Q&A WITH WILLIAM ALLAN, CEO, THUS
THUS plc is one of the UK's leading providers of voice, data, Internet and interactive services, operating principally under the THUS and Demon brands.
Corporate customers include, for example, Amstrad, BSkyB, Virgin, The Royal Bank of Scotland, GWR and Capital Radio. THUS has recently signed a deal to support the UK launch of Tele2.
Bill joined a predecessor company in December 1998 as Chief Operating Officer and was appointed Managing Director in February 1999.
He started his telecoms career over 25 years ago with Cable & Wireless where he served in a number of executive positions which spanned the globe including:
- Chief Executive, Regional Businesses
- Regional Director Cable & Wireless North East Asia, and Representative Director, Cable & Wireless Japan
- Chairman of Cable & Wireless Communications Services Ltd. (Japan)
- Director, Telecommunications of Jamaica, Entel Panama, the Barbados Telephone Company and the Barbados External Telecommunications Company and IDC (Japan)
Bill gives us his views on the telecommunications industry and the role of THUS within it.
From Sakhalin and Panama, to now London and Glasgow is quite a change Bill?
It is, but a refreshing change. However it is not too different from my previous business experiences of being parachuted into places half way around the world like the Yemen, Bolivia or Panama, with very limited resources and support. C&W taught me how to deliver real results quickly, in very different cultures and difficult conditions. My past experience has proved to be invaluable to THUS. To be successful, I had to be financially disciplined. I didn't have the time or inclination to develop a large corporate centre with the typical trappings of a CEO and be frivolous with shareholder funds. I learned how to be prudent and keep costs under control, a trait that I share with one or two of my fellow Scotsmen!!
You must be quite upbeat, given the announcement of your interim results and becoming cash-flow positive ahead of target?
The fundamentals of our company are getting stronger year on year and our productivity continues to improve. This gives the market reassurance that we can manage through difficult times. And times have been tough for telecommunication companies from over-supply, mismanagement, fraud, uncompetitive pricing... many of the old C&W practices have stood us in good stead during this turbulence.
Moving forward will be different for THUS. Our loan facility changes to a normal repayment loan from 1st April. In many ways, this is a sign of our maturity. Our business model has also moved on. Now that we are free cash flow positive, we have moved away from the much maligned EBITDA to setting an operating profit target for the second half of the next financial year.
During the trauma of the last three years, the strength of THUS has been our management, and our ability to manage cash flows and earnings. We have taken the view that it's better to have slower growth rather than chase headline revenues that dilute earnings and cash flow. Our focus is high value services for our customers.
We have consistently honoured our promises to both investors and customers and exceeded or met the expectations of the market.
Our scale and continued operating efficiencies has enabled us to improve bottom line performance and to absorb price erosion from distressed competitors.
We are confident that the business is on a steady path to deliver operating profits in the second half of the next financial year.
Given ever decreasing product and business life cycles, how does THUS harness new technology?
We saw the Internet as an evolutionary and not a revolutionary technology and therefore not a disruptive technology. Indeed, we believe we were the first company to fully integrate an Internet company (Demon) into a telecommunications company and implement a new generation of services for our customers.
We are technology agnostic and focus only on using technologies which create service and value for our customers. During the past four years, I believe our service innovation record has been second to none in the UK. We have launched world class services for our customers including world-first and European-first applications, for example, to Sky, On-Digital, GWR and Amstrad. It is our ability to innovate at the service level that provides a clear differentiator on our capability.
Whenever one talks about customers and the organisation one is never too far from a cliché. What is the approach of THUS to its customers and its people?
In my view, the quality of our staff is second to none. Our ability to meet and exceed our customers' expectations is down solely to the quality of our people. At THUS we set high standards for our staff and we are demanding. Nevertheless, we are a company that behaves with integrity towards our staff, our customers and our shareholders.
Our staff are key to our success. It's not just that they are very capable and competent, they are also prepared to go the extra mile to deliver targets. At THUS we typically have a certain bloody mindedness in delivering, despite the doubters and, in so doing, achieve something that is quite unique to the UK market.
In terms of our organisation, managing succession is essential. Like other Chief Executives, I should be measured not only on what I achieve but, more importantly, on the strength of organisation I leave behind.
Our customers have gone through a learning experience. Many of them now realise that short term solutions that offer short term financial gain are not the optimum solution, and that they are far better served by medium to long term solutions which achieve greater service and operational efficiencies in their business. We are not the lowest priced telecoms operator in the market but we do care about service delivery and giving value to our customers. Consequently, the quality of both our customers and the revenue from them continues to get better.
Our values are non-negotiable and we operate with integrity at all times. The deal has to be right for both parties and we will walk away from the 'wrong' business. We are interested in developing long term relationships with our customers that are beneficial to both our interests.
If you were looking into your crystal ball how do you see the future?
Our ambition is to be No. 2 to BT in the UK corporate marketplace.
The current market structure is not sustainable and has made investors uncertain about the future for the UK fixed line telecoms market. The market includes a number of companies which have emerged from Chapter 11 or other forms of financial restructuring. The financial viability of some of these companies remains questionable.
There is talk about consolidation, but apart from BT there is no obvious catalyst for consolidation.
In my view, the winners will have the ability to innovate at the service level. Old fashioned virtues of prudence and conservatism in managing the financial conduct of a company is also a virtue. Companies which do this by providing the highest levels of service quality, with recurring contracted revenues, will prevail. THUS is strongly positioned to succeed - and that is what we intend to do.
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