Ireland 3 of a kind

THE FRIDAY INTERVIEW - Robert Finnegan, managing director, 3 :ROBERT FINNEGAN, managing director of mobile phone operator 3 Ireland, could justifiably be feeling a little smug. The subsidiary of the Hong Kong conglomerate Hutchison Whampoa has just signed up the 250,000th subscriber to its high-speed mobile network.

Even when a popular media pastime was to speculate on 3's subscriber numbers, or perceived lack of them, Finnegan stuck hard to his assertion that positioning 3 as a mobile media network, providing content like Premiership football, music downloads and computer games, would eventually pay off. Many analysts, industry insiders and journalists didn't believe him.

Sitting in the company's bright and bustling Dublin offices, decorated in bold primary colours and chunky furniture, Finnegan resists the temptation to say I told you so.

"We have trebled our business in just over a year - we went from 80,000-odd to over 250,000," he says. "We are now looking at half a million, that's the next benchmark."

Things certainly look very different from the business that Finnegan took over in December 2005, which when it launched the previous summer had effectively been a satellite of 3's operations in Britain.

In addition to the subscriber numbers, the operator has established a high-street retail presence and now has 16 shops around the country.

Hundreds of millions of Hutchison's €500 million investment in the Irish market has gone into the 3G network, allowing the company to lead the way on mobile broadband and provide high-speed coverage to about 90 per cent of the population (a roaming agreement with Vodafone fills in the gaps for the rest of the State).

Finnegan has also trumpeted the value that 3 offers subscribers and is fond of criticising Vodafone and O2 for their higher tariffs and huge profits in the Irish market.

Finnegan concedes that it took time for Irish consumers to build up confidence in the brand.

"Meteor probably didn't help the scenario when they launched," sighs Finnegan. "My understanding from the market is that they launched with a network not in great condition and the legacy of that is still in people's minds."

Despite the criticism of Meteor, 3 recently ran the rule over the Eircom mobile subsidiary which owners Babcock Brown are keen to offload. It would have been an attractive buy in terms of customer numbers as, according to ComReg figures at the end of 2007, 3 had 4.4 per cent of the mobile market and Meteor had 19.2 per cent.

"We had a good look at it and we will not be buying Meteor," says Finnegan. Among the reasons he gives for walking away are that much of its network is still based on older 2G technology and that the average monthly spend by customers is lower than "you would like".

He also feels 3 Ireland would have been "distracted" by the task of integrating Meteor.

"It's not just a customer number game, it's about quality of customer," says Finnegan. Given that parent Hutchison Whampoa has $33 billion (€21 billion) on its balance sheet, "writing a cheque would not have been a problem", but Finnegan points out that Hutchison sold Orange, another European mobile subsidiary with an older network, "not to get out of telephony but to get into multimedia".

Market sources suggest the asking price for Meteor was €1.2 billion but Finnegan just smiles when asked to confirm this. "It just didn't stack up," he says. "There were many reasons, but the valuation was something we would have a major problem with."

Finnegan says Hutchison, which recently joined a Treasury Holdings consortium to develop the €300 million Bremore Port project in north Co Dublin, likes the Irish market. "Two or three years ago, Hutchison wouldn't really have taken note of Ireland and now it's very much on the radar screen," says Finnegan.

He is well positioned to take a reading on the corporation's mood, having spent 11 years working for the company in Asia. There, he finished up as boss of its beverage division, which employed 3,000 staff, turned over $200 million and was ultimately acquired by Nestlé.

That's a far cry from his roots in Co Waterford, where he now lives, preferring to commute to Dublin for his week's work and return home at weekends. He believes spending weekdays in the capital and weekends in Dunmore East gives him a good perspective on what is really happening in the country.

Finnegan studied accountancy at Waterford Institute of Technology and got his first job at Irish Leathers in Portlaw. "That was a bit of a baptism of fire because they were in financial difficulties at the time," Finnegan recalls.

Like many graduates in the 1980s, his next move was to the UK, where he worked in a series of finance roles at large companies including Procter Gamble, Allied Domecq and Lyons Tetley.

When the offer came from Hutchison to relocate to Hong Kong, he wasn't that enthusiastic but eventually decided he would move for five years. He stayed for 10 and admits he "had a great time building businesses in China" before taking over the beverage division in 1996.

Finnegan certainly isn't afraid to shake things up in the Irish market. He has recently been extremely vocal in criticising Eircom's efforts to get Government funding to subsidise the rollout of higher broadband speeds to about 70 per cent of the population.

He describes Eircom's proposal to provide speeds of 25MBits/sec within seven years as "laughable" and says that the mobile broadband technology 3 sells could offer 50-75MBits/sec within the same time frame.

"They are no longer the only show in town and the good thing is the Department [of Communications] realise that," says Finnegan. "So if there are any handouts, we would certainly be looking for a handout as well because we've invested over €500 million in this market to date and we will continue to invest."

Mobile broadband has been a surprise success for 3. Well over 100,000 people in Ireland have opted to get broadband this way and 3 is understood to be the market leader. Finnegan estimates the customer base is split 50/50 between people using it at home and mobile professionals travelling around the country.

3 is also one of the three shortlisted bidders for the Government's national broadband scheme, which will subsidise provision in the 10 per cent of the State where Eircom has deemed it is not economical to provide any service.

Despite a court challenge to the scheme, Finnegan expects the Department of Communications to be "not far off" its stated goal of announcing the winner in June.

"We have a very good solution and one that we could roll out very fast," says Finnegan. "If you start talking about digging roads up and you name it, it's going to take forever."

3 is also awaiting a decision from regulator ComReg on a dispute with Tesco Mobile, the virtual operator which is a joint venture between Tesco and O2. The two have been unable to agree a price for connecting calls between the two networks.

"We are ready to open up traffic to Tesco customers, but Tesco has been unwilling to talk to us or negotiate or agree a termination rate," says Finnegan. "We have offered to allow calls to be passed and put a billing moratorium in place and they have refused that as well."

While the amount of money at stake is small, primarily because as a new entrant Tesco Mobile has relatively few subscribers, Finnegan feels there is an important principal at stake.

He is particularly vexed that O2 can charge a higher termination rate for calls on its network to Tesco Mobile customers compared to what it charges for calls to O2 customers.

"That's crazy when they haven't even invested in the marketplace," says Finnegan.

Despite ComReg saying it is "very concerned" about the row, Finnegan says 3 has a "good, open relationship" with ComReg.

Hutchison may have deep pockets but 3 Ireland was carrying accumulated losses of €152 million at the end of 2006, the most recent year for which it has filed accounts.

Much of those losses relate to the buildout of its 3G network and the significant marketing spend on establishing the brand. On the plus side, the accounts show 3 had fixed assets of €250 million, which includes a value of €39.7 million assigned to its 3G licence.

"This is a marathon, not a sprint, and we are in investment mode," says Finnegan. "Normal telecoms operations going in from greenfield would be in investment mode for five to seven years. We see ourselves as actually being far better than that."