m.Net - the journey to commercial reality

m.Net Corporation was created in 2001 as a collaboration between business, government and education to stimulate the uptake of wireless broadband services in Australia. Here Ian Dixon, who provided facilitation and support to m.Net in its early stages,   talks to Barry Porter, CFO for m.Net since its inception, about the journey from a government funded partnership to a successful commercial alliance.

What is m.Net and how did it start?

m.Net is Australia's leading mobile solutions company and focusses on the needs of major media organisations, telecommunications carriers and their advertising clients. We provide a range of mobile services and mobile marketing solutions that enable brands to exploit mobile opportunities directly, or as a fully managed solution.

The genesis of m.Net occurred following the T2 sale of Telstra back in 2001. At that time the federal government used some of the money it received from the float to establish the Advanced Network Program, which offered significant grants to encourage research, development and innovation in the telecommunications industry. m.Net was fortunate to be one of the 3 successful applicants and the only one to look at mobile telecommunications. Its task was to stimulate the development and commercialisation of advanced mobile services in Australia.

The company was originally established as a consortium supported by more than a dozen organisations, who all committed cash and in kind support as part of the grant funding arrangement. The clever part of this scheme was that each of these organisations received equity in the company for any contributions they provided.

Who was involved in the partnership at the start and are these partners still involved?

As I said, there were about a dozen very diverse organisations involved in m.Net at the start, all of whom had an interest in higher speed mobile communications. These organisations ranged from large multinationals such as Alcatel, Telstra, Motorola and Cisco, to SME's such as Agile, Chimo and MCA, the 3 South Australian Universities and the Adelaide City Council. Unfortunately 2 of these organisations (Cisco and the Adelaide City Council) later had to decline their share entitlement but all of the other partners are now shareholders in m.Net.

In 2004 m.Net did a sales pitch for the mobile content business from Australia's largest radio network, Austereo. After doing so, Austereo not only gave us their business but were also interested in getting more involved in the mobile space. So, on the back of our pitch they also decided to take up an equity stake in m.Net.  

Likewise in 2005 we once again pitched for work from Pacific Magazines, which is part of the Seven Network. At the time Seven were also interested in having a closer involvement in the growing mobile industry and obviously liked what m.Net was doing. As a result Seven bought into the company at the end of 2005, coming on board as a major shareholder.

One interesting thing about m.Net's partners and shareholders is that if you look at the list many are often fierce competitors in the market place. This has created challenges for the company but m.Net has often played a role in allowing shareholders to collaborate as much as they see fit.

Has the original purpose for the m.Net partnership changed over the last 6 years?

Unlike today, back in 2001 mobile communications meant operating on slow 2G networks, which were really only suitable for voice and SMS messaging. m.Net's original purpose was based around infrastructure, i.e. investigating and looking at opportunities for using faster 3G networks. 

We established the first 3G network in the southern hemisphere (located in the Adelaide CBD) and also rolled out a distributed WLAN network, which was a world first at the time. 

So the company was at the cutting edge of advanced mobile network development. However, we soon realised that once the major carriers started rolling out their own 3G networks that they would soon overtake m.Net's position and that the opportunities for a small mobile network operator would be limited.

So just how have you managed to move from a largely government funded partnership to a successful commercial operation?

The initial government grant was good because it enabled us to establish the company and get the basis of a great team together. However from a commercial perspective it also meant that our focus was diverted. Much of the team's focus in the early years was around meeting the needs and milestones for our major 'client', the federal government, rather than thinking about commercial opportunities.

What the government grant enabled us to do was to build up an understanding of the industry and develop links and relationships within the mobile development community. However we knew that the government grant was only for a fixed period and if the company was to survive beyond the grant it needed to identify commercial opportunities quickly. We had a good knowledge of the mobile space and we knew it was going to take off - eventually. The problem was identifying commercial opportunities that didn't yet exist! At the time it was a bit like gazing into a crystal ball. 

We knew we had good relationships with our consortium partners and with other mobile companies in Australia and internationally, we also had a lot of research on what was working overseas and what we thought would work in Australia. However the problem for us was that our expertise was in an area that wasn't yet available - i.e. 3G
 
Consequently we made a conscious decision to take a backward step and get involved in other less advanced technologies such as SMS. Our logic was that SMS would allow us to build commercial experience and a reputation in the mobile space and position us to capitalise on the introduction of advanced networks when they were eventually rolled out.

m.Net was then able to go to clients and not only provide SMS services but also articulate a vision where we could assist them developing advanced mobile services and take their brands into the next generation of the mobile internet.

What are some of the key drivers that have kept this partnership going?

m.Net currently has 18 shareholders; of which we have 3 major shareholders who own 90% of the company.  

The following things have driven our relationships with all of our shareholders: 

  • The first thing has been to constantly look at the company from our shareholders perspective and what benefits we can offer them.  For some it has been about growth in shareholder value and for others it is simply about being involved in the mobile industry and the insights we can provide.  However the third group are shareholders that see m.Net as a strategic partner in the mobile space. These shareholders have often become customers and we let them know that m.Net sees the relationship not as a shareholder, or even a customer - but as a strategic partnership which will benefit both businesses.
  • The second has been to articulate a clear vision to our Board and our shareholders and get their buy-in on what we want to do. This hasn't always been easy in an industry as dynamic as mobile telecommunications.  m.Net usually deals with break-through technologies where there is often no, or only a limited indication of how something will be received in the marketplace.  However, we are very lucky to have a very experienced Board who critically scrutinize anything we put forward.  Although it is hard being put through this wringer, the process ensures the robustness of the decisions we make and the direction we take.
  • Finally we believe the key is relationships. At m.Net we often say that our most important learning has been that the business is all about relationships.  We have worked very hard and spent a lot of money on travel to ensure that both our shareholders and customers are personally briefed and know us and what is going on.  This is as much about understanding the shareholders and customers needs, as it is about giving them assurance that we know what we are doing. 

In the past we have used devices such as newsletters and media releases but really the best way to maintain relationships is for someone to get on a plane and let the key people in the other organisation meet you, and for both parties to ask questions and gain insights.


What has been the most significant learning for you from this partnership process?

We have learnt lots of important lessons over the years but I think the most important learning has been "Where you plan to go is not always where you will end up"! 

When m.Net was founded it was established to focus on mobile networks. We then had to change tack and look for other opportunities in the mobile area. Several times we have started out looking at opportunities in a particular area and then had to change direction slightly because the opportunity didn't eventuate, the landscape had changed or the prospects simply looked better elsewhere. Some have criticised this approach as being opportunistic, but really it is about adopting a flexible strategy that can cope with change. We have made a few mistakes along the way such as launching a consumer brand - however we learnt from these, changed our approach and got on with it.  

In an industry such as ours where it is hard to forecast what the next innovation will be, where it will come from, or what the industry will look like 6 months from now - we think the key is to build a strong team and then build the business based on your long term vision and competence. It also is essential to stay close to your friends (i.e. your clients), and even closer to your enemies (i.e. make sure you know what is going on in your industry).

So where to from here for the m.Net partnership?

Every indication is that the mobile internet is going to take off in Australia and we think there will be a concerted shift towards companies wanting a presence in the mobile space. In particular m.Net's focus is currently centred on expansion into Mobile Marketing and Mobile Social Networking both in Australia and internationally. We see no reason why an Adelaide based company, such as m.Net, should not compete on the world stage with its mobile products and services.

m.Net is extremely lucky to have shareholders that support this vision. However if there are sufficient opportunities (and we suspect there will be), m.Net may need to look at expanding our shareholder base, or even an IPO.

 

 

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