The Friday Interview: Geoff Butcher, Prime Carrier


1 Jul 2005

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Enterprise Ireland and the Irish Software Association recently recommended software companies build themselves up to a scale to be relevant on an international stage — but one company is doing this. Dublin-based Prime Carrier, which last month acquired another Irish firm Am-beo for an undisclosed sum, is on track to revenues of €5m next year and aims to be a management powerhouse in the merging worlds of mobile, fixed and triple-play communications.

To say that Prime Carrier actually took the recommendation to build itself into a mid-size enterprise literally from anyone else is not quite true. As if out of a passage from the strategic writings of the ancient Chinese general Sun Tzu, of whom he is a confessed student, Prime Carrier CEO Geoff Butcher (pictured) had already realised and pre-empted this strategic imperative and the trains necessary to acquire Galway-based billing settlement software player Am-beo were in place almost a year ago.

Both companies already boast an impressive blue-chip client listing in the telecoms world. While Am-Beo boasts players such as Sonera Zed, Western Wireless, XTS and Xtempus, Prime Carrier’s customers include KPN, Colt, Energis, France Telecom Equant, Tele2, BellSouth and MCI.

Now, similar to the key to most battle winning campaigns, Butcher’s imperative is to keep the initiative and he is assessing the company’s next acquisition target. This, he avers, is fundamental to bringing the 50-strong Prime Carrier to a point where by the end of this financial year it will have achieved revenues of €5m and will be en route to dominating a key position amidst the most fundamental revolution to impact the communications industry. “There’s one billion people on the planet with mobiles and that exceeds the number of people with fixed and it is still growing phenomenally. Our charging principle can still apply to the internet world. That’s a €50bn-a-year business. If only 3pc of that revenue is spent on IT, you’re looking at a massive market.”

Butcher says an acquisition of another company could take place any time in the next six to 12 months. His company’s acquisition of Am-beo was an all-stock transaction that was welcomed by the combined entity’s principal shareholders, ACT Venture Capital and Advent Venture Partners, as well as Enterprise Ireland and Hot Origin. The next acquisition, could involve a different structure that could involve stock, raising more venture capital or possibly floating the company on London’s Alternative Investments Market.

The latter option has also been suggested in a research note by the Yankee Group. According to Yankee, the combination of Prime Carrier and Am-beo assets creates a larger competitor in the wholesale and retail telecoms market spaces and based on the core technologies of both players, the newly combined organisation aims to become a wholesale trading and retail-billing solution leader, supporting voice, convergent internet protocol, 3G and triple-play telecoms services. Yankee said the merger will give Prime Carrier the financial stability and tier one reference power required by carriers seeking to make technology investment.

“We want to build a fairly sizeable mid-size software business. The scope for building a company of €50m to €100m revenue should be possible in the space we are in. There are a number of people who feel Irish software businesses historically are under-scale, what we are trying to do is create a medium to large-sized one. How we will do that is by pulling together a strong technology product base that allows strong organic growth and also by going after further acquisitions.

Such moves necessary to building a company to scale Butcher warns are fundamental, not only to the future of Prime Carrier, but the Irish software industry as a whole, which is under-scale and under-funded. “The challenge for technology buyers is integrating lots of different solutions and that costs a huge among of money to do. What they want now is to go out to people who can offer them a single source. So there really are a number of drivers pointing towards consolidation. I see parallels between Irish firms and some Scandinavian companies — they are all under-funded. They tend to go to venture capital sources that put in relatively small funds and they invest too little. If you are constrained by the level of funding you develop a very narrow, niche product. If you look at the globally successful companies, they are the ones who go to market with a broad product, score early-market tractions from big customers who then fund the development and deepening of the product in the right area.”

The Am-beo acquisition is already powering ahead and already Prime Carrier has delivered the first proof of concept for the merging of the two companies’ software. On the one hand Prime Carrier’s technology will provide telecom firms, internet service providers and mobile operators with the power to manage their businesses and make tactical and strategic management decision, on the other hand Am-beo’s settlement technologies enable operators to derive revenues from mobile, fixed line and eventually triple-play content streams. The synergies are obvious and compelling, says Butcher

“There are a very limited number of market players capable of doing what we do. If you look at the Tesco grocery model, they place items according to what they know will result in consumers spending more money because they have gathered information that gives them the knowledge. For example, is it by chance that the higher margin confectionary is on the slat next to the tills? They know how much you will buy and how much margin they can make. However, with the telecoms arena it is different. A typical telco throws away all of this information.”

Prime Carrier’s movements over the next year will make compelling viewing, just as compelling as trying to predict the shape of communications in the years to come. Globally, mobile subscriber levels in 2004 were 1.8 billion, forecast to grow to four billion by 2010, according to research house Telestrategies, and international voice minutes will increase by 6pc a year. The voice traffic worldwide was 170 billion minutes in 2003. Voice over IP traffic, Telestrategies, say is currently growing at a rate of 30-40pc a year.

“What we’re about is enabling telcos such as Vodafone and Eircom to optimise their businesses and make sure they are billing for the right things and are utilising their assets. Especially if they bring out new services, they would need to know how many people will pay for it. Right now investment decisions in telecom companies are far too uncertain and that’s where we come in, ultimately giving the management people the accurate information they require to come out with good, profitable products,” Butcher concludes.

By John Kennedy