Calling the shots in telecommunications

Date: 10/07/1997

By Chris Johnstone

DUTCHMAN Jacobus Franciscus (Koos) van der Meulen had three things on his mind as he outlined his company's dramatic rise to its position as the biggest telecoms rival to KPN, the Netherlands' dominant post and telecommunications enterprise.

The first was whether planning permission had been obtained for the large company sign which was to be planted above its new headquarters on the outskirts of Amsterdam; the second concerned final preparations for the unveiling of a new cable network linking the main Dutch cities; and the third centred on a crucial challenge to KPN.

Telfort, the telecommunications joint venture between BT's Dutch subsidiary and the Dutch railways, has taken off so fast since it was founded in 1996 that it has moved into the old headquarters of bankrupt planemaker Fokker.

Telfort managing director Koos van der Meulen - as he likes to be known - is not superstitious about taking over the former base of a company which collapsed in spectacular fashion and produced rare Dutch angst and recriminations about the country's economic performance.

He has had little time for second thoughts since the company's launch. “We started with about 50 people and we now have around 400. We are aiming at securing between 10&percent; and 15&percent; of the Dutch telecoms market within ten years. We already have large customers such as Shell, Unilever, Philips, ING and ABN/AMRO,” he says, adding: “KPN recognises that we are a strong competitor.”

Telfort was born from a marriage of BT's know-how and presence in the Netherlands serving business customers (it had already been established for five years) and the telecommunications network of the local railway company Nederlandse Spoorwegen, which had a lot of vacant capacity.

“The 50/50 joint venture was ideal. If you have a minority partner, it can often feel like a sleeping partner. With us, the deal worked extremely well - there was almost no overlap,” says Van Der Meulen.

The business plan was simple: attract heavy telecoms users such as big business with better services and lower charges, use KPN's local connections to link up to the railway's system and, if necessary, connect into BT's international circuit using an undersea cable between the Netherlands and the UK. In this way, it could largely bypass KPN's network and cut payments to its rival.

Even so, like so many start-up telecoms companies, an irritatingly large amount of Telfort's initial turnover is still paid to KPN. “Interconnection rates are still a major part of the costs, between 20&percent; and 40&percent;,” says Van Der Meulen.

Those high interconnection costs have allowed Telfort to win a partial victory after complaining about KPN's charges, which are some of the highest in the world, to the Dutch government. It ruled that KPN should cut some of its interconnection fees and review its entire charging system, with the threat of cash penalties if it failed to deliver on time.

But Telfort maintains that KPN's prices for business customers to connect to its network are still too high.

Telfort did not bother with the European Commission when lodging the complaint, partly because it would have taken too long and also because Van Der Meulen has a high degree of confidence in the Dutch ministry's ability to deal with such cases and create, within the next few weeks, an independent telecoms regulator.

Part of Telfort's answer is to develop further its fibre-optic network in the Netherlands.

Last month it unveiled its Randstad network, linking the country's main towns such as Amsterdam, Utrecht and The Hague. Next year it will complete a North-South system. “These networks and that of the railways will allow us to pass around 80&percent; of business parks in the Netherlands,” says Van Der Meulen.

The company is also planning to open a new undersea cable between the Netherlands and the UK which will allow it to keep channelling calls into BT's international network. “The cable is called NL14 - the same number as Johann Cruyf,” adds Van Der Meulen.

He is aiming to shift Telfort's customer profile rapidly to a more balanced proportion of international and national calls. At the moment, 90&percent; of Telfort's business involves international calls, and only 10&percent; national. The goal is to transform that to a 60-40 proportion next year and 40-60 after a further five years.

“We have seen 26&percent;-27&percent; growth since we started. There are not many company bosses who can claim that, but I am confident it will continue. We are in a totally new market,” he insists.