HGC sets out for full-scale transformation
01 June 2018 |
Andrew Kwok wants HGC Global Communications, now under new ownership, to be a non-traditional telco that is committed to transformation, remembering that infrastructure is fundamental. He tells Alan Burkitt-Gray how he’s getting there
Andrew Kwok is seven months into a digital transformation project at HGC Global Communications, where he is now CEO. He’s hired a chief digital officer and he’s recruiting a range of digitally-skilled people, not to replace existing staff, he insists, but to add to the range of talent available to the company as it pursues a goal of transformation.
At last year’s ITW, he was president of the international and carrier business at Hutchison Telecommunications (Hong Kong), a unit that traded as Hutchison Global Communications (HGC). It was owned by CK Hutchison, the giant Hong Kong company that owns the Three telecoms brands around the world.
But at the end of July CK Hutchison negotiated the sale of HGC to a US private equity company, I Squared Capital, for the equivalent of about $1.9 billion. Kwok was named CEO of the operation, which also owns fixed-line and Wifi businesses in Hong Kong. CK Hutchison would use the proceeds to invest in mobile and the transaction was completed at the start of October.
What’s happened since? First, the name. It couldn’t call itself Hutchison any more. “HGC Global Communications is a pretty well-known brand – well known to our customers and our business partners,” he says.
The company reinforced its new identity with a number of initiatives in Hong Kong, where it sponsored the Volvo Ocean Race. “It was their first time in Hong Kong,” says Kwok proudly. The race, which started in Alicante in October, is due to finish in the Netherlands at the end of June. “We have a lot of support from our international carrier partners at the race,” says Kwok. “We had a concert for our consumer market and that was well received.”
The chief digital officer is Jacqueline Teo, who joined in February. She has a background that includes KPMG, where she was in its telecoms, media and entertainment practice, as well as Hewlett-Packard and more recently Telstra International: Teo was global head of digital customer enablement for two years until the end of 2016. Kwok continues: “The second item is to streamline our business. On the financial side we have defined our investment philosophy.” That includes a strategy that is “critical to our long-term investment and returns”, he says.
He has spent much time talking to HGC’s business partners about “our new kind of thinking”, he says. “We can proudly say that we have not lost a single contract with customers or partners around the world because of this change. No contracts at all have been lost or terminated because of this transaction. The market feedback is good.”
There’s been “a lot of hard work”, he adds, not only naming the executive team and working on the new strategy with the staff as well as developing HGC’s partnership model “and especially our digital roadmap”. He’s pleased that “after all the things that we’ve done in the past seven months”, he’s retained 99.6% of staff.
“We have been asking ourselves what does digital transformation mean for a telco,” he says. “We could talk about this for an hour or more, but let’s keep it short. Basically it is success or failure.”
Why does he say that? “We believe that human beings are stepping into the fourth industrial revolution, starting several years ago.” It’s a “very well-defined fourth industrial revolution” that is already happening.
There are three parts to it: “One is globalisation, the second is personalisation, and the third one is granularisation – all the life styles have been cut into very individual pieces. Everyone has their own choice.” Specifically, in our business, he says, they have choices “on the way telecommunications are conducted, the services, the expectations and so on”.
How is HGC going to tackle this challenge? “Our main belief is that one thing that will not change is the fundamental infrastructure of the telecoms operators.” Kwok is talking about fixed local and international infrastructure, he says. “The telco absolutely should not forget about its fundamental role – otherwise all the thinking, all the wish lists, everything will be in vain, because there is no fundamental infrastructure there.”
That gives Kwok some challenges. “We have put down four different factors to allow operators like us to participate in and contribute to digital transformation.” He lists them: “New technologies, the business model and new services; and the last is a new type of organisation so that we can achieve it all.”
The future, he adds, will rely heavily on machine learning and artificial intelligence. “Having said that, we do not forget our infrastructure, and we should not forget what kind of new technologies we have to adopt as soon as possible so we can ride on the digital transformation wave. That is something that we are already doing or thinking.”
He started his list of four different factors that are needed in transformation with new technologies. These include software-defined networks (SDN) and network functions virtualisation (NFV), he says. They include an application programming interface (API) hub, and a big data analysis platform.
“Those are at the top of our priorities,” says Kwok. “All these items we have already started work on and we are planning some of the fundamentals inside our network, inside our services, inside our business model and very importantly inside our organisation also.”
The first step was the launch its software-defined wide area network (SD WAN) services. “For the API hub we talked about, our network is already interconnected with our partners, service providers and customers on the API level.”
Next? “Machine learning will come,” he says. “For us that is mainly in our network topology and also functionality.” What would that do? Kwok’s example is a network fault, “machine learning will give us a lot of help to rectify some of the failures in the network”, he says, independent of rerouting or speed.
But a warning: “Having said that this is the future step, it is absolutely not something we are deploying right now, I have to stress. Machine learning is a hot topic, but this is a concept. We are not at that stage yet. It is an idea brewing inside the company.” AI applications – for smart cities, for example – “are the future and we’re not at that stage yet”.
Let’s turn to his ideas for a new business model. “Our previous relationship with partners and carriers around the world was very pure buyer-and-supplier kind of relationship,” he says. “More and more we see a success-based kind of relationship.”
What does that mean, precisely? The initial investment is shared. “This may not be good news for the carrier,” he says. “If it fails I collect less from you. But we see this kind of request coming from the market in return for more speedy and solid cooperation.” If the project is successful the carrier will collect “more in the future” and the relationship is “more and more sticky”, he adds. Demand for this “is coming from the market and you cannot go against market forces”, he accepts. “This is the market force. Embrace it.” It matches HGC’s investment philosophy and provides “a longer term of return”.
Whose sort of potential partners are seeking such relationships? Both over-the-top (OTT) content companies “and some of the carriers around the world”, he says. “Corporate customers very seldom ask for this – not to mention the consumers. It is only for the brave ones, who can be very open with a telco.”
Kwok offers a warning, though. New services are important, but “we still very much care about our bread and butter” of today’s service mix. “If you forget about it you will pay a very big price.”
That doesn’t mean HGC shouldn’t go for digital transformation, though. “One of our tasks is to add in the digital ingredients on top of our existing services. We should only fulfil reasonable requirements to put on top of our services.” For example, “to enhance our OSS and BSS”, he says, or to improve “the internal and external interfaces with our customers to speed up communications, to standardise working processes and to make the process speedy and also efficient”.
Kwok adds: “This is an example of how we do not forget our fundamental bread and butter.” We can think out of the box and create a lot of things, but those are not our mainstream revenue. Digitisation has just started.” And that’s why he’s trying to change HGC. “We have to present HGC as a telco committed to transformation. This is long-term. It means a lot of hard work. We’ll do something that is meaningful.”
That’s why he’s hiring new people into HGC. “Some think I am hiring new people to replace existing staff. I’m absolutely not hiring to replace people. I believe in continuity.”
This means identifying people “who are more applicable to the digital path” and building up “a new team”. Existing staff will look after key infrastructure, with “new talents and new colleagues” to work on the digital strategy. They will come from IT, from apps cos and OTTs. And he needs people – more likely from the telco side – to act as bridges.
He sighs. It’s a challenge to persuade OTT people to join the telecoms industry. “They say we’re old guys. But when we explain they start to adapt and are open to join our industry. We’re already hiring some, and not only in Hong Kong. I have 18 different nationalities in my organisation. I find these people in Europe and Asia.” He’s in a hurry, but he is taking the long view. “This industrial revolution will go on for 10 or 20 years,” he concludes.
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