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Matthew Vella
Dozens of documents, emails and memos related to the Maltacom sale and laid on the table of the Houses of Representatives apparently eluded the keen eye of the Labour opposition, revealing the crucial link to Tecom’s plans for more internet cities and reducing Maltacom’s workforce by 750.
Experts’ reports reveal that Tecom’s purchase of government’s 60 per cent shareholding in Maltacom were crucially tied to the Ricasoli internet city and Maltacom’s role in the creation of further internet cities by Tecom.
“…the overall attractiveness of the Tecom bid is dependant on the parallel introduction of the Internet City concept in Malta,” experts Gartner said in their technical assessment of bidders Tecom and Ararco – a confirmation that Maltacom was Tecom’s vehicle for establishing its new internet city.
Likewise, advisers Lehman Bros strongly pushed for Tecom’s recommendation on the strength of its plans for an internet city.
Gartner’s report reveals that Tecom provided no evidence that it possessed any greater internal engineering expertise than Maltacom, but was clearly spearheading its bid with its commitment to fund what is now dubbed SmartCity, the backbone of minister Austin Gatt’s futuristic IT vision.
Tecom scored less than Ararco in technical points – 53% compared to 69.1% – but it was the “clearly described” concept for an internet city that won the day for the Dubai investors.
That’s because Ararco faced a lower rating of 20% if it failed to guarantee a firm commitment to Maltacom in the medium term along with partner Telecom Italia. Tecom only faced a reduced rating of 51.2% should it default on funding the internet city.
Gartner in fact noted the internet city was a “strong concept” that would fit well with Malta’s IT strategy, but that success in Malta “may be more elusive” than Dubai.
“The Internet City is central to the Tecom vision and bid, but so far we have only statements of ‘current intent’,” the report says, warning that there were “no assurances relating to the priority attached to Maltacom…”
Indeed, Gartner said neither bid had been outstanding, and that Tecom itself was unproven outside of Dubai, having only just introduced a mobile service.
Lehman Bros however strongly recommended Tecom due to the risk that a failure on the part of the Ararco-Telecom Italia equity bid could potentially leave a non-telecoms operator in control of Maltacom.
The first hint of Maltacom’s future in Tecom’s business strategy for internet cities, is its reduced headcount.
As early as September 2004, Lehman Bros had identified that Maltacom’s 1,426 employees were on an average annual salary of Lm8,098. According to Lehman Bros, chopping off 20 per cent of staff – 280 employees – would lead to an increase in Lm15 million for Maltacom’s value. By targeting the higher-paid management, more savings in costs would be guaranteed.
Tecom is aiming for greater cuts according to the deal it has clinched.
Before June 2009 there will be no forced redundancies, but Tecom had already pointed out in its strategy document that voluntary redundancies – between 175 to 225 every year until 2008, and another 75 in 2009 – were to be expected to bring Maltacom in line with average EU benchmarks.
That means that anything between 600 to 750 employees are expected to take up voluntary redundancies from Maltacom within the next three years. The issue, observers say, is what strategy will Tecom adopt in 2009 if its early retirements are not taken up.
mvella@mediatoday.com.mt
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