AN EPIC JOURNEY IN THE LAST 6 YEARS – A Final Letter from Peter Loko

I received a letter from Sir Mekere Morauta Minister for State Enterprises on Monday the 13th of February dated 10th February 2012 of my suspension. I thank the Minister for teaching me a lot about life.

The process of the suspension does not appear to be in order and I hope, as a matter of principle, they get it corrected. The suspension can only be served on me by the Board of Telikom. That should not be the main issue and I don’t want to get into a public debate over this.

I was charged for not complying with Section 46 B of the IPBC Act. That particular section restricts all State Owned Entities from not spending any money beyond K1 million unless approved by the Minister for Finance. This clause came into play in 2007. The interesting thing about this section is that it does not allow an SOE an advantage in a highly competitive market and Telikom and a number of other SOEs have asked for this section to be changed. It also does not allow for quick delivery of services.

I sincerely hope something is done about this section. One thing I can guarantee our people is that the money was put into good use. I thank the Telikom Board for their foresight and support in allowing those investments to take place.

All the investments over K1 million (or below) have the Telikom Boards endorsement and have also been sighted by IPBC. One of our Board members was a member of the IPBC management team.

2012 will be the great year as far as opportunities go. It has been an interesting journey for Telikom as an organisation over the last 6 years and the following is an account of this epic journey.

Before I talk about this journey I want to start off by saying Telikom has completed its 2010 accounts and it is now with the Auditor Generals office. We hope to have this signed off with zero qualifications by end of February. In addition our external auditors have completed the 2011 accounts and we want to have this signed off before July this year. Again we want to make it 2 in a row for zero qualifications. That is a Key performance indicator we have set for ourselves. Once the accounts get sent to the AGs office the public is free to check our books.
We at Telikom have had a bumpy but great experience over the last 6 years and you will not be disappointed by what I want to share with you.

Telikom has been faced with many challenges and many opportunities since its incorporation in 1997, especially when the company was expected to generate profits on the one hand whilst at the same time provide services as part of governments community service obligations. These coupled with inheritance of an aging telecommunication network and staff predominantly with public service mentality, it doesn’t make things any easier. Even with those challenges our team has shown true grit.

This was usual for a company that was on a transformation journey and going from a government agency to one that was going to compete. Since 2006 the constant changes we had at the Board and Management level have slowed somewhat for the good of the country.

With all these legacy issues we resolved to deliver.

The telecommunication market was deregulated and Telikom was expected to deliver world class service amidst competition from market experienced international operators/carriers. From the graph below the value of Telikom has grown over the last 9 years to below K780 million in 2010. The amount of money it has poured into the network has increased since 2006 per year compared to the years 2002 to 2005.

While Telikom books from 2002 to 2005 show higher returns, network and service quality was deteriorating prior to competition in 2007. Major decisions and some pain had to be experienced to turn this around. Telikom would be in a far worse situation now if nothing was done!

So where has Telikom invested its money?

Telikom has over the years invested considerably into upgrading its network and its people. It had to bite the bullet – short term pain for long term gain. This is evident from the various network projects and change management exercises that have been completed over the recent past, under the current Board. Telikom invested in a change management office because over the years while we invested in projects we invested little in addressing the soft issues. The end result is that Management and Union have worked very hard on building a relationship for the betterment of Telikom- a mutually beneficial relationship. I want to thank the Union for their understanding with the interest of the country and organisation ahead of personal interest.

A few of these projects eventuated and include:

(a) The replacement of APNG cable with APNG2 in September of 2006; APNG1 was installed prior to independence in 1975 and with a 25 year life cycle was about to collapse, as it had gone beyond its useful years. This undersea cable was PNG’s only telecommunication link with outside world via cable linking Port Moresby to Cairns – Australia, though satellite options were available but costly. If the Board had not approved the APNG2 cable from Sydney to Port Moresby, all communication now would be through satellite, which at times are unreliable and very costly. Other service providers only has satellite links and are pushing Telikom to provide more cable capacity – a testimony of this belief.

(b) The Board also in the same year,2006, explored options of running a secondary undersea cable from to the outside world. It so happened that at an international forum Telikom learnt that there was a cable going to be run from Australia to Guam and it was going to pass through PNG waters. Telikom spoke to the owners of the PIPE cable to consider running the cable into PNG so we could tap into it instead of putting in our own cable. The cable runs from Sydney to Madang and Guam. This project was subsequently commissioned in 2009, and is currently carrying traffic from Madang. PIPE cable has capacity 10 times more than the APNG2, and has attracted a lot of interest from corporate customers including other Telecommunications service providers and is posed to generate more revenue for Telikom in years to come. Currently is has 5 big clients including our competitor using it for services in Madang.

(c) In November of 2008 Telikom sold 50% of its mobile business, Bemobile to both Foreign and local interests. It parted with its mobile business arm under this JV. The partners included GEMS from Hong Kong, Nambawan Supa, NASFUND and PNG Sustainable. In March of 2011 Telikom sold the remaining shares to IPBC.

(d) In December 2008, a brand new terrestrial microwave radio link from Port Moresby to Lae to Kimbe to Kokopo. This link involved 2 main segments. The Port Moresby Lae link and the Lae- Tomar link covering Lae to East New Britain. This project involved replacement of the aging terrestrial links, which were installed in the colonial days, and took almost a year to complete. Today we have fewer telecommunication failure along this route compared to earlier days.

(e) In 2009, Telikom invested in a modernized Intelligent Network (IN) system, which enables a convenience in billing. This billing system also gives us billing options to provide to our customers.

(f) In the same year, Telikom also rolled out Wimax, a 4th generation (4G) network, the first service provider to do so in PNG. We currently have WIMAX services in Port Moresby, Lae, Madang, Kimbe and Kokopo.

(g) In March 2010, we commissioned our second internet gateway in Madang, which provides a back up for our internet gateway, Tiare in Port Moresby for ALL ISPs in the country.

(h) In the same year, we installed newer version of the VSAT – Dial away IP, which provides voice and internet services where wire line and wireless services are not available. Telikom currently has +600 VSATs around the country. We provide these services for leaders who want communications in the absence of any alternatives. No other telecommunications service provider can boost to have this number.

(i) We also launched our own ISP – Telinet, providing competition for other ISPs in PNG and are the cheapest internet provider in the country.

(j) In March of 2011 Telikom sold all its shares in Bemobile to IPBC to fund its critical projects. Right now Telikom does NOT have any shares in Bemobile.

(k) In April 2011, we launched our own mobile service, going by the brand name: Citifon, which mostly has coverage in major towns but gradually will be rolled out to rural settings. No other service provider offers call rates at 2 toea per minute and 1 toea SMS. We offer the most cost effective service for our customers.

In 2012 Telikom planned to invest over K200 million to continue upgrading our Network. With these projects and many others that are not mentioned and those that are still in progress, Telikom wants to ensure customers have access to much affordable and reliable telecommunication service, in the country. Telikoms vision is that before 2020 every Papua New Guinean will have access to a telecommunications facility. We want to improve service quality along the highlands highway and bring this all the way to Madang into the PIPE cable. This can only happen if capital is injected into this project.

Telikom had to have access to money to invest in these projects so it persisted with funding particularly over the last 18 months. An Information Memorandum (IM) was submitted to a consortium of banks, the 3 major banks in PNG initially 2 years ago and the banks were keen to fund this investment. They gave Telikom the first loan of K200 million and were in the process of resolving the balance. For the balance the banks were awaiting feedback from Telikom’s shareholder. Before the shareholder could make a commitment Telikom engaged PWC to look at calculations done to calculate staffs redundancy package. This was prior to the changes in Government last year.

A number of projects in 2011 had to be defered because the Government at the beginning of the year 2011, strategized to restructure the Telecommunications structure between a Net core and a servco business. A major decision was going to be made in the middle of the year. This all came to a halt when the Government changed. As a result of this consideration a number of projects were either delayed or did not take place and this had a major bearing on Telikoms projections. The question of where this is heading in terms of the Telecommunications structure is still been considered. The sooner this question is answered there will be certainty.

Over the years undercapitalization had taken its toll on Telikom as in any business that does not re-invest. As a consequence Telikom decided to off load its shares in BeMobile to IPBC to have access to the money to fund many of its projects including phase 2 of the PIPE cable (Port Moresby Alotau BU3). Offloading its shares was necessary to sustain itself in the business. The proceeds of the sale are still held with IPBC under an agreement between IPBC and Telikom. After making presentation to IPPC and with vigorous follow ups, IPBC have released an amount of just below K6m which will allow Telikom to complete the Lae- Madang segment to connect PIPE from Madang all the way to Port Moresby. The balances of the proceeds from the sale of Bemobile are held in trust with IPBC.

In the last 6 months two of the major banks have approached Telikom. 4 meetings have eventuated with the banks expressing a desire to continue discussions on the Information memorandum that Telikom provided in 2009. The banks had earlier given Telikom a loan of K200million and were in discussion with Telikom to deal with the balance of K200 million. Despite what has been said about the Telikom not getting its shareholders blessing, the banks have spoken to our shareholders and for that reason have backed Telikom with a loan. There is a willingness on the part of the banks to pursue the balance of the loan a sign of confidence in Telikom. Telikom’s current debt to equity ratio is 27% and we want to keep it at this level in 2012. Compare this to industry like companies in the region we are in a good position. See gearing ratio of others in the region in 2010 – Telstra gearing ratio 202% , Telecom New Zealand 170%, Singtel 61%, and Telecom Malaysia 70.1%.

Because funding has been a challenge to secure due to the process affecting all SOEs and requirement by Leaders to have communications in their provinces Telikom took an initiative to secure funding from Leaders, Government Departments and others. As a result of this exercise the National Planning Office has signed an MOA with Telikom worth K20 million to roll our wireless services at selected LLGs. This is due to take place this year. Currently Telikom has over 600 VSATs in place all across the country thanks to some extent to the Government.
Telikom had to make drastic investment decisions, or go into extinction in the face of competition. A company like Telikom, operating in a multi-million kina industry, can not effectively compete, if the IPBC Act requires the organisation to obtain both IPBC and then the Minister of Treasury’s approval, for every expenditure above a million kina. From past experience this process sometimes takes almost 3 to 6 months, until final endorsement is given to spend money. If this process was quicker it would not be a problem. Telikom and other SOE concerns were raised 2 years ago.

It is hoped that the above account gives you a quick snap shot of what we have been up to over the last 6 years.

I pay tribute Telikoms management team for sticking by me in good and bad times. Thank you ! I also acknowledge Telikom staff and their families that have sacrificed a good part of their life to bring us to where we are now. From the staff in the back office, IT staff, HR staff, Corporate staff and sales team to the liners, the exchange staff, the VSAT technicians and engineers to the riggers and radio techs and engineers in the field. Their jobs are thankless at times but come with a lot of risk and danger especially at this time when the seas are rough and the winds are strong. I also thank the Union for been very understanding and supportive in keeping the company stable. You are a wonderful team.

I also pay tribute to the Telikom Board who at times had to keep me focused and give me sincere and genuine tough advice. I thank the Government for showing faith in me and the team to deliver services.

PNGeans be reassured that we only had you in mind in delivering services to our people. I sincerely ask the Government to amend section 46B of the IPBC Act. I publically made this call in Bakawari on Friday 3rd February and once again make this call to our leaders so SOEs can deliver timely services. All the other SOEs are suffering from this same sickness called section 46B of the IPBC Act.

May God bless you all.

Peter Loko

2 thoughts on “AN EPIC JOURNEY IN THE LAST 6 YEARS – A Final Letter from Peter Loko

  1. As an ex employee, I take my hat off to MR Loko. What Telikom has done in the last 6 years should have been done decades ago (Infrastructure investment). But its not too late…Keep it up Telikom…Once the people get access to telecom services they will definitely support the company they own…

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