The telecoms rich list
16 May 2011 | Kavit Majithia
Kavit Majithia identifies telecoms' billion dollar men.
In an industry that is dominated by relationships, networking and the interaction of people, the biggest names in telecoms are those that are charged with making the important decisions to develop a company, develop a market and develop a service. What is more difficult to establish and to really understand than the ownership structure of these multinational corporations? We set out to identify those players who put the decision makers in charge – the men who have made billions from the telecoms industry.
For the second year in a row, Mexican telecoms tycoon Carlos Slim was named by Forbes as the world’s richest man, amassing a fortune of $74 billion with a considerable share of it made from his two merged telecoms companies Telmex and America Movil. Those who question the profitability of the sector as a whole, especially with the problems now facing wholesale providers following the increase in data requirements and the growing market maturity, only have to look at what Carlos Slim has done over the past 12 months, building his individual net worth by $20.5 billion. It is not, of course, only in telecoms that Slim has grown his money empire, but it was where he began and where his interests are still proving as prominent as ever.
The power of foresight
Forbes identifies billionaires from all over the most prominent economic sectors, including commodities, new technology, retail and finance. Telecoms entrepreneurs range across operators, ISPs and vendors from a variety of geographical markets, each with a telling story of how they reached such affluence from the sector. Emeka Obiodu, senior analyst at Ovum, believes most billionaires in the industry made the crux of their money in the early nineties when mobile first came onto the market. “The key was getting into the industry when mobile was still a nascent technology,” she said. “Those who got into the mobile industry that early have been able to see the value of their investment grow in multiples.”
The boom in mobile has been most prominent for the past 15 years. But now telecoms has pretty much gone past that boom period and, with growing market maturity in most services, the biggest potential for new entrepreneurs lies in developing data and investing in social media, while developing the still nascent LTE networks.
The billionaires that have made this industry what it is are those that had the foresight to invest in the industry. To look at South America, and possibly across telecoms as an industry, it is clear the larger companies and the incumbents either have state ownership or private funding – the latter was difficult to secure early in the century but this no longer the case. Wally Swain, SVP Latin America at Yankee Group believes “state-owned companies will continue to limp along until their governments can no longer afford them.”
It is now also unlikely the industry “will develop in the same way to create another Carlos Slim,” Swain says. “I don’t believe the region or even the world will develop more like Slim. The industry now demands such a scale that few companies can start from scratch with a single vision. The other large telecoms companies are all relatively mature and while they might encourage entrepreneurial value, none are one man’s vision.”
The man at the top
The only way to start a telecoms rich list is to begin with the man at the top. Swain’s admission that the world, perhaps any industry, will not see another Carlos Slim is not unrealistic considering the remarkable success he has had in the telecoms sector.
Slim was in fact a very wealthy man before his investment in Telmex during the 1994 ‘tequila crisis’ in Mexico, when the economy experienced a significant devaluation of the peso. At the time, Slim had significant cash reserves and invested in several high-cash generating companies like the then state-owned Telmex. Telmex in turn provided the cash flow to merge the company, as it developed, with America Movil, which is now Latin America’s largest wireless carrier. Slim’s family-owned global conglomerate company, Grupo Carso, which is the parent company to several retail, construction, automotive and energy companies, operates as a separate entity to Slim’s telecoms subsidiary, named Carso Global telecom. “Slim is a unique individual with brilliant timing, singular vision and great luck,” adds Swain. “His luck will not be soon seen again.”
Slim’s wealth is certainly incomparable to other telecoms entrepreneurs, especially when considering Microsoft tycoon Bill Gates held the title as Forbes richest man from 1995 to 2007 but Slim has now widened the gap between himself and Gates by $18 billion. Telecoms racks up 16 representatives in the top 1,000 billionaires of the world according to Forbes, with others investing in the industry over time.
The closest competitor to Slim in telecoms in terms of wealth is Ananda Krishnan, at number 93 with a reported wealth of $9.5 billion. Krishnan owns a majority stake in Maxis Communications, the largest telecoms provider in Malaysia, and also has interests in satellite, gambling and power. Renowned for shying away from any media attention, Krishnan began his career as an oil trader after graduating from Harvard business school. His first foray in to telecoms came in 1995 when he partnered with BT and AT&T, which then together owned a 46% stake in Maxis, before Krishnan bought the companies’ shares out for $680 million.
Krishnan now owns a 75% stake in the company and is renowned in Malaysia among businessmen, particularly for raising a loan of $735 million for Maxis in 2001 to develop the brand under his growing multimedia conglomerate. The company’s recent acquisition of Aircel, Tamil Nadu’s largest provider, has seen Krishnan spread his business empire towards India and Indonesia.
As many industry experts would testify, the fastest growing telecoms market at the moment has been particularly fruitful for individuals. India’s telecoms market is still in boom mode, and BuddeComm estimates mobile subscriber rates have reached beyond 584 million, as of Q3 2010, up by 350 million from just 15 months earlier.
One man cashing in on such growth is Sunil Mittal, the Indian telecoms tycoon that owns the country’s largest global telecoms company bharti airtel. Described as ‘hard charging’ by Forbes, he comes in at 110 in the rich list with a personal wealth of $8.3 billion. Mittal’s bharti airtel is now the fifth largest telecoms company in the world and became one of the first Indian telecoms companies to go global, following the acquisition of the African assets of Zain last year.
Mittal was one of the first men in India to enter telecoms after lobbying with the government in the 1980s to allow private firms to manufacture landline phones and was one of the first men to invest in wireless when regulation changed to open the market. In 1995, the Indian government finally approved his plans and he launched services in Delhi, 11 years after he founded his first company Bharti Telecom Limited. By slashing tariff prices and securing cheap handset deals, Mittal has been able to grow his bharti airtel group at a phenomenal rate, and now has over 200 million customers over its worldwide operations.
Similar to Mittal, it was the late Dhirubhai Ambani who also recognised the clear potential in India’s telecoms market and developed Reliance Communications as a telecoms subsidiary of what is now the most valuable company in India, the Reliance group. The late Ambani is represented in the Forbes rich list by his sons Mukesh and Anil, who are placed at ninth and 101st respectively. Anil Ambani heads up the telecoms side of Reliance and has a wealth of $8.8 billion, approximately $17 billion less than older brother Mukesh, who controls the oil and gas conglomerate Reliance Industries.
“Within the 20 or so industry-related billionaires, there are also combined hedge funds and other financial players using telecoms to amass their fortunes,” says Judy Reed Smith, CEO at Atlantic-ACM. “That amounts to a healthy percentage of wealthy people, but they are dwarfed by construction, finance, investment, real estate and other broad categories.”
From Asia to Europe, it is Russia that has provided the most telecoms billionaires specifically from one region. The world’s 35th richest man and fifth richest man in Russia is Alisher Usmanov. Renowned for his investments in steel, Usmanov has made small yet significant investments in the internet and social media and seen his investments in Facebook, Zynga and Groupon triple over the past year. He also acquired a reported 8% stake in Russia’s third largest operator MegaFon, and a 59% stake in the operator’s holding company Telekominvest. Fellow Russian Vladimir Yevtushenkov co-founded multi-operational company Sistema in 1993, and created a joint venture with major mobile carrier MTS to receive a controlling stake in its network. He has now amassed a fortune of $7.7 billion and is placed at 120th in the rich list. Other billionaires from Russia with interests in telecoms include Mikhail Fridman, German Khan and Gleb Fetisov.
Making his first appearance in the Forbes rich list is Mike Adenuga, who debuts in 595th place with a wealth of $2 billion. Adenuga’s entrance outlines the growth potential of telecoms in Africa after his Nigerian telecoms carrier Globacom invested $1 billion in the Glo submarine cable, connecting Nigeria to the rest of the world, shooting Adenuga in to prominence. Adenuga, described by Forbes as “making waves with mobile technology,” has also pioneered the launch of the first 4G LTE network in Nigeria this year. He initially made his millions in the oil sector, and put himself through school in the US by working as a taxi driver and security guard.
It is very rare to talk of prominence in the industry without mentioning the largest telecoms market in the world, but it is the fundamental ownership structure of telecoms in US that makes it very rare to find a US telecoms billionaire. “Stateside, the large incumbents are public companies, listed on one of the stock exchanges,” says Reed Smith. “The large players typically do not privatise, so there does not appear to be a trend to change ownership.” The exception to this is Kenny Troutt, who founded long-distance provider Excel Communications in 1988, almost immediately after market deregulation. The company was involved in a major legal issue with AT&T throughout the nineties in a patent dispute and operated primarily by selling franchise and services through network marketing or multi-level marketing. Troutt made most of his $1.2 billion fortune after taking the company public in 1996, then merging with Teleglobe in 1998 in a $3.5 billion deal. Troutt is 993rd in the Forbes rich list.
Concluding the telecoms rich list is Masayoshi Son, founder of internet and telecoms provider Softbank in Japan. Son has grown the company for the past 30 years and gathered an $8.1 billion fortune, is placed at 113th in the Forbes rich list, and is presently the richest man in Japan. Softbank’s growth has been fast-tracked, considering the company still holds exclusivity for the iPhone in the region. In keeping with developments in new technology, Son’s Softbank owns a reported 8% stake in Yahoo Japan and a 40% stake in Chinese social networking site Renren, with rumours it will go private very soon. His wealth has grown considerably over the past few years following an acquisition to acquire Vodafone Japan in 2006 for approximately $15 billion.
Slim will surely go down as one of the great entrepreneurs of the 21st century, and it is clear that telecoms has its fair share of billionaires. However, in the wider context, Swain believes the “great age of entrepreneurs in capital intensive industries passed in the 20th century. Originally railroads, energy companies and airlines started as entrepreneurial companies but the competitive environment and the need for global scale means few or no great entrepreneurial players arose in the second half of the century,” he says. “Only Slim comes close in telecoms.”