Revenge of the obelisk
The Maltacom Groups annual figures for 2002 proves
government monoliths let out to play free can become profitable. Yesterday
the Group celebrated a future that had been unsure back in 1998. CEO
Stephen Muscat tells MATTHEW VELLA where the Group is heading.
Theres a bright future ahead for the Maltacom Group.
Five years ago there was a nervous brooding about what type of direction
a top-heavy government monolith would take in the liberalised playground
of fixed-line and mobile telephony.
The results smack of smug self-assurance. Maltacoms 2002 profits
have put it way ahead of all the pessimism that could have made it stumble
in its first years of operation. CEO Stephen Muscat knows 2002s
figures are a boon for the phoenix that emerged from Telemaltas
"These have been the best results ever for the last five years,"
"We are now looking towards the future with great optimism. We
are not only a fixed-line operator now, but we also offer various telecommunications
services, and these have also expanded greatly within the last three
"Go Mobile, our mobile company, now has more than 113,000 subscribers.
Our ADSL operation Datastream has around 13,000 customers. There has
also been a shift in the mentality towards pre-paid fixed-line telephony
with our Easyine services. We have entered new markets which we had
not envisaged five years ago.
"There areas being exploited now are based on infrastructure, starting
with the network of underground fibre-optics, which should provide more
bandwith for all users. The internet is also a major area in which we
expect greater activity, and our companies are now also writing computer
software and designing web pages."
The optimism with which Maltacom faces its future has somewhat been
marred by what the group has seen a highly-regulated environment, often
hostile towards Maltacoms dominant status.
Muscat says that the group has had to incur certain expenses in relation
to the markets drive towards liberalisation and free competition.
The decision notices of 2002 with regards to market liberalisation saw
the group having to undertake additional expenses which Muscat says
were necessarily justified, despite these being expected conditions
within mature and competitive markets.
"Maltacom had to make a reference interconnect offer, being the
rate that has to be offered to those who wanted to make a connection
with Maltacom services. This process took six months to complete, where
we needed technical aid in the area of regulatory accounting.
"This exercise cost us over a quarter of a million, and despite
having given this offer, there is effectively none of the expected level
of immediate competition. Apart from that, we used to see ourselves
as already having these interconnection rates, since from 1999 we have
been in connection with the Vodafone Malta network so Go Mobile subscribers
could connect with Vodafone subscribers.
"However, the regulator expected us to base such exercise on a
cost-based plane, and a whole set of new procedures had to be taken
in order to identify this. One might say this actually justifies certain
"Yet, when one sees dominant operators like Vodafone Malta, who
did this exercise and have not yet produced the results of such, whilst
keeping in mind that the indications show their interconnection rate
will be higher, it has to be said Maltacoms cheaper rates and
level of investment are quite exceptional for a company that is considered
to be dominant, big and inefficient."
Muscat says Maltacom had expected to certain decisions taken with more
maturity. Accepting the inevitability that a competitive market had
to be established, this happened when in the last quarter of the year,
the regulator issued a consultative paper on voice-over IP, freeing
up access for new players.
"This did not happen with us because there was an obligation in
the National Plan for the Adoption of the Acquis, that there had to
be tariff re-balancing, which had to take place before liberalisation.
This hasnt yet happened, but our plea for tariff re-balancing
is still there and we are now in the stage of appeal.
"The regulator expects more face-to-face discussions on tariff
re-balancing. We believe tariff re-balancing was an exercise we completed
and that we gave all the information pertaining to the matter. This
was not a question of negotiations but of decision-making."
At yesterdays public announcement of Maltacoms performance
for the end of the year, Chairman Maurice Zarb Adami informs those present
the divestiture of Maltacoms twenty per cent shareholding in Vodafone
Malta had been wasting some precious time for the groups executives.
Having encountered certain stumbling blocks, the group is committed
to have its share interest in the company sold off as soon as possible.
"We appointed Bank of Valletta consultants and NM Rotschild to
help us in the sale of the shares. The first step was an international
call for a non-binding expression of interest in the foreign media.
We had over 26 expressions of interest.
"From thereon we examined those companies which were ready to do
a due diligence. A due diligence was also initiated for Vodafone Malta.
But when Vodafone Malta did not declare a dividend in 2001 and there
was no exit option for the investors, there was no active follow-up
to the proposal.
"So we entered into direct discussions with Vodafone abroad. Since
according to current legislation every licensed operator has to be listed
on the Malta Stock Exchange since 1 January of this year, we are now
in the stage of seeing Vodafone Malta Ltd being listed on the MSE. This
includes a mandatory sale of at least 20 per cent of its shares.
"This has to be proportionate, and this will include a part of
our shares and a part of Vodafone internationals. That would be
the opportunity to invest our shares and we are insisting on a fair
price for these shares, calculated in terms of todays and tomorrows
"The relation between Vodafone Malta and Go Mobile is a commercial
one. There is an agreement covering interconnection and how tariffs
should be set with regards to the transmission of information. As for
future relations, one has to keep in mind that before 2005 there wont
be a third operator, so there will be a duopoly and until then the consumer
can see that there will are new services already being developed."
The Maltacom group is now preparing to actively participate in foreign
markets with the onset of EU accession, that should also see the threat
of foreign companies laying foot on the island.
The group already attempted an international offer for a company operating
in the Channel Islands. After following closely the companys performance,
the local Channel authorities suspended the bidding and entered into
direct discussions with another company and sell it totally.
"We were also participating in the sale of part of an Icelandic
telecom company but this was suspended by the Icelandic government.
Currently we are analysing another company right now where to further