Factor 4: Opportunities in big Asian markets
1. The first attempts to build an international strategy can be characterized as a “Viking strategy” - it was important to “hunt” the possible projects where it was possible
On the question, “Did ‘T’ have an international strategy after the first steps in the international arena?”, several of “T”’s key personnel admitted that there was no clear strategy in this period, but the top management tried to work with a strategy, based on the experience and knowledge from the international projects in the early 1990s.
One former member of Group Executive Management, who worked in “T” for almost 40 years, described the strategy as the “Viking way to do things”.
“T”’s people, “passionate ambassadors”, planted flags in different countries where we thought we could develop a good partnership with the local partners.
(Conversation, 2007)
Another respondent stated that the strategy in this period did not involve the issue of how to manage the projects or control them, and that there were no discussions in “T” at the top level or among the
“passionate ambassadors” about it.
We did not think about how to control and manage the project. The idea was to get something. The question about the management and control came later. We wanted expansion. We were hungry. And we wanted several JVs. (Interview with one of the former executives worked with the legal issues”, 2015)
We had to invest in the countries where we could find the companies to invest in.
Now, I can say that there were investments with little money and, at the same time, with the opportunity for good profits in the future. (One of the former executives, who worked in international mobile operations, interview, 2015)
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Pursuant to the former CEO, in 1995, senior managers in “T” discussed several scenarios for the further growth of “T”. The scenario, named “expansion scenario”, collected the majority of voices, and the plan, with the title “Reconditioning and positioning”, was improved. The big issue for the top management of “T” was how to finance the investments, as “T” was still a state-owned company. The Norwegian Parliament Storting’s37 White Paper about “T” (1995-1996) states that ““T” would continue to have a high level of activities and the BoD would present the plan further for the General Assembly” (Stortingsmelding 21, 1995, p. 37).
In the period from 1995 to 1999, “T” increased its investments from 4.6 to 13.2 billion NOK, and, further, to 50.7 billion in 2000 (Annual reports, 1995-2001).
In order to finance the international expansion and compete with other players in the market, “T” was supposed to get the capital from the owner – the Norwegian state. The Storting was informed about
“T”’s plans for further growth (Stortingsmelding 17, 1997-1998: 37). The General Assembly supported the BoD’s proposal to return dividends back to “T” after the state had taken 15% of the profits. “T”
got 566 million NOK (ref. Thue: 343). A low level of dividends was paid to the state, in order to give
“T” the possibility to build up the equity for international expansion. The ministry followed the proposal from the BoD.
Nevertheless, at the end of 1997, the CEO of “T” started the debate (Dagbladet, 1997) about the state’s dividend practice and indicated possible scenarios for the further positive development of “T” – to find a strategic partner related to the issue of ownership. In this way, two central questions were put on the agenda – the process of privatization, in order to get enough capital for the further process of internationalization, and the process to frame an alliance with an international partner, in order to better maintain the process of internationalization.
Both issues show that “T” had certain challenges related to the process of internationalization: 1.) connected to its status as a state-owned company and to be a big national player in the Norwegian market, with a strong national profile; 2.) related to the necessity to find the right strategic partner.
Finding a good solution for both these issues could help “T” to increase its equity and obtain sufficient capital for further internationalization, and to gain the support of a powerful alliance partner, in realization of its international strategy. On the question: “Was it realistic to find such a solution for
37 Hereafter in the text, it will be referred to as Storting.
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‘T’, which was a state-owned incumbent, and was the role of the state positive or negative in the process of internationalization?”, a former executive, who had the responsibility for international expansion, said the following:
We were enthusiastic cowboys with a state as an owner. And there was no conflict in this. During the early stages of internationalization, we noticed the benefits of state ownership. Although we did not have sufficient money for the investments, we knew that we had backup from the state and, if bad results came, they would not come out as “red figures” when a company is listed. At the same time, there were many partners who wanted to have an investor from a state-owned enterprise – that gave them a feeling of safety. We felt that the state was on our side; it means that we could start to think about privatization and to find a strategic partner. But, in the issue related to dividends, the state had a strong policy, and, as a result of that, we lacked the capital for investments. (Interview, 2015)
The CEO of “T” in this period explained that “T” needed 15-16 billion NOK in grants from the state as equity capital for the next seven to eight years. The grants were necessary, in order to have approximately 50 billion NOK for investments, with the greatest part of the capital going abroad (Dagens Næringsliv, 1997). This means that the development of “T”’s international strategy was not just a question of natural expansion, it was a struggle, influenced by serious external factors – political: to convince the owner about the necessity of privatization and changing the form of the ownership and entering into a strategic alliance; economic: to obtain the capital for the realization of the strategy; and social: as a big player in Norway, changing the structure of the company could have an impact on employment in “T”, the place of the important divisions in the matter of the merger and possible consequences for the quality of and access to services.
At the same time, the respondents related that, while the top management and the state/politicians discussed the issue of the international strategy of “T” at the top political level, the employees were also working well with internationalization on the practical level.
While the top management of “T” tried to formulate the international strategy, the
“passionate ambassadors” “hunted” the projects. (Interview with a director, who worked internationally from the 1990s, 2018)
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“Passionate ambassadors” often used personal contacts in finding the projects, in this way imbuing the international strategy with personalization or/individualization. The “passionate ambassadors” in this period increased, and they used the possibilities that appeared in this period with the liberalization of the world markets, when several private companies, not only governmental structures, had licenses. In this connection, it was much easier to establish contact, but, at the same time, the level of the risks increased. This international strategy did not define the geographical areas of the investments and/or technology. The only thing that was important was to find projects for investment that “T” could develop further.
We tried to find some projects in several geographic areas – Eastern Europe, Western Europe, Central Europe, Asia… The broad approach – here and there. And we tried the different technologies… Who worked with that? ... always some “passionate ambassadors”. We worked in parallel – one group with the geographical expansion, another with the technological expansion, the third came from the business areas and looked for the products. What was special was that, unfortunately, we did not manage to transfer all the knowledge back to the organization. The groups did not share their experience, mostly because of the lack of time – the processes had to happen quickly. (Interview with one of the former executives who worked with legal issues and was also a country manager, 2015)
At the same, the international team, which should support “passionate ambassadors”, had been recruiting, and started, with the staff, the several newly opened country offices38. In this way, personalization of the internationalization strategy was supplied by the attempts to centralize it.
Several country offices were established. Country offices were supposed to co-ordinate “T”’s operations in the same country. (Interview with a former Legal Director, also a country manager, 2015)
38 Country offices were opened in those countries where there were substantial investments and/or several of “T”’s activities. In this period, country offices were opened in Hungary, Russia, Ukraine and Singapore (responsible for the investments in Asia; later, the office was moved to Bangkok).
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Thus, in 1997–1998, “T” experienced active expansion abroad, with acquisitions in several operations in Russia (two operations – in Kaliningrad and in Stavropol), Ukraine, Germany, Greece, Ireland and Austria.
“T” was in a partnership with B in several very small projects in Western Europe, where “T”’s role was very limited. The investments in Germany (10%) Greece (22%) and Ireland (49%) were the important part of the international expansion. Co-operation with B was an attempt to build an alliance with a powerful and experienced European operator. Unfortunately, we had to stop this co-operation later. (Interview with one of the executives, who worked in international projects in the 1990s, 2016)
One of the executive managers, who worked as a country manager, emphasized the importance of the activities in Western Europe for increasing knowledge:
The projects in Western Europe created the success in internationalization, taught us much and gave the feeling of how to be a partner with a global company, but, later, we decided to go into a strategic partnership with “TA”. It failed. (Interview, 2015)
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Here is the portfolio just in the mobile projects as it was in 2000 is shown below (from “T”’s press release March 2000. “T”’s website).
Table 5.1 “T”’s international mobile projects from 1993-2000
Company Markets Percentage owned
VIA Germany 10%
COS Greece 22%
DT39 Thailand 40%
PAN Hungary 25.8%
ESA Ireland 49.5%
DG40 Malaysia 30%
CON Austria 17.5%
VCom Russia 31.7%
NWG St. Petersburg, Russia 12.7%
KVS Ukraine 35%
GRPh41 Bangladesh 46.4%
PRM42 Montenegro 40.1%
STAV43 Stavropol, Russia 49%
EXT44 Kaliningrad, Russia 49%
2. “Passionate ambassadors” “planted flags” in risky and low-cost markets, where “T” both had already got experience and understood the opportunities for further growth in the new markets.
The issue of low-cost investments in high-risk markets
Several respondents stated that “T”, being a state-owned company, did not have enough capital to invest in the projects the company wanted to be an owner in. Thus, “T” focused on low-cost projects.
39 JV in Thailand
40 JV in Malaysia
41 JV in Bangladesh
42 JV in Montenegro
43 JV in Stavropol, Russia
44 JV in Kaliningrad, Russia
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We did not have enough money and had to buy cheap. (Interview with the former executive worked with the international projects, 2016)
At the same time, it is important to mention that being a state-owned company, “T” had to co-ordinate its investment activities with the ministry and, further, with the Storting. The amount of money used on the investments depended on the state’s dividend policy, regulated by the Storting. Thus, for 1995,
“T” paid to the state 550 million NOK. In 1996, the state increased the dividends from 400 million to 900 million NOK, while, in 1997, the state increased the dividends from the suggested 300 million NOK to 570 million NOK. All these additional payments were implemented in order to compensate when the size of the dividends was low, regulated by Stortingsmelding (Stortingsmelding 17, 1997-1998, p. 37), when the Parliament agreed to return dividends to “T”, after the state had received 15%
of the profits. At the end of 1997, the CEO of “T” published an article in Dagbladet (27.11.1997), in which he called the state’s dividend policy short-term thinking and wrote that “‘T’ is not a cow for milking!”, protesting against the policy of tapping money from state-owned companies. In 1998 and 1999, “T” paid to the state, respectively, 675 million NOK and 500 million NOK, in accordance with the proposal of the BoD on 15% of the profits.
Although the size of the dividends to the state was reduced from 1999 (from 41% to 12%), “T” did not have enough capital for the expansion abroad (the CEO of “T” estimated in 1997 that “T” needed approximately 50 billion NOK for the investments, mostly for international projects) (Dagensnæringsliv, 4.2.1997). Thus, “T” had to go for the low-cost projects and struggled to obtain funds for international expansion.
One of the directors of the projects in Russia in the 1990s confirmed that “T” also had to go for the low-cost projects because “T” was late in its international expansion, it did not manage to build up enough capital for the investments, and because “T” was limited by its capital resources:
We came late to the international market and had to take the high-risk and low-cost projects that the many big companies that were experienced in Europe were possibly skeptical of. We always needed more money for the investments but did not have it.
(Interview 2018)
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3. An international team was built in HQ, in order to support "passionate ambassadors" to manage the international expansion.
In order to manage the growing international activities of “T” and to support the activities of
“passionate ambassadors”, who “planted the flags” in different countries in Europe and Asia, “T”
started to build an international team. The team consisted of people who had the experience to work abroad; people who could work as expatriates and had different professional skills in foreign affairs;
Norwegians with a foreign background, who could help “T” to understand national cultures; local staff in country offices, who had the experience to work with the Western companies and had excellent skills in English. Some of the local staff in Eastern Europe could speak one of the Scandinavian languages.
Several top managers, who had the international experience, were appointed. More than more than 30 positions were announced, dedicated to the international projects.
In order to survive as a company, we had to start with internationalization. (Interview with one of the former members of the Executive Board, who worked in international activities, 2015)
At the same time, the importance of educating the new team to be international managers was mentioned.
We had to send the consultants to our subsidiaries abroad. We thought that they would bring competence into the subsidiaries. We needed all kinds of specialists:
finance people, marketing people, project managers, etc. We had qualified technical staff, but they did not work internationally. We needed to teach them to be international managers. (Interview with a former manager, who worked in legal issues and was also a country manager, 2015)
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4. The important question of the choice of the technology for the telecommunication was not yet