Telecom Rentals a quiet success story

Overlooked division provides steady revenue stream for parent

When Telecom Rentals was set up in 2006, general manager Geoff Hamilton thought it would be funding mainly phone systems “with a little bit of IT”.

“In fact, clients were interested in anything IT, and today we fund technology from the laptop through to the data centre,” he says.

Telecom Rentals has been one of the quiet success stories, with a loan book today of more than $150 million.

Hamilton expects that to grow to more than $500 million over the next five years.

Compound annual growth over the five years since the business was formed has been around 160 percent, yet the company only employs five staff.

Telecom Rentals is a wholly owned subsidiary of the Telecom group, with a Standard & Poor’s single A credit rating. When Telecom splits, Telecom Rentals will stay with the retail side, not Chorus.

The company offers a variety of lease options, the most common include operating and finance leases, sale and leaseback, and solution financing.

One of the key factors behind the company’s success, according to Hamilton, was a decision to employ the Metastorm business process management suite.

“What we thought we wanted on day one soon changed,” says Hamilton. “We’d looked at HP’s Asset Centre originally ... We thought we needed asset management first but it soon became obvious that we needed business process management.

“The focus is on no one particular database, so we flushed out the scope, which led to business process management. That was a eureka moment.”

When Telecom Rentals opted for Metastorm, provided by Techtonics, Michael Krueger, employed at that time by Techtonics, was responsible for the installation. He has since set up his own consultancy, and also does work for Braintree, a consultancy founded by Haydn Virtue. Krueger continues his association with Telecom Rentals, along with Techtonics.

While Telecom Rentals leverages parts of Telecom systems, such as accounts payable and treasury, the parent company has allowed it to be fluid in its approach to the business. Metastorm handles billing, quotes, contracts, asset management, and recovery.

“We use Telecom’s credit information a lot,” says Hamilton. “We leverage that in making credit assessments.” (Telecom has credit information on two million customers.)

During the credit crunch in 2008, Hamilton was surprised at the number of customers who wanted to rent to own. “That became huge. They didn’t want to go to their banks.

“We’ve now got 12-14 percent of the total IT leasing market in New Zealand.”

Customers include government departments, local bodies, district health boards and a number of NZX-listed companies. There are around 1,000 customers, “mostly at the high end of the market”.

The next step is to move into the small-to-medium-enterprise market.

“The most potential is in the SME market where a number of companies don’t have IT managers and there is a lot of development going on in the cloud space,” Hamilton says.

Telecom Rentals has remained largely under the radar because it markets only to its channels. Introductions to customers occur only after the customer has sought financing through the channel.

The channels include Gen-i but the rental company is agnostic about what equipment it funds, says Hamilton.

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