Telco tales

Ambition and an eye for the future helped a farmer ride the mobile phone boom to the rarefied heights

Born: Mooroopna, Victoria

Lives: Melbourne

Age: 53

Career: After studying to be a vet, he dropped out to help on the family farm. Invested in telcos and then helped Vodafone win an Australian mobile phone licence. Now has a range of technology investments

Wealth: $190 million

Telecommunications investor Philip Cornish took a roundabout route to the ultimate source of his $190 million fortune.

In 1980, Cornish was studying to become a veterinary surgeon until the death of his father brought him back to the family property in rural Victoria.

“I’ve never practised being a vet because my father died just before I graduated from Melbourne University,” Cornish says. “I came home to attend to the family businesses and then became immersed in it from day one; much of it was running the farming, stud cattle, orchard and venture capital operations in northern Victoria.”

In 1983, Cornish moved to Melbourne and turned his interests into venture capital and business start-ups – this time in the telco sector. He struck the big time with Exicom, which developed switching equipment and telephone systems, and by 1989 – at the age of 32 – debuted on the BRW Rich 200 list with wealth of $57 million.

Cornish was attracted to the telco industry because it was being deregulated.

In 1991, the federal government allowed the entry of a third mobile phone carrier. Cornish seized the opportunity and flew to the United Kingdom to convince Vodafone that he could help them win the new licence.

“Around that time the penetration of mobiles was less than 10 per cent,” Cornish says. “My view was that it was going to be a lot more – much more – and this was going to transform the communications industry.

“I went to England and met with Vodafone to see if they were interested in expanding to Australia. The debate at the time was whether mobile telecoms was going to go digital as opposed to analogue. I formed the view that the world was going to go GSM (now the most widely used mobile telephony system in the world) and the best player who was expanding around the world in this area was Vodafone UK. Were they interested in Australia? Yes, they definitely were.”

The bid was a success, with Vodafone winning the third licence in 1992 and Cornish getting a 5 per cent stake in Vodafone Pacific as payment. Cornish put that stake into his Mobile Communications Holdings, which listed in 1992.

As the technology boom unfolded, his wealth rose rapidly – from $80 million in 1997 to $380 million two years later.

“In 2000, mobile phone companies were trading on 40 times EBITDA [earnings before interest, tax, depreciation and amortisation]. We thought that was insane; today most mobile phone companies are trading on 5 times EBITDA. So the internet boom drove not only the internet stocks but mobile phones into insane levels and we said, ‘That’s enough and we’re out of here’,” Cornish says.

In 2001 Cornish sold his stake in Vodafone and pocketed about $200 million. “The internet boom had overtaken the mobile phone market. We decided to sell. No matter how good the future was, the future was already priced in.”

Cornish says that Vodafone was by far the best deal he’s done and gave him the appetite for many more. In 2005, he invested in Unwired, a wireless internet company that emerged from a backdoor listing from his company Breathe.

“My holding was significant but not too large. I sold out at $1 in 2007, not long after the backdoor listing was done. It was subsequently sold to Channel Seven.”

Not all of Cornish’s investments have gone as well as he’d hoped. In 2007, he invested in call centre company UCMS at $1 a share. During the financial meltdown in 2009, the shares fell to 35¢. One year later, Cornish sold to Indian call centre outfit AEGIS for the original $1 a share. “I can’t say that was super successful,” he says. “We had hoped to grow it into a big company, and then the [global financial crisis] came along and stymied our expansion plans and the ability to raise capital.”

However, the downturn has given Cornish the opportunity to invest in two companies, M2 Telecommunications, a reseller for Optus and Telstra services, and fast-growing Darwin information technology services company CSG.

Cornish believes the telco landscape is about to undergo a radical change because of the national broadband network.

“I think the potential arrival of NBN is going to fundamentally change the landscape of telecommunications in a big way, especially in regard to Telstra’s position. I’m not sure whether it is necessarily going to be good for Telstra, but I think it’s going to be good for resellers, and M2 Telecoms is a large reseller.”

Are the changes going to be as big as the mobile phone revolution of the late 1990s? Nearly, says Cornish. “The world has gone mobile – and now it’s going wholesale.”

BRW

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