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Andrew Chetham

From Distacom's boardroom on the 38th floor of the Lippo Centre you get a clear view across Victoria Harbour to Kowloon and beyond.

 One of the buildings you look down on is the Hunghom headquarters of Hutchison Telecom, one of the main planks of Li Ka-shing's corporate empire.

 You may not have heard of Distacom but once the two companies were inextricably linked.

 Distacom was a founding shareholder of Hutchison Telecom and for a decade its chairman, Rick Siemens, was head of Hutchison's telecoms operations, building the business from scratch to market leader.

 Now, solely at Distacom, he heads the company that is behind perhaps the most high-profile of Hong Kong's new mobile-phone networks, Sunday. Mr Siemens believes Sunday can one day overtake Hutchison in cellular subscribers.

 Interviewing Mr Siemens it soon becomes apparent that to understand what drives him, you must first understand what he achieved, and was unable to achieve, while at Hutchison under Li Ka-shing.

 'My theory was that I was always going to make it for K.S. If he had kept me and my organisation inside Hutchison the telecoms business would have been twice as large as all of Hutchison today.'  Bold words and ones that can never be tested.

 However, people do listen to what Mr Siemens says.

 He commands huge respect among the phone industry in Hong Kong as one of the pioneers who very early saw the vast potential of the cellular-phone business.

 After winning a mobile licence in 1983 his firm teamed up with Hutchison and Motorola to launch Hutchison Telecom. Starting two years behind Hongkong Telecom, in about 18 months Hutchison had more subscribers.

 Not only did Hutchison have a market-leading brand, it was immensely profitable; by 1993 the combined cellular and paging operations made HK$1.2 billion.

 In his own words: 'I made a lot of money for K.S.'  For Mr Siemens, however, Hong Kong was only the start of a much bigger vision.

 The Orange network was created in Britain and negotiations were under way to start cellular services in several European countries.

 'My view was that all we were doing in Hong Kong was getting to know each other and what we really had to do was things like Orange.

 'You had to become Orange, you had to become [like] Vodafone AirTouch. And that's where we fell out.'  The trans-Atlantic merger of Vodafone and AirTouch has shown that the cellular phone as a large-scale communications entity has come of age.

 With a price tag of about US$100 billion Vodafone AirTouch is bigger than some of the former goliaths of the world industry.

 Mr Siemens believes that, with the right vision at an early stage, Hutchison could by now have been a world player of equal, if not bigger, rank.

 But just as Hutchison began to reach out to develop its global base of cellular companies, Mr Siemens and Hutchison managing director Simon Murray left suddenly - within a month of each other.

 Mr Siemens cites an array of problems which eventually forced his departure but they all appear to come down to the same root cause; a lack of 'vision' at the very top.

 The top being Mr Li.

 'K.S. didn't believe in the view. Back in 1991 you had to believe that Microsoft and [Bill] Gates could be the richest company in the world, you had to believe that telecoms in 1999 would be the most important industry in the world.

 'K.S. for all his strengths - you know a poor guy who became the fourth-richest guy in the world - did it on the back of property.

 'He knows nothing about technology and therefore he just didn't trust us.

 'He thought we were leading him into maybe a black hole or direction where he felt he had no understanding and it was going to take away from him becoming the wealthiest guy in the world.'  That mistrust, according to Mr Siemens, has ultimately backfired as property has slumped.

 'I'd love to have helped K.S. become the richest man in the world, to try.

 'Whether he would have made it or not, who knows. But we would have given it a shot.

 'Now he never will be. It has gone, forever.'  Despite the rhetoric, Mr Siemens does not come over as a moaning ex-employee.

 He talks of Hutchison in terms more akin to a love affair that went wrong, than with any pointed bitterness.

 Despite the criticisms, he clearly holds Li Ka-shing in great regard, although privately he is less complimentary about certain advisers and senior executives.

 So what about Rick Siemens eight years later?  He undoubtedly did well at Hutchison. Before he left, Hutchison bought out Distacom's 19 per cent stake in Hutchison Telecom.

 With new backers, including the Singapore Government's investment fund, Mr Siemens set about building a new regional cellular player.

 Distacom has investments in four mobile companies in India (one is a joint venture with Hutchison), one in Japan and owns 60 per cent of Sunday.

 The parallels of what he wanted to do at Hutchison scream out.

 Is what he is doing now to show them what could have been?  'I think what it is is that I saw what was possible. When I started again I thought I was simply going to have fun in my life and see what I could achieve. The concept is still open to do.'  But time has moved on.

 Distacom is a small player compared with the global giants of the cellular business and stands little chance of catching them.

 So the plan is to target and grow in particular strategic markets, then be either assimilated or bought by a player with more muscle, the new Vodafone AirTouch being a prime example.

 Mr Siemens sees Distacom's role in a merger as providing access to the world's best growth opportunities for cellular telephony; India and the mainland.

 Fine words but a quick reality check is also needed.

 The mainland remains closed to foreign direct investment in telecoms and the growth of the cellular market has been distinctly disappointing so far.

 'Yes [China is inaccessible] but if you have that short a perspective you wouldn't come to Hong Kong.

 'The door is not closed in China. The door is slowly opening and the way it will open is through Hong Kong.'  It comes down to the fact that these markets will eventually succeed and when they do you have to have the best networks, branding and service concepts in place.

 His argument is that the world's largest telecoms companies have no choice but to get into these biggest of potential markets.

 'If you are anyone of the big boys you have to create shareholder value. No shareholder accepts no growth.

 'When you are already worth US$100 billion where are you going to get growth? By going to Greece? By going to Egypt?  'No, you have got to go to China and you have got to go to India. No options.'  And this is where Sunday comes in.

 It was one of six companies which was awarded a PCS licence in late 1996 and launched about a year later.

 Sunday was talked about from the very beginning because of its low-tariff offers, high-profile marketing campaign and similar branding approach to Britain's Orange.

 It also gained notoriety as the network most often pointed to as up for sale, which has been constantly denied by the management.

 To Mr Siemens Sunday is a 'model'. A way to build a lean and winning mobile company in the most competitive of environments. And, importantly, a model to take over the border to the mainland when regulations permit.

 'If you were starting up here and you only had an economic model you wouldn't come. You wouldn't come here to get your share of six million people.

 'The point is to show that as a late entrant (fifth or sixth) to a market you can still make it with the right strategy.'  Sunday has more than 200,000 subscribers and will start to return cash to shareholders by the 'end of this year', Mr Siemens believes.

 The beginning of next month will see what amounts to something of a revolution in the mobile industry in Hong Kong, the introduction of number portability.

 This will allow customers to change networks without the need to change their personal numbers.

 The new operators have pushed hard for this change, which makes it so much more easy for customers to leave existing providers.

 Mr Siemens sees the move as the great leveller between all the networks in Hong Kong.

 By the end of this year he predicts the six providers will roughly have the same quality of network and equally share the subscriber base.

 Until then the likes of Hutchison, SmarTone and Hongkong Telecom will fight tooth and nail to hold back the inevitable market share loss at a heavy cost.

 'The three that are fighting are the three at the top. And they're fighting an ego battle and that's all it is,'  By now Mr Siemens is in full flow explaining his vision of Hong Kong's cellular future.

 After listening to an hour of his ideas and predictions, you can't help feeling he's one of these people who have an ability to persuade you that black is in fact white, or vice versa.

 In this case you go into a meeting believing that Sunday is in one of the weaker positions in the industry and leave believing it has a good chance of coming out on top.

 He puts no particular time scale on an eventual merger - maybe Distacom itself will list before it happens - and interestingly he would still consider linking again with Mr Li.

 'If K.S. could swallow his pride and I could swallow my feelings, we could still be quite prominent.'  It is a marriage that after raising the idea he immediately suggests probably wouldn't happen.

 They have been separated a long time and there were more inviting partners, he said.

 'We can add to someone who takes exactly the vision that they threw away and end up as a US$200 billion company.

 'That would be fun.' Rick Siemens, 54, was born in Winnipeg, Canada, and attended university in Manitoba and Alberta, qualifying as a chartered accountant. His first job was in Vancouver, British Columbia, which became the base of his firm Distacom. He arrived in Hong Kong in 1976, bringing Distacom over to work on the problems of a local family company. In 1983 Distacom, Hutchison and Motorola formed Hutchison Telecom with Mr Siemens at its head. He resigned in 1993 to run Distacom full time.

When you are already worth US$100 billion where are you going to get growth? By going to Greece? By going to Egypt? No, you have got to go to China and you have got to go to India 



Andrew Chetham talks to a telecoms pioneer with US$200b vision