Ian Heath spoke to company chairman Phil Male about his path from internet pioneer to overseeing one of Jersey’s biggest-ever deals.
Established in 2014 as part of an international expansion programme, JT’s Internet of Things division was sold in June this year for a reported £200 million.
The division employs 70 staff worldwide, including 20 in Jersey, and is now the property of private equity firm Perwyn, which specialises in rapid growth technology companies.
Not only will JT, which will remain a minority shareholder, benefit from the sale proceeds, the Government of Jersey will receive a unconfirmed amount from the windfall.
Phil Male, who became JT chairman four years ago, explained that he has been at the cutting edge of internet technology since his student days.
‘I spent most of my time at university building early-stage internet and I left to start a business in the media world,’ he said.
‘We did the TV pages and racing pages and sports results and weather panels and all that kind of stuff. Then I sold that business to the Press Association, who I worked for and ran all their technology and innovation for ten years. I left again and I did another start-up. We came up with the idea of dialling up to the internet and we built the world’s first internet service provider, Demon Internet. That grew and floated on the London Stock Exchange in 1999 for a couple of billion.
‘Then we rolled out fibre networks across the UK and I ran that for ten years. Cable and Wireless ate us up and I ended up running Cable and Wireless for a few years before selling that off when it went into trouble. I ended up doing non-exec jobs and JT got in touch. They said they were looking for a non-exec and they had this wacky idea about “fibre-ing” up the Island, which in the telecoms world is the holy grail. I joined the board as a NED, we did the fibre roll-out and then I took on the chair role four years ago.’
Having years of experience in the corporate world, Mr Male said that JT had certain advantages that he enjoyed, not least the ‘agility’ of the firm due to its smaller size.
He added that JT's fibre project, where every Islander has access to high speed internet, was a huge lure for him.
‘JT is a very innovative company. Being a telecoms company on an island, there are some challenges. It can be very constrained in the market that we can address,’ he said.
‘But similarly, I can talk to a lot of customers really easily and can effect change very easily. There’s a lot of agility. We can be quite innovative and build new things quite quickly which, if you’re a big telecoms company on the FTSE, you can’t do as quickly.
‘Being able to innovate was the attraction and, of course, the fibre thing was massive. It’s where everyone else is heading and we managed to do it here first and we managed to be smart enough to implement it and get the vision right for what it should look like when it’s deployed. And here we are today, sat on a “gigabit island”, which you can’t do anywhere else in the world.’
Discussing the sale of the Internet of Things division, Mr Male said that it was in a ‘rapidly expanding’ field and that section of the business had become too big for JT to handle any more.
‘IoT was something that we invested in five or six years ago. We had five or six “game-changer” ideas that we thought were going to be good investments,’ he said.
‘We put some money into it and it took off. It’s been a tremendous success. It’s doubled every year in size, which has been great. It’s captured a market that is rapidly expanding around the world. If you look at the growth of the internet in general, IoT is rapidly exceeding those growth profiles as well. We’ve managed to find ourselves a market where we can grow incredibly quickly.’
He added: ‘The problem for us is that we are an incumbent telco. We can’t afford to take risks on that service provision and we can’t afford to continually pour money into something that is (1) off-island (2) is inherently more risky than running an incumbent telecom. IoT was starting to dominate our balance sheet. With that kind of growth profile and with a foot on the gas as hard as it is, it would need more funding and it was getting bigger and starting to increase our risk. Our decision was that we can either stop it or we could find somebody else who was willing to put some risk capital into it to continue its journey. That seemed to be the obvious answer, so that’s why we did it now. Strategically, we want to be involved in that sector and we want it to be a success. It was better to continue to fuel it with investment from other sources than it was to continue to drain JT for it.’
Following the deal, JT’s chief executive Graeme Millar moved across to head up the new Perwyn-owned IoT company.
Mr Male said that moves of this kind were nothing unusual in the business world and there had been no conflict of interest during the negotiation process.
‘If you just think about the process of selling a business, just think about how that works,’ he said.
‘The customer base, the assets and the people in the management teams are what we’re selling. That’s what you always do in any deal.
‘In the run-up to a sale, those people and management teams are all focused on getting the best value for the current owner and shareholder. And then the deal gets done.
‘Then tomorrow they wake up and they work for a new owner. At any point in any deal, you end up with people that are moving from one side of the deal to the other.’
He added: ‘Throughout this process, anybody that was in any way associated with the IoT business was not part of the selling team or the negotiating team.
‘The legal teams, the advisory teams and everybody involved, all the professional advisors, were only ever taking advice from a team of people that were 100% only ever going to stay with JT. All of that is completely sound practice and normal and was independently audited as well.’
He explained that around 50 investors were interested in buying the IoT division and Perwyn were viewed as the best fit for JT.
‘We narrowed it right away down ultimately to three people and we never went into exclusivity with any of them,’ he said.
‘Until the last minute, it was in no way clear who would be the successful bidder. They were the best value and that’s not necessarily just about the cash.
‘That’s about ongoing interest in the Island and we wanted a partner that’s going to invest long-term. We’ve retained a stake in the business going forward because we believe in it and want to back it. We wanted an ongoing relationship with JT IoT, in the sense that it’s now our largest customer and we want it to succeed. When you take all of those factors into account Perwyn were the best choice.’
He added: ‘They are a family-run fund, so it’s not like they’re in the usual fundraising cycle a lot of private equity companies are, where they’ve got to return the cash in three to five years, or whatever it might be. One of the attractions was that they are long-term capital for this.’
In terms of the future of the new company, Mr Male said that he saw it as great opportunity for the Island to expand its digital presence.
‘The company is based here, it’s headquartered here and the management teams live here. It’s not going anywhere,’ he said.
‘It’s a big opportunity for Jersey. We have just created a massive technical business on Jersey and I hope we can coalesce around that.
‘JT needs to support it, Digital Jersey needs to support. We’ve got an opportunity to create an IoT thing here in this island, which is all about jobs, employment and future investment. It is one of the most exciting areas of technology today. Let’s step up to it.’
Mr Male said that the world becoming increasingly ‘data rich’ meant there would be more and more opportunities for the Internet of Things.
‘What this business does is enable the flow of that data from non-human things,’ he said.
‘If you think about all the smart stuff that’s going on around you, whether that’s smart home or smart industry, or robotics or monitoring or environment sensors, or metering systems or any of those kinds of things, that’s what this business does. It provides that connectivity to all those kinds of smart devices. That can bring huge benefits both in terms of our ability to manage devices remotely and to be able to deliver different services to people.
‘IoT is not an area which is shrinking or in trouble. This is a world of new opportunity that’s happening all over. One of the things that I’m doing over in the UK is rolling out all the smart meters. We’re deploying millions of IoT devices into everybody’s home as part of that and that’s just one project in one country. JT’s IoT division enables all that sort of stuff. At the moment there isn’t a smart metering business on Jersey but we’ve created an entity that provides the base connectivity to a lot of those sectors. If somebody wants to start building a metering business on Jersey, we’ve now got everything here to be able to do that. There are vast opportunities.’