S.Atlantic : FALKLANDS RADIO GOES ONE TO ONE WITH JUSTIN McPHEE
Submitted by SARTMA.com (Juanita Brock) 07.01.2017 (Current Article)
A Report for Falklands’ Radio by Ronnie McLennan Baird
FALKLANDS RADIO GOES ONE TO ONE WITH JUSTIN McPHEE
A Report for Falklands’ Radio by Ronnie McLennan Baird
RMB: Justin McPhee is the Chief Executive Officer of SURE South Atlantic Limited and he came into the studio this morning to talk about the new broadband allowances that start the 1st of January. While Justin was here we both took the chance to talk more generally about the current regulations for a new telecoms licence for SURE.
You brought up the licence. What is your current position on the licence negotiations?
JMP: I think we are sat like everyone else at the moment and possibly we are waiting for the relative relationship process to go through. It is currently in Select Committee. Currently we are by-standers at this stage whilst the Government goes through its legislative process. And that will pick up again obviously in January.
RMB: What have you made of that process as by-standers?
JMP: I think this is an interesting process seeing there is so much public attention and interest. Obviously it is an emotive subject where everybody has a view including ourselves.
RMB: You said you have got a view. What is that view?
JMP: I think we made it very clear that SURE South Atlantic Limited is fully committed to the Falkland Islands. We’ve got an entirely local team and I am the first local Chief Executive. Buy may the outline of the clear set of plans, the investment and terms of developing the Falklands’ Network in exchange for a certain licence period to recoup that investment and make sure it makes sense – well it gives us sufficient clarity to undertake those investments in the first place.
The other thing it does, again, is the key factor for the remotely distributed countries like the Falklands actually guarantees everyone a service – an expanded universal service in there which we are fully committed and continue to serve the more difficult and more outlaying communities at no extra cost to those customers.
RMB: So I understand that you need a certain period of clarity. Can you expand on why you need a minimum of 10 years?
JMP:I think it is really driven by the scale of investment like the new Mobile Network, 4 G Network – it is such a big investment for such a small community in a particularly rough geographic area that the company needs some certainty that the investment can be made in the first place. If it is anything less than that it doesn’t make financial sense of the pay back is seven years and you only have a five-year licence, for example. It doesn’t incentivise us to make such big investments.
RMB: So do you see us being on 4G for as long as seven years or 7 or 10 years just to state figures to do with licencing than the one you mentioned probably off the top of your head; because telecoms are fairly fast moving – I know this isn’t standard for you yet but people are actually talking about 5G and presumably 6G will come along within a 10-year timeframe?
JMP: I think almost certainly. I think the sort of step changes we have seen in terms of, for example, mobile development – the sort of step change from 2G - 3G was sort of an interim step to reach the development of 2G and 4G is much more like mobile broadband. Five G will offer more incremental speed but it also comes at a cost in terms of reduced coverage so for a 5G network you may need many sites than a 4G network or 2G network so I think there is always a balance in terms of a small community in terms of the length of investment VS the technology life-span of the equipment but we are a technology company we look at that continuously. We are always looking to how Stanley changes and how we can upgrade equipment within the constraints of such a small operating market.
RMB: You talk about the size of the market and I said I would come back to the question that you said you were SURE South Atlantic Limited, not SURE Falkland Islands Limited. One of the things that people have wondered is why there is no apparent transparency. If you look at the public accounts you see the accounts are to three markets, not just to one market. How do you explain that?
JMP: It is because of the South Atlantic. We have operations in two other Islands. We meet the current legal requirements for filing our accounts as do other companies here who have operations in multiple jurisdictions so that’s the way we operate. As I said on one of your colleague’s talk shows, there is actually no cross-subsidy in terms of one paying for another. Each Island pays for itself. They are in the same market and they obviously have regulations and government monitoring and review and they do as well, so at the moment we meet the requirements of….
RMB: And those companies have requirements which, some would say, the accounts were allegedly filed late so were you current on requirements?
JMP: That was an administrative issue. There was nothing sinister about that. As soon as we had them available and audited they were filed. So they were late this year and as soon as they were available we filed them.
RMB: But the regulatory requirements on the Falklands say regulators have access only to the Falkland Islands’ figures to satisfy themselves that there is no cross subsidy.
JMP: They do. Yes. And they have done this for many years.
RMB: Now one of the things that people have been picking apart in published accounts when they became public are suggesting that SURE are making several millions of pounds of profit from 3,000 people. It may not be as simple as that. Is it as simple as that?
JMP: It certainly is not as simple as that. The Falklands are a small market but we undertake other activities outside telecoms. We hope to expand our renewable energy business. We have done other various engineering projects not directly telecoms or purely regulated as telecoms services. As we face the pressure of ever increasing costs and expectation that costs were lower so we are always exploring for new lines of revenue. And also I also think we clearly made a windfall with oil being in the country as many other businesses and even the government itself clearly made significant windfalls because that was a very short-term injection of many more people who wanted an advanced range of services for a short period of time. That’s obviously gone now. And also I think – I was away at the time but Cable & Wireless were divested from the business so they weren’t going to invest in projects that required many years to pay back. SURE has made it clear that they are going to be here for the long term.
(Additional information remotely related to the question)
Certainly we are very much committed to remaining here. We have an entirely local team. We have 33 staff here and only one has a work permit and everyone else is local. I think the company is always committed to investing in people and support the communities they are in or wherever else in the world. I am a product of that in terms of I started off as an apprentice and now I am a Chief Executive and I am very much keen to continue that development of young Falkland Islanders. We have taken on a bunch of College graduates across a range of subjects in terms of engineers and electricians and also recently this year we funded a Master’s degree for one of our sponsored students that we actually picked up during work experience some years ago. We actually encouraged them through College and then University. And this year over the last 12 months SURE funded their Master’s Degree in Computer Science at Southampton University. So we are very much committed in investing in young people in the Falklands and try and interesting them in a most interesting career as well as the wider range of support for sponsorship and activities we undertake.
The last 12 months we obviously committed to support the child protection group. We put in help lines to Samaritans and SPCC. We funded sport and a various range of local charities and we are very much committed to being part of the community here. So we are all locals, we live here, we use these services and I would really like to take the opportunity to thank the team we do have at SUTR. Obviously there has been a lot of comment of late but we are very much committed to deliver services in the Islands across the entire Islands, often in fairly difficult conditions. So they certainly do a very good job. This is a very good opportunity to say thank you very much to them.
RMB: So does that mean you are champing at the bit for a new licence to invest more in the future?
JMP: Certainly we have some very clear plans. We have been sitting on investment this year with investing a significant amount of money on the exchange and the associated equipment around that. It is an industry where you have to continue to invest. You just can’t stand still. I mean even to deliver the same services, equipment goes obsolete much more quickly than it used to so it is an industry that requires continuous investment but we are very keen to move forward when the new licence with some exciting new investments around – broadband, mobile broadband, 4G around Stanley we will also extend the 2G network further out into Camp to cover more percentage of the Camp population and we will take the opportunity to look at investing in a small number of mobile sites right at the edge of the network that we just aren’t bothered but we need additional public safety and community services such as road coverage. So I think it is an interesting investment along with keeping an ongoing commitment to international capacity to continue to refresh the core network and make some very interesting changes to the way we build services so there is an awful lot to do in the next few years if we can agree a licence with the Government here. It’s going to be a very interesting time for us and beneficial for our customers.
RMB: I will come back to one of my previous questions again because you said again how fast telecoms are moving so why 10 years or 7 years or even 5 years or even 2 years?
JMP: I think it is clearly a matter of work it takes to get to this point so I don’t think anyone would have an appetite to renew the licence every 3 years simply because of the amount of effort involved. And I think you know from previous experience having the works involved in the processing of legal documents and legal drafting in agreements and also the work behind that so when we commit to invest we should have to go to the suppliers who must understand what the business model for those investments might be and what the potential market is here so there is an awful lot of work to do and some of the investments that people would like in terms of setting things up with mobile would be the biggest investment. And if it doesn’t pay for itself in 5 years, it throws cold water on any operation to invest in such a big capital project if you don’t have clarity that you can make a return on it over a reasonable period of time.
RMB: So are you are hoping the new licence is in place before you have to start negotiating the next one?
JMP: I would certainly hope so, yes.
RMB: I would like to thank Justin McPhee, the Chief Executive of SURE South Atlantic Limited for participating in this programme.
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