HGC sets out on expansion drive from Hong Kong

07 February 2019 | Alan Burkitt-Gray

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In the hotel garden outside Capacity Asia, Andrew Kwok tells Alan Burkitt-Gray about HGC’s developing business. But there are some things he won’t talk about

A year after ownership of HGC Global Communications moved from its Hong Kong parent to a US private equity company, CEO Andrew Kwok is developing plans to build a services business and to acquire more companies.

New York-based I Squared Capital (ISQ) paid $1.9 billion at the end of 2017 to CK Hutchison to take over 100% of its former international and fixed operation, which Kwok has been with for years. Until the completion of the acquisition his job title was president of the international and carrier business of Hutchison Telecoms (Hong Kong).

But the only thing Kwok resolutely refuses to talk about is the role of ISQ and its industry strategy; still less its position as one of the two bidders for troubled Indian business Global Cloud Xchange (GCX) and Reliance Communications (RCom). He shakes his head: “Can’t say anything.”

But he can talk about the things that HGC has done since it moved to its new owner.

“We still have a very big link with Hutchison, a long-term contract and a relationship,” he says. “But after we became an independent company the first thing that happened is that more companies came to talk with us. Now the sky is wide open,” he says.

In particular, it seems, content companies now recognise HGC as a newly independent operator that is not a potential competitor.

We’re sitting in a garden outside the hotel that is the venue for Capacity Asia at the end of 2018. We’re under an ancient baobab tree that shaded the British military barracks that once stood on the site; the hotel has added bronze statues of gardeners, a photographer and a courting couple on a bench – she’s feeding him a bronze potato crisp. Around us are the sparkling lights of Christmas decorations.

Under new ownership, HGC is also free to talk to CK Hutchison’s competitors in Hong Kong. Just before our meeting, Kwok told a panel at Capacity Asia that the company had “just finished a test in Hong Kong with Hutchison and China Mobile Hong Kong” as part of a plan to move the local fixed edge closer to the customer. “There’s an opportunity for fixed operators,” he told the conference. “There’s a new model – a shared network.”

With ISQ’s support, HGC has already agreed to buy a controlling stake in a Myanmar fixed-line operator, GTMH. “It’s a Myanmar fixed-line company. All the formalities are done. We’re pushing for the agreement to be done, waiting for government approval.” It offers cloud services and local fixed services for mobile operators, he adds.

Once the deal has official sanction, Kwok hopes that the previous team will continue to work under the new majority ownership. “We’re not a company that goes into a country to buy up a business and run it ourselves. We want the previous investors to take part and do it together with us. GTMH is a private group of people and deeply involved in the industry.”

GTMH “is only one example – the first”, he adds, indicating that HGC is on the lookout for more. “We are going to have more projects.”

Meanwhile Kwok has started the process of transforming HGC itself. One of his first moves, in February 2018, was to appoint a former Telstra executive, Jacqueline Teo, as chief digital officer. “She’ll drive two things,” Kwok tells me in the Hong Kong garden: “Internal digitisation and also HGC’s external offer – how we face the market. The digital officer will drive external opportunities and aggressively go out to help our business expansion.”

Teo has been joined by “a bunch of software people” so that HGC can develop its offer to enterprises –companies that used to have their own IT departments.

In the past year, HGC has been developing new services in south-east Asia with a number of partners. One that Kwok is particularly proud of is a deal with WeChat, Tencent’s messaging, social media and mobile payment operation, so that customers can pay their bills and buy services online.

“How can I use the technology to join with the financial industry to look for new business?” he asks. “I can access 900 million WeChat users this way. They can pay for Wifi access through their WeChat account.”

Kwok is calling this move “techfin”, to contrast with the more common “fintech” term for services for the financial industry. “We can use our technology to participate in and help the financial industry.”

At the same time the company has also set up the first two of what it calls big data exchanges (BDXs), targeting smaller over-the-top (OTT) operators that Kwok believes will be entering the market. “OTTs will come into different market sectors and we are facilitating them.” One BDX is in Hong Kong, where HGC is headquartered.

“Infrastructure is at the base of it all,” says Kwok, noting that infrastructure accounts for 70% of the business. “We build services on top.” That’s the other 30%, he adds.

With that, he heads back from the garden into the crowds inside the Capacity Asia event, stopping at almost every small group of people to shake hands and exchange a few words.

Kwok is clearly big in telecoms in Hong Kong.