Battles of the Bolger

25 Feb 2003

Best known for taking on the might of a mobile operator and losing, you could be forgiven for filing Sean Bolger (pictured) under ‘opportunist’ and leaving it at that. It would be a big mistake.

By the time he entered the mobile market in 1997 he was already a self-made millionaire having sold his company, International Telecommunications, to the Global Telesystems Group (GTS) for IR£78m. This was payback for a pioneering business that had begun to open up the Irish fixed line market as early as 1994, long before there was even a regulator to set the rules.

What most people remember is the high-profile battle between his company, Cellular 3, and Eircell (since bought out by Vodafone) that ended up in court.

The two companies had struck a deal whereby Cellular 3, subsequently under the Imagine brand name, would buy bulk airtime and sell it on. The trouble was, Bolger was getting too good at it, radically undercutting Eircell’s tariffs and quickly amassing 20,000 customers. The salt in the wound was when Imagine started targeting Eircell’s own customers and the legal spat ensued.

To this day, Bolger is incredulous on the point of law that forced Imagine to wind up its Irish operation. For a third party to be able to buy bulk from an operator, the operator had to have market dominance. Eircell had 64pc of the Irish mobile customers at that time. The court ruled that this was not a dominant position and Cellular 3 closed for business in 2001.

“Do we stay and fight? It was just a ridiculous decision,” says Bolger, still smarting from the whole episode. But he has moved on. Big time.

Last year he bought back his old company from GTS in what he describes as “taking advantage of the market” and re-christened it Access Telecom. There are, he says, bargains to be had in a recession. There are also new opportunities that are not necessarily routed in the latest technologies, as Bolger explains.

“I understand opportunities and I know how to put together the people and technologies to deliver those opportunities. We are very technology aware but we are not technology constrained. We have never been specifically mobile or fixed. It’s about understanding what the market wants and investing in that need,” he continues.

But isn’t the small Irish market notoriously hard to crack? “It’s much easier than it was four or five years ago because people are educated. It’s like the Berlin Wall coming down. People know they can get their services,” Bolger says.

He makes no bones about convergence being the way forward regardless of the state of the economy. “Customers have an amount they can spend. The difficulty is that if your strategy is purely voice, you will have a diminishing cost, diminishing price and a diminishing market. You’re not really going anywhere,” he explains.

“If a customer is willing to pay €1,000 a month, say, as its voice costs drop there’s a gap. The company is still getting the same basic service, maybe for 50pc less, but it is still willing to spend another 50pc. The key in competing is how you fill that other 50pc,” he reasons.

Such unassailable logic leads to only one conclusion. “The opportunity is in convergence. A telecoms company that provides all communications requirements is the ultimate goal and that’s where the opportunity lies,” Bolger adds.

The bigger strategy for buying back GTS is part of Bolger’s pan-European business (more of that later) but the local market is important to a man who is passionate about being Irish (“I live here. I don’t live in Portugal!”).

He elaborates on the plan for Access: “GTS had considerable assets but it was being run from the UK. We thought we could position it properly in the Irish market and create back office systems and applications that will take it into Europe. While we’re doing that we took the view that there was a fabulous opportunity in Ireland.”

The opportunity stems as much from the mistakes of others in Bolger’s view, particularly the Irish government and its plans for broadband infrastructure.

“The government sold the major asset of the State [Eircom] while trying to sell Ireland as a European hub. The problem is that it has no control over the infrastructure that could enable that to happen. It’s out there talking about something it can’t deliver. And companies that were going to make the investment in broadband are no longer willing to do it,” he says.

He has some sympathy for the position of British Telecom (BT) in Ireland. “The government has been driven into delivering an alternative strategy and then it goes and gives all the business to the two incumbents. Why didn’t it give it to East BT?” he says, alluding to a massive public service contract for a VPN (virtual private network). “If you’re not going to support BT you can’t expect it to be very active here. If I was BT I’d be seriously questioning my commitment to the Irish market.”

“The large telcos [telecommunications companies] are pulling back,” he says, comparing Ireland to the size of Manchester from the perspective of a multinational telco. “The only attractive business is the carrier business and large corporates. Servicing a customer base out in Ireland isn’t very attractive to them.”

Naturally, these words are somewhat loaded. If multinational telcos decided to vacate these shores Bolger would doubtless be available to drive them to the airport. But you get the feeling that he’ll carve out his niche regardless of the competition. Especially now.

Hutchison Whampoa will have a network in Ireland in approximately one year and the duopoly of mobile networks that has survived the launch of Meteor will get its first serious challenge.

“I am very confident that we will be actively involved in the mobile market,” says Bolger unequivocally, just in case we thought we’d seen the last of the Imagine brand. “It opens up in 18 months and we expect to be in there before that.”

How and with whom is the moot point. He would neither confirm nor deny that he is in advanced dialogue with either Hutchison or Meteor, but he had plenty say about both.

Hutchison won a type A 3G (third generation) licence for its 3 network, which necessitates provision of an MVNO (mobile virtual network operator). Intended to create further competition this enables another company to feed off a licence holder’s infrastructure and market its own brand and services.

Virgin in the UK, Sense Communications in Norway and Imagine in Ireland are the only real examples of an MVNO making its presence felt. With the arrival of 3G there are about to be many more.

Just to confuse things there are many different definitions of an MVNO but for regulators it’s a separate company with a degree of technical independence. Taking bets on who’s going to strike up such a relationship with Hutchison is a risky business. There are many contenders.

Eircom CEO Philip Nolan declared his company’s intention to re-enter the mobile space in these very pages (Digital Ireland, December 2002) but it’s conjecture as to with whom it will partner.

“Selling Eircell was a huge mistake for Eircom,” says Bolger, providing an instant guide to how he thinks it went wrong for the incumbent. “When the share price went to the dogs it had to keep everyone happy so it sold off Eircell. Eircom sold it to Vodafone and it has been left with a utility that has a cost base that’s too high and that’s losing market share to mobile operators. It sells that to a consortium of investors. There’s no harm in that except suddenly you have real finance-driven shareholders who want to drive the value. In the next 18 months Eircom will come back into the mobile market because it has to.”

And what of Meteor in this transitional period? “If Meteor doesn’t make its play now, and I mean now, it will not get a market share. It will have no value,” says Bolger, with more than a hint that he is trying to negotiate something with the operator.

“Meteor should have come in and said it was the best value and cheapest in the market. Maybe its strategy was to get the licence, build the network, look and smell like an operator and wait to be bought out,” he says.

“It came in with a standard strategy when the industry was changing quickly. It was small enough to change but didn’t take that opportunity. Its pricing and image is exactly the same as the others, so if it’s the same except it hasn’t got as good a network what’s its differentiator?” Bolger asks.

Harking back to his Imagine/Eircell days, the cost of mobile tariffs in Ireland still irks Bolger who is as intent as ever on exploiting what he sees as a massive opportunity.

“Operators don’t compete. They haven’t needed to. Up until two years ago you could get customers easily and, unless you royally screwed it up, it was going to happen. Get a licence, build a network and people will come. They don’t actively compete against each other,” he adds.

There is a growing consensus that a country the size of Ireland will struggle to sustain four operators let alone MVNOs but Bolger begs to differ.

“Ireland could sustain six or 10 MVNOs! Even if you were to cut the mobile tariffs by half, O2 and Vodafone would still be making money,” he says.

If you’ve been paying attention you may have noticed that there’s an apparent gap in Bolger’s CV. From the winding up of Imagine in Ireland in May 2001 to reopening for business as Access last September, what was he doing? Finding his holy grail is how he describes it.

For the last two years he has been on the road, taking the MVNO principle to a whole new level, talking to operators, pitching to investment bankers and sharing ideas with application and content providers.

His vision is of a pan-European MVNO and he claims he has negotiated contracts in seven countries. “It might happen, it might not,” he says with a casualness that’s a little hard to swallow considering the time and energy he has put into the project.

The basic principle is to open up the mobile market at a time when crippling licence fees and huge rollout costs have curtailed all but the biggest companies from extending their business across countries other than their own.

While he hopes to extend his MVNO into Ireland in the not-too-distant future, local business to date is primarily concerned with fixed line.

“We’ve bought GTS, a fixed-line general licence service provider with a switching centre and co-location facility and a small to medium-sized enterprise customer base. We bought it in its entirety as a staging post for Imagine services,” he explains. “We’ve interconnected our switches to all of the other operators and we are going to be using their infrastructure. This means we can deal with customers on a national basis by using infrastructure that is already there.”

Wireless in the broader sense is never far from the agenda. Bolger believes that fixed wireless is the only way to deliver the notorious last mile, ie the connection between backbone fibre and the customer. “It’s the only way it can be done quickly and efficiently on a national basis,” he says.

The endgame in all of this is a loose affiliation he calls ‘wireless Ireland’, a co-operative of carriers, communities, content and application providers with Access at the fulcrum offering ‘white label’ telecommunications packages to any organisation that wants one.

Judging by his track record, you wouldn’t bet against him finding plenty of people that would. Didn’t anyone tell Bolger that the telecoms industry was in a crippling recession? “A lot of people have got hurt,” he says, “but, on the positive side, that creates opportunities. We certainly didn’t expect to be coming back into the Irish business. We’ve taken advantage of it.”

By Ian Campbell