CEO (Gibtelecom)

How did Gibtelecom, a 50% joint venture between the government of Gibraltar and the American company Verizon, come to be?

Before Verizon, the company was a partnership between NYNEX, which was the New York/New England Telephone Company, and the Gibraltar government. It was their first ever acquisition outside the Americas, and it was called Gibraltar NYNEX Communications Limited. It was the privatization of an old government public sector telephone department, and subsequently NYNEX, through various acquisitions and mergers in the US became Verizon Communications. In 2001, the NYNEX company here bought Gibtel, a BT company based in Gibraltar which previously had been owned by Cable and Wireless, to form Gibtelecom. Therefore, Gibtelecom is the result of a merger of two different telephone operators within Gibraltar. One previously handled the local network and one was the international carrier and ran a mobile network.



Could you describe the relationship and talk about the greatest strength or advantage that Verizon brings to the partnership?

Originally, when the Americans first came here, part of their agreement of buying into the company was that they had to build a fibre optic network around the Rock. If there is a criticism of the Rock’s telecommunications, it is that it was actually over-engineered, in the fact that it has very sophisticated fibre rings running round the Rock. This has been the bedrock for the expansion of the private sector economy and its dependence on communications in this day and age. Therefore, NYNEX brought this sophisticated technology to the partnership and they also contributed in the early years to moving a public sector organization into a leading Gibraltar private sector company.

Now, the direct input on a technical front, day to day is not so great, but the board members still contribute lots of commercial experience and regulatory knowledge, from having worked in liberalized markets for a number of years; this is increasingly important as Gibraltar liberalizes its telecommunications market. However, in terms of direct hands-on involvement, these days there is not so much, but the Company returns the Shareholders good dividends every year, but I suspect in proportion to Verizon’s size, it is relatively small.



The gaming industry has increased the demand of telecommunication services. How has Gibtelecom accommodated that industry?

I think there have really been two big challenges for telecommunications from the gaming side. I think the first is that Gibraltar traditionally used to buy bandwidth capacity on demand, so for instance a customer would come and say “I want a certain size of pipe to take me from x to y” and they would order it and there would always be delays on the delivery side from the carrier involved. A few years ago, Gibtelecom took the view that it would invest in capacity well beyond its immediate needs, and of course it was a commercial risk on which the company could have lost. But having it there, it was very attractive to the gaming industry when they came because they could immediately have bandwidth.

A second change occurring as we speak is that we are moving the business back to twenty-four hours a day, seven days a week. Traditionally, the businesses ran round the clock, but the technology changed such that we were able to run some things remotely. For instance, our System X switch is monitored overnight in Liverpool, our Internet is now monitored in Shropshire, England. We did not really need many people to work all night because they could be called out if they were needed. However, because the gaming industry is twenty-four hours a day, seven days a week, and they have lots of technological issues, we have to be there too. Therefore, now we have to drive our whole business back to having qualified engineers working around the clock, which creates a lot of personnel, organizational and technological challenges for us.



What percentage of your business do you think is derived from the gaming industry?

I do not have an exact percentage on it now, but one of the things that have changed over the years is the percentage of business represented by traditional telephony. During the first years of the company, traditional telephony probably represented about 70% of our turnover. If you look at it today, you would see it is less than 40% of our business. The two big growth areas are mobile and Internet. One of the things Gibtelecom does, which is unusual, is that we do the A to Z of telecommunications in one company. We offer Internet, wireless and wireline services and we also do something else in Gibraltar that we think is a market leader, and that is that we produce one bill! Frightening in some ways because people see what they spend in total on communications, but you get a one-stop shop that covers all of your Internet, wireless and fixed line services, including the equipment you buy.



Up to this point you have basically had no competition, Gibnet has been around but they have been a very small player. Now that they are partnering with Sapphire Networks, what kind of threat do you think they pose and how do you plan on staying ahead of them?

Competition is good, so we welcome it, and as you point out we already have competitors at the margins, including Gibnet, the Internet service provider. With regards to selling of telephone equipment, we are competing with a whole range of suppliers especially from Spain. On the GSM mobile service, because of the Spanish - Gibraltar political problem Spanish operators do not have mobile roaming arrangements with Gibtelecom. Therefore, we have unfair competition from all the Spanish operators, which we are taking forward in EU Courts. Where you are sitting now, you would pick up a Spanish mobile signal, and some people it may suit to just use a Spanish mobile instead of a Gibtelecom one. So, we have got competition there. We have had international competition for some years now, where service providers offer cheap call services on the back of our fixed line network. I think in Gibraltar there are two or three operating at the moment.

I think Sapphire Networks is the first company to be licensed to provide a competing fixed line service like us. I do not think we see it as a threat. We would see it as a challenge to keep us on our toes, but I think the worry we see with these things is whether they will cherry pick.



What do you mean by cherry pick?

Cherry pick in the sense that in a small market this size, there is only so much of the cake to be eaten and that some bits are tastier than others. For instance, we talk about private sector companies that hire substantial bandwidth. That is a market that you could easily go for, at the expense of providing a service for the entire community, which obviously carries a huge cost line. That is the worry about a competitor, that they would cherry pick those things they wanted to do and not provide a community wide service.

I would like to say telecommunications has been fairly instrumental in Gibraltar’s economy and will continue to be so because of the interdependence of individuals as well as businesses on communications, whether voice, data or whatever. They almost need these services as much as they need water on tap.



Is the finance industry concerned that Gibtelecom has shifted its focus towards the gaming industry, and thus that they might be neglected in some way?

No, every customer is a customer, whether they are a residential customer wanting their basic fixed line telephone repaired, or right through to a business wanting a substantial telephone infrastructure.



You do not anticipate any problems with meeting the increase in demand?

No, I think we have geared ourselves in the company to be able to meet future demand. We have restructured ourselves following liberalization, and are ready to face more competition. We have been doing some downsizing and readjustment of our cost base, which puts us in a strong position. The main restraint on Gibraltar’s telecommunications industry comes from the Spanish problem. Currently, if you make a call from Spain you dial as if Gibraltar was part of Spain, where as if you were calling from any other part of the world, the States or wherever, you would dial our ITU (International Telecoms Union) recognised international code “350”. Because of that differential, it places restrictions on the amount of telephone numbers that are available in Gibraltar, and it also causes some problems over the routing of traffic, in the sense that a call can come in by two international routes, one direct to us and the other via Spain. We hope that the current bilateral talks between Gibraltar, the UK and Spain, will hopefully sort this out relatively quickly.



What are the immediate and short-term goals of Gibtelecom?

The immediate goals of the company are to ensure that we are in a position to live up to the riggers of competition in a way that we have not had to in the past. I believe to this point in time we are doing well. We continue to expand the technology, our turnover continues to grow, and we continue to make a good return on the investment to our Shareholders. So it is all looking good.

I think one of the problems a telephone company of this size has is keeping up with the technology. It is such a fast moving world and the investment required is substantial. Just to get to where we are the investment in this small place of 28,000 people, the companies that make up the group have put in over 70 million dollars in the network itself, in capital investment. As you look forward, there is going to continue to be substantial investment to keep pace.



Could you tell us a little bit about your professional background and your other job as Financial Secretary of Gibraltar?

Besides being the CEO of Gibtelecom, I am also the Financial Secretary of Gibraltar. That is how I came to Gibraltar a few years ago. At the government’s nomination I sit on the boards of some commercial companies, such as AquaGib (a Northumbrian Water Group Company) and Gibtelecom, in which they have a shareholdings. After facilitating the deal that merged Gibraltar NYNEX with Gibtel, the new company made me the CEO. I ended up doing these two things, at which time gaming has also formed a growing part of the Financial Secretary’s role. By profession, after University I started life as an accountant.

Gibraltar was fortunate because we were selective over who could come here. We were very strict, so as a consequence we have ended up with some of the premier operators in this sort of internet, betting, gaming, casino field, and really it has grown to be quite a substantial industry now. It employs over a thousand people and obviously is a substantial contributor to the Gibraltar government through various taxes and levies and duties, etc. Also, as we were talking about telephones, it has obviously become an important source of business there.

Some jurisdictions put in a lot of regulations and rules before they went into this business. Gibraltar did this in a slightly different way; we let this business grow with blue chip companies. So we built the first class hotel and now we need to put in the roads, whereas some jurisdictions built the roads and then never had a hotel at the end of them. We have got the premier gaming companies here and now the Gibraltar government plans to modernize the legislation, such that it caters to remote gambling in a way the old legislation does not. Right now, the Government are in the final stages of drafting the legislation.



How do you anticipate the new legislation changing the licensing and regulation of the gaming industry?

My understanding is that the model will follow what has happened in other things, where a Minister will take responsibility for the licensing side. Gibraltar, because of its size, has taken the policy of having a Gibraltar Regulatory Authority, which covers a number of aspects such as telecoms, data protection, etc. I think it is highly probable that gaming may fall into that structure.

I think the real issue is that as the remote gambling industry has grown now to the size it is, we need to bring our legislation up to date to ensure that the industry is policed to the highest standards.



What would be your personal message for our readers?

Gibraltar is a microcosm of a larger society and is an exciting place to do business. It has all the opportunities, all the challenges and some of the problems, but in a great part of the world.