Interview Ukrainian macroeconomics

We are not lacking ideas, we face issues when implementing them. It is impossible to do anything without the right people, after all.

Mykhailo Shelemba is the CEO of Datagroup, an all-Ukrainian telecom operator for business and home, the leader of the telecommunications market in data transmission segments, international transit traffic, and satellite communications, told about the company evolution, secrets of the rapid growth of large businesses, active support of the team spirit, as well as features of the domestic and world telecom market at the saturation stage.

: Could you be so kind to tell us about «Datagroup»?

M.Shelemba: We provide access to the Internet and data transmission channels, telephony, satellite communications – traditional telecom services. We have very strong positions and unique advantages in this area, we try to make them stronger. However, possibilities for development and qualitative transformation are seen in advancing new market-demanded services.

Our goal is to build a digital company of the XXI century.  We understand that under these conditions if we do not become as digitized and as efficient as possible, we will inevitably have to spend more to get less. Therefore, we focus on operational efficiency, digitalization, long-term processes inside the company and among people.

We can observe that more and more companies are moving towards to the ‘service consumption’ service model. Therefore, if a client needs to protect an online business from a cyber attack, they can use box solutions from Datagroup based on Arbor Network which is the industry leader. The customer receives a unique solution that protects their business interests 24/7. In addition, Datagroup offers a wide range of cloud services. We have begun and continue to invest in the new products and services. This is also another advantage for our clients when they can get a complete list of necessary services from one service provider.

: What unique benefits have you mentioned? There are dozens of big players and thousands of small ones on the market…

M.Shelemba: Our uniqueness on the market of fixed Internet access lays in our strong positions among large corporate business. For example, 80% of country’s banks are our customers, especially in remote regions. You must be sure that Oshchadbank branch offices in villages are connected with HO via data channels created by our experts.

Secondly, we are unique. We have an own large fiber-optic network of 20 thousand kilometers throughout the country. This is half the Earth circumference at the equator (smiles). The network provides over 100 DWDM hosts located in Ukraine and the nearest telecommunication centers of Europe and Asia. In addition, the company has its own international transitions to Poland, Slovakia, Hungary, and Russia, as well as a transcontinental highway data transmission Europe-Asia.

The conclusion: Datagroup is the leader on the inter-operator market of Ukraine (50%). Not all communication providers have their own Internet access channels, many of them work through us. Our clients are all-Ukrainian and regional home networks, Internet providers and telecom operators. Accordingly, our positions are strong both in the corporate and inter-operator segment. In retail—small and medium business—we are among the top 10 players in the country, serving more than 200 thousand customers, and their number is actively growing.

We are also the market leader in the VSAT satellite communications segment. If you look at the map of mobile coverage, it looks like a “leopard”. In large cities,  there are 3-4G data transmission networks. These networks are not present everywhere in smaller settlements and sometimes, there are no networks at all. The satellite covers almost 100% of the territory of Ukraine. And this is very important for all areas, especially border areas and hard-to-reach places. This will be important for decades, as there are no alternatives.

: You have been in Datagroup since July 2016. How was it that you immediately became the CEO?

M.Shelemba: They believed in me! (smiles) I started the career in the banking sector. And then I realized that banks were not exactly what I wanted to do all my life. I decided to expand my business and went to the McKinsey & Company consulting firm. I was working in Ukraine and Russia for three years and spent three years in the Middle East then: the UAE, Saudi Arabia, Qatar. Over the past six years of working for McKinsey & Company, I have advised and managed projects in a few areas: banking, aviation, mining and metallurgical spheres, as well as telecommunications. Just before entering Datagroup, I advised a major telecom company in the UAE. Taking into account my experience, our current major shareholders of Horizon Capital invited me to lead the Datagroup telecom company.

: How has the company changed over the last 18 years on the market?

M.Shelemba: The global telecom market in general and the Ukrainian market, in particular, have passed several stages. If you take into account the middle 2000s, the share of telecom in GDP and part of its revenues in the economy grew. On the global peak, it was about 3% of world GDP. After that, the share of telecom in GDP began to decline, especially in developed countries. We see the same thing in Ukraine. We see that the telecom is not unique, and this leads to the fact that companies-operators are forced to think what they can do next because the margin for classical telecom services will be reduced.

Datagroup began with the merger of two companies — Datasat and Datakom. The first one was focusing on satellite telecommunications, and the second one — on land telecommunications. The company came through important periods of tangible network expansion or contracting with new powerful customers. Initially, the focus was on corporate, large, system clients that had quality on the top of their interests. Networks were built for them.

An important milestone was the year 2005 when a national DWDM network was built across the entire territory of Ukraine. Additionally, Horizon Capital entered as a minority shareholder in 2010, and the company has chosen a strategy for diversification and emergence of new segments, and territorial coverage extension.

Therefore, from 2010 to 2014, the company actively bought up small local operators which had dominant positions in the retail segment. It gave us wider coverage across Ukraine, as well as diversification of incomes. As previously, the company focused only on the corporate and inter-operator segments.

The third stage started in 2015-2016.  A large transformation of the enterprise began.

: What are the peculiarities of the Ukrainian telecommunications market?

M.Shelemba: Low margin of business, high competition, including price. On the one hand, it gives consumers instant gain, on the other hand — slows down the market development and the introduction of technologies. There are a lot of small players on the market that work under the general 5% taxation system. Many of these operators are scarce enough to be effective. We sometimes see unjustified agonistic moves when they just do not have enough money, so they start dumping stocks and collapse the market.

Now, according to National Commission for the State Regulation of Communications and Informatization, over 3000 thousand providers work in the retail segment. This is a unique feature of the domestic market. For large companies, including Datagroup, it is difficult to compete with them in those segments where the tax burden is the lion’s share of production cost.

: What about legislation?

M.Shelemba: We can say that there are no single rules of the game in the fixed-line market. I greatly respect the work done by the regulator team over the last three years, a tremendous breakthrough — both 3G and 4G were launched in Ukraine. But since the regulator focused on the strategic tasks of the mobile part, no attention was paid to the fixed one. Although correct regulation of service providers will lead to flow balance for entry into the telecom market.

The Law concerning Access to Infrastructure conduces this and it is very important.  This Law is to ensure a single access rule for everyone. However, the system of holders resists, it is difficult to rebuild this system to work in a single legal field. Separate departments, for example, the Kyivavtoshlyahmist, find ways to ignore the adopted law. There is also no responsibility for the non-compliance with the law by the holders. The document was accepted, but there was no methodology for the calculation. We have been waiting for more than a year to make it work. We discuss this issue at all meetings with the government, we search help from deputies. Therefore, the legislative base is important, but that is difficult!

: Tell us about the corporate culture within the team, please.

M.Shelemba: When I came to this post, I concluded that there was no lack of ideas but a lack of opportunities for their implementation. Without a proper culture, without right people, no matter how brilliant are the ideas, nothing can be done. Therefore, corporate culture is very important.

We began with the formation of values. Values ​​are a kind of barometer that helps you make difficult decisions. We also worked to improve the interaction between people. Although we are one big company, each region lived its own life. Not always employees from different territories knew their colleagues from the center that made the interaction complicated. We began studying this problem, first quarterly, and now, we evaluate the interaction between departments every six years. Departments evaluate each other on several parameters, including the engagement quality, politeness, and accuracy. After this poll, we immediately see where we have problems. Each manager creates a plan of how they will solve the problem before the next poll takes place.

For example, our assessment of the interaction over this year has improved from 3.7 to 4.16. We also define employee loyalty levels (eNPS). This is a poll, in which employees say if they are ready to recommend the company as an employer to their friends and acquaintances. This is important because if the person is dissatisfied with the enterprise, he will hardly work hard or recommend the company to clients.

: How much do you invest in employee training? Are there any career growth opportunities within the company?

M.Shelemba: We have launched several very important strategic training programs. We have fundamentally changed our approach to qualification improvement and career growth. We spent 42 thousand UAH on staff training in 2016, and this year, our expenses have already exceeded 5 million UAH. We launched a large-scale Human Reserves program. The aim of this program is to show career growth opportunities in the company to 20% ​​of active workers. They can make it either moving through career stages (the hierarchy) or expert stages (professional growth). This is when an employee has no ambition to be a leader but wants to become a better specialist.

The same goes for those who want to move up the career ladder. We identify positions that should be changed soon, including the CEO position. The competencies required for these positions are defined. People nominate the candidates for COO, CEO, Regional Manager, Sales Manager. At the start, we evaluate their competencies, explaining which of them should be improved. We see if growing from point A to point B is possible within two years.

There were people who needed 10 years to get to the position they wanted. We suggested them to be ambitious but more realistic in their purposes. For these employees, we have developed a plan for their career development, including trainings and studying.

We also distinguish our “gold staff”, those who have perfect results and follow the cultural alignment. We reward them once a year. They also have training preferences. I believe that managers should not be afraid of this candidates pool. When people are preparеd for your position, this does not mean that they will be hired instead of you. You can be a regional director and at the same time, you can educate a leader who will be responsible for a nearby region. All leaders must participate in such events. This is a kind of mentoring. It is necessary to spend time with students, to share leaders’ experience and knowledge with them.

: You have mentioned that in 2016, workers from other regions usually didn’t know their colleagues from the center. Has something changed since then?

M.Shelemba: We have emphasized that the boundaries between people were becoming thinner, and the distance is becoming less visible. I make all our top managers travel regularly to the regions. There were situations when employees said: “We are seeing our CEO for the first time in the past 15 years” or “Almost nobody visits us from Kyiv, except the Administrative director.” We go one by one. There are townhalls where everybody comes together — from an adjuster to a regional director. We broadcast certain messages to them and get feedback from people. Something works, something does not. Then, we meet and bring all the collected data together.

Our goal is to answer all the questions by solving at least 50% of them. If at least half of the issues are not resolved, the trip can be considered worthless — this is about talking. This way, it becomes an effective tool for supporting interpersonal exchanges in the company, part of our corporate culture.

Furthermore, we hold a meeting of line management every two years, when we come together, tell what’s going on in the company, what is the strategy, and which changes are there. We also broadcast messages through our 80-90 line managers. Townhalls with them take place every half a year, while we started with once-a-quarter meetings at the very beginning.

: Sounds interesting…

M.Shelemba: Team building and staff developing is a top priority for us. This is the key to business success. I am proud of the achieved results, and I have something to tell about it here, as the big result consists of many small pieces.

We have updated the DataLab Distance Learning Portal. It serves 700 unique users per month on average. There is also a number of compulsory trainings—for example, on information security—which everyone must learn.

DataLab was updated less than a year ago, and now, two-thirds of employees are using online training tools. Our employees got an opportunity to independently choose the materials for studying, they bring the subject up for discussion and form a community they need.

We also take part in the country’s hallmark sporting and cultural events. We arrange excursions for our employees: visited castles, descended tunnels, climbed Hoverla. We started with participation in racing marathons twice a year, added a bike race this year, and the next year, we are going to add swimming and triathlon.

We have achievements to tell about. We had the largest corporate team on the Kyivskaya Sotka-2018 bicycle race — 19 participants and 60+ supporters. Our employees came with families and children. 108 km of a rather complicated route was a serious challenge, but our team managed to do a great job. The first participation in corporate bike competitions and the second place in the overall ranking among corporate teams.

In addition, there is still a football team encouraged by the company. Guys play corporate tournaments and win. Some employees come to support them on Saturdays. So, we are an active and sporting company, because healthy people are more productive and happier.

: How do you assess the investment climate in the country?

M.Shelemba: Positively enough. The crisis is a peak of opportunities, and changes in the market can always be possibilities. There are a lot of changes now. There are rating agencies that have improved the forecast for Ukraine. Investment funds, including Horizon Capital, attract additional funds for investing in the country. The structure of our economy qualitatively changes – it departs from the raw material type, IT grows — the share is small but is increasing rapidly. We see that even the classical industry—for instance, agriculture—is significantly modernizing and changing. There is an enormous additional growth potential through the cost of technology improvement. There are difficulties but the dynamics are positive. It seems to me that this potential has become much higher than it was two or three years ago. This is also reflected in all Doing Business rankings. 2019 will be interesting due to the political situation and the elections. Still, the fundamental foundations of the Ukrainian economy say that it should be on the increase.

: What are the company’s plans for 2019?

M.Shelemba: The two-year digital transformation is completing now. We have replaced and united many IT systems, most of them must be launched. We are going to introduce many CRMs, a new Workflow which is a supporting system for the securing tasks. Field-force management is when we can see where everyone is now. This will help us rise to a new level. Service Desk is the only point of contact between service providers and users. This all is related to customer service, and instead of being in different systems, as before, all of this will belong to a single system. Accordingly, we expect a significant improvement in efficiency, and this will be noticed by our customers.

Therefore, the global task for the first half of 2019 is to complete the digital transformation, make its product a part of us, part of how we work, and make it effective.  So, no one will remember how it was before after June 2019.

There is also an ambitious task of improving efficiency and revenue. We have grown by an average of 18-20% per year during the last two years. Different segments grew in various ways, but in general, this was faster compared to average market indicators (for example, the 2nd quarter of 2018 compared to the 2nd quarter of 2017). So, in the B2C segment (Internet), the market growth was 16% while Datagroup’s growth was 32%. In the SMB segment (Internet), the market rose by 8%, while we grew by 45%. In B2B, our share is quite stable – 45%. Accordingly, the company’s task is to continue growing faster than the market and to increase efficiency and margin at the same time. Why do we need it? When there is high margins and efficiency, then there is the opportunity to invest in new technologies, in improving the service. This is what helps us be both tactical and strategic leaders.

Please read: Establishing fair and transparent rules of the game begins with the business itself

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