Telecom's crumbs ringing in changes

Battling phone companies: the second in a four-part series on managing turbulence by SELWYN PARKER

Hard to imagine an industry as unpredictable as this one.

Competitors come and go like buses. Prices go only one way - down.

Customers are only as loyal as your latest offer, as a lot of Internet service providers are learning since Telecom's latest cut-price deal for Xtra members. And new technology almost routinely changes the rules.

Welcome to the wild world of the telecommunications sector. At last count there were somewhere between 100 to 200 phone companies, big and small in New Zealand, according to the best official estimate - all of them fighting for the crumbs off Telecom New Zealand's groaning table. And meet CallPlus, one of the baby phone companies carving out a future in this maelstrom where short-term planning is not so much a failure as the means of survival.

"We're always having to revise our plans," laments CallPlus' managing director Roger Payne, a veteran of the communications industry. "In this environment it is a challenge to accurately forecast our requirements."

That's everything from how much office space the company might need to how much working capital, staff, technology and management.

"You've got to be fleet of foot," adds his boss and CallPlus' joint owner, Malcolm Dick.

"You have to respond quickly to every change in the market, like Telecom's latest weekend call rates."

Consider the issue of accommodation alone. Since hanging up its shingle 21/2 years ago, CallPlus has shifted three times, or will have very soon. The company started in Parnell, moved to Khyber Pass, and next stop will be Nelson Street.

Or take pricing. Telecom calls the shots here, and competitors can only react. Although Mr Payne knows that prices will continue to fall, "it's difficult to forecast how fast they will fall. It means that we have to continually rework our financial plans and cost structures."

Although Telecom's power in the market is immense, the high level of competition is responsible for a lot of the mayhem in the sector. Slugging away are scores of Internet service providers which hook customers up through their computers - majors like Telecom, Vodafone, Telstra and Clear, and numerous bit-players including CallPlus, Callback, Codex, Compass, WorldXChange, Global Connect, Global One, Unicall, Newcall, Teamtalk, and even one called Hearsay.

If this were the Rugby World Cup, CallPlus' position would be something like Japan playing all the other teams at once, including the All Blacks.

Launched as a reseller of Telstra services in New Zealand, CallPlus has since installed its own switch, signed an interconnect agreement with Telecom and Clear, and become a fully fledged domestic and international carrier. Indeed, the company can claim to be the biggest wholly owned New Zealand phone company. Compared with the giants of the industry, that might not be much but it's pretty good for a start-up.

Deep pockets clearly help here, and in CallPlus' case they belong to Mr Dick, who has a history of successful start-ups in the industry including Netway Communications, and his wife, Annette Presley. When CallPlus fell behind its customer-building targets early on, the couple were able to leapfrog some of the competition by buying the residential customer bases of four rivals - Global One, TelePacific, TelAsia, and Metro. In this race, they couldn't afford to lag behind the bunch in what has become a volume game where the customer base is paramount.

Oddly enough, Mr Dick wants his competition to stay around, in part because the presence of other niche players helps legitimise the smaller phone companies like CallPlus. "Also, they keep us on our toes," he adds.

Survival also depends on not treading too heavily on the toes of the industry giants. Hence, CallPlus, which has hit breakeven, keeps clear of the major corporate business which is so critical to the Telecoms of this world and concentrates on small and medium-sized businesses and residential customers.

How can you possibly manage in this maelstrom? Mr Payne has developed a few tricks over the years that allow him to stay more or less on top of things.

First, he always keeps his office door open.

"You're skating on top of all these unpredictable factors at once, which means you have to have a finger on everything," he explains. "The only way you can work in this environment is through very good communications channels. For us, that means a very informal management style. You can't run a telco like this through formalised weekly or monthly reviews because they may well be too late."

Thus, staff are encouraged to walk in the door whenever they've got a problem they can't fix themselves. They don't even have to knock, let alone make an appointment.

Management on the hoof also helps. Several times a day Mr Payne does a circuit of everybody's desks to listen, advise and learn.

Second, CallPlus looks for a special kind of staff.

"They've got to be able to get on with it. It's management by empowerment," he says.

Unassuming and unflappable, he has a genuine admiration for his staff. In practice, they've got to be highly motivated, savvy in customer service, self-starting, flexible enough to be jump-started into new duties, and young.

Yes, gilded youth helps in a 24-hour-a-day, seven-days-a-week business where, as the boss acknowledges, "everybody is working at 100 miles an hour."

The average age of CallPlus's staff is mid-20s or half Mr Payne's age. He gets a bit of good-natured stick over the age difference and keeps a stuffed "silver fox" toy in his office, a backhanded gift from the troops.

Doesn't the pace burn everybody out? "Only me," Mr Payne jokes.

The usual round of de-stressing activities helps keep everybody sane - dress-down days, company drinks, rewards and incentives like free dinner tickets.

Where will CallPlus be in a year's time? It's a fair question in a sector where the horizon is always moving.

"We'll certainly be in business, I can tell you that," says Mr Payne who says the heart of CallPlus is adding value to its customer base. "To survive in this business, we've got to provide more than just a connection. It's a cliche but it's the competitive edge."

Meantime, it will be management on the hoof, by necessity. As Mr Payne says, a shade wearily, "if you slowed down and did everything very methodically, you'd soon be out of business."

* In last week's Business Herald management column (Big is not always better for engineers), we said there were just two New Zealand-owned engineering consultancies. But there are also Beca Carter and Harrison Grierson.

Selwyn Parker is available at wordz@xtra.co.nz