After Dominating Broadband, HKBN Takes On Enterprise
Hong Kong's HKBN, the longtime leader in residential fiber, has refashioned itself as an enterprise provider.
After acquiring two of its rivals, HKBN's enterprise unit now accounts for two thirds of revenue.
"We are by far the largest alternative provider of enterprise services," said CEO and Co-Owner Niq Lai. "Our ambition over time is to overtake [incumbent] HKT."
The company held an initial public offering (IPO) four years ago as a mass broadband play, having upended HKT with an all-fiber network that delivered affordable gigabit service to suburban estates across the city.
Since then -- a time when most operators have been in continuous financial decline -- HKBN has continued to grow profitably.
Its stock is up nearly 50% from the IPO price, while its February interim results show a 19% hike in sales, a 22% increase in EBITDA and 26% growth in free cash flow.
Those numbers don't include HKBN's $1.3 billion acquisition of rival WTT, completed in April, which doubled the size of the enterprise segment.
Now the company aims to disrupt the enterprise market.
"We don't have legacy profits to defend," Lai said. "There are a lot of new technologies today that would destroy legacy profits. We're happy to see them collapse for the benefit of the end user."
Cloud is an obvious one, along with systems integration and security.
"If you run a 100-person sized company, do you really want to employ six people in the IT department? There is no way you can have the resources to be world class in security."
Aside from relishing the challenge of attacking the incumbent, Lai says what sets HKBN apart is its inclusive culture and employee ownership scheme.
The company is owned by 340 executives, about 10% of total staff (or "talents" as HKBN calls them).
Lai, who shares an open plan desk, points out that the top eight executives have committed to putting one-year gross salary into the co-ownership plan.
"That's about five years' savings, so when your senior executives make that commitment, you can be sure they're not going to be nine-to-five, clocking in and clocking out."
This is not the same as stock options, he stresses. "We don’t give them out. Stock options are a free ride. You get the upside without the downside.
"In our case we have skin in the game. So if the share price underperforms, we feel the financial pain."
But the concept of shared risk and reward goes beyond owning company stock.
HKBN also enables staff to stake a third of their salary toward a specific campaign or new product.
"If you pitch an idea to senior management and we love your idea, we are going to back you. If you hit the number we give you three times [the amount]. If you miss the number you lose your one third."
One final difference with other telcos is HKBN has no plans to expand outside its home city, despite being on the doorstep of the world's second-largest economy.
"We really feel Hong Kong is our home. Our core purpose is to make Hong Kong a better place to live.
"We feel we make Hong Kong a better place by making broadband more affordable. Now we want to make business more affordable."
Lai and other senior executives are now setting up a charity fund that will hold a 1% company stake and have an independent board that will choose deserving charities.
It's already been seeded with 4 million shares, worth about HK$55 million and, assuming other co-owners approve, will be established in November.
"It will be one of the largest corporate endowments in Hong Kong. It's something we are incredibly proud of."
— Robert Clark, contributing editor, special to Light Reading