition hasn’t been about the fibre, it’s been about the services on top.

What it does change is we can now buy all this fibre. Now we have a choice, lease from Chorus or dig up the ground and build our own - this increases our coverage.

Obviously we don’t make as much money reselling Chorus’ services as digging up the ground and building our own, but it gives us the choices.

What are your thoughts on the 700MHz spectrum auction, and the possibility of selling parts of that range to the industry?

The 700MHz spectrum will be carved up amongst the biggest players. They won’t release any other spectrum. I think that’s a tragedy for New Zealand.

They [Vodafone, Telecom, 2degrees] don’t need all the spectrum they’ve got. We’ve got four million people in this country, that’s half the population of Sao Paolo - but there’s exactly the same amount of spectrum as anywhere else around the world.

The government wants to get the most money for the spectrum, and the people that are able to pay are the cellular operators. This shuts the door on small innovative companies that could take that spectrum and do exciting things.

The government isn’t interested in all this. Amy [Adams, ICT Minister] just wants as much money as she can get.

How could the government fairly distribute the spectrum?

Limits to the amount of bandwidth, a use it or lose it clause. A lot of countries do “beauty contests” where the best business case gets a slice of the spectrum.

That stuff encourages innovation.

Right now it’s a very short term view to maximise the return.

Are you working to lobby for a better deal for the smaller players in any future spectrum auctions?

You can’t beat city hall. I’d rather devote my energy to my customers.

I’m convinced the battle is lost, this government doesn’t care about small telcos, the bias is towards large companies won’t change anytime soon.

I’ve kind of given up on that. I’ve been dreadfully let down by Amy [Adams].

Is that a fair comment?

It’s her decision in the end. It’s absolutely her decision.

You and Minister Adams are related, she’s your sister-in-law. Is there a conflict of interest there? How does that effect your personal and business relationships?

We have an unspoken rule to not talk about telecommunication at all.

It’s a real pain. Whenever I do need to talk to the government about anything to do with my business it goes through Steven Joyce, the government has put in a whole bunch of protocols.

I saw the strongly worded letter you sent to the Telecommunications Carriers Forum (TCF) in 2010 criticising them. Do you still feel that way?

Yes. This stuff really matters, this stuff really matters to my kids, it matters to New Zealand.

If you look at the guys at Weta, if you cut their umbilical cord to Hollywood they would wither and die.

How likely is it for New Zealand to get a second international internet cable in the next five to 10 years?

It’s inevitable that it will happen. The question is whether the people who invest will make any money.

The analogy I like to think of is hotels. The people who build flash hotels lose money, it’s the second or third owners that make the money. I have a concern that’s what’s going to happen.

The other problem is the Pacific Fibre guys have destroyed the market for everyone else.

It’s all about funding, the way you fund it is to get anchor tenants to commit to bandwidth.

Making that decision to commit is a big deal, you’re committing to international bandwidth for years into the future. All of this thinking, planning and work - that’s what a lot of people did with Pacific Fibre. Then that thing fell over. What happens when another person comes to your door?

The other issue with all of this is the America/China trade war. Chinese gear isn’t that cheap, it’s the Chinese funding. They’re throwing around a lot of money but they’ll only fund it if you use Chinese gear and the Americans are against that.

It’s going to be a difficult period for the next few years, but eventually the industry will forget [the failure of Pacific Fibre].

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