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Archives -
2006 Archive
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Written by B. Tyril
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Monday, 08 May 2006 |
Faroese companies discover new strength in small size and compact characteristics, however enterprises that used to be privileged are faced with a race against time as the competitive situation intensifies—making change management pivotal as global realities shape market conditions in everything from software to shipping.
In the Faroes, the last couple of years have seen a profound process of industry consolidation. While changes in ownership structures contrast starkly with traditional practices, a main backdrop everyone seems to acknowledge is the fierce competitive environment of the global economy. Key propelling factors in the Faroes include the initiation of a massive series of privatizations with the government clearly signaling it wants to sell most of the corporations it controls; this has been coupled with increasing foreign direct investments and a shift in mentality among the Faroese—in addition to changes in the international markets.
Such conditions were reflected not least in the fishing industry, which still overwhelmingly dominates the economic life of the Faroes. It was a fishing company that was first to become privatized, although that particular deal—the Faroe Fund of 1971 selling all the shares of the JFK group to the company’s managing director and the local bank—came under fire for perceived lack of transparency and under-pricing. However, as one Klaksvík patriot said, the deal “went through quickly and effectively,” to the delight of locals who might fear that a non-local investor would not have been too keen on keeping business operations based there. Besides, there is no denying that this town is the nation’s leader when it comes to the business of trawling—home to some of the world’s finest and most advanced fishing vessels and best skippers.
The jump start of long awaited privatizations set off a wave of mergers and acquisitions that saw the ownership of three of the country’s largest fishing enterprises change hands: JFK group, the Vesturvón group, and Faroe Seafood, the country’s largest seafood processor and exporter—the second government owned company to be privatized. Framherji, one-third of which is owned by Iceland’s Samherji, purchased the privately owned Vesturvón group, making it a major player in the Faroese fishing industry. As to the privatization of Faroe Seafood, the company was eventually sold to a group of investors consisting of venture capital firm Notio, Iceland’s Traustfang (subsidiary of insurance company Vís) and a few others including Faroe Seafood chief executive Meinhard Jacobsen; the government owned Faroe Development Fund kept one-third of the shares. According to the new owners, Faroe Seafood aims for listing on the VMF (Faroese Securities Market) in the near future.
Numerous Faroese businesses cater to the onshore fishing industry as well as to domestic and foreign sea vessels with services and manufactured products. While some of these are international players in design and manufacturing of fishing gear, for instance, others specialize in mechanical or electrical engineering to offer processing lines and electronic equipment, as well as repairs. And the Faroese do possess a noteworthy, natural strength in shipping, a good example of which is Thor Offshore, a leading international player in its field.
Helping Siemens, Microsoft: Other sectors of domestic strength are marine electronics and ICT (information and communication technology). With the convergence of digital technologies across traditional borders offering a new generation of Internet based products in telephony, data communication and imaging, the winds of change are no stranger to the ICT sector.
The successful European security software developer BullGuard, headed by a Faroese, Heini Zachariassen, has made headlines across the web. Headquartered in Copenhagen, Denmark and with offices in Romania and the UK, BullGuard specializes in PC and mobile security solutions for home-users and small-businesses, emphasizing “technical excellence, ease of use and customer care.” Overseeing a period of rapid growth, Mr Zachariassen was the company’s chief operating officer from October 2002 until February 2006 when he was appointed CEO. His predecessor, Morten Lund, a Skype seed-investor who co-founded the company in 2002, said: “Heini Zachariassen has proven that he has the edge and toughness in addition to the social skill-set that today’s leaders need. He has shown that he can build on the tremendous success BullGuard has had over the past four years. During that period BullGuard has doubled its revenue every year and expanded its staff from 3 to 65. BullGuard has established itself as a very successful retail brand in Europe and developed a Mobile Division whose main product, BullGuard Mobile Anti-virus will be a standard installation on more than a million Windows Mobile powered devices over the next 9 months.”
Another ICT success story, and this one is headquartered in the Faroes, is Formula.fo, the country’s only Microsoft Gold Certified partner. Apart from being a major domestic software developer, the company is also an agent for Marel, Iceland’s giant manufacturer of food processing equipment, and a large developer of Microsoft and Siemens software applications for the international markets. Awarded the ‘Business Solution of the Year’ award (Ársins Átak) by the House of Industry for its Totalview software, the company was praised for being able to obtain a partnership agreement with Siemens to deliver Totalview with the Siemens HiPath 3000 telephone system.
Countering erosion: Not unlike the former telco monopolies of Europe, the Faroese ditto—much smaller but still a mammoth in the home market—is tackling the challenge of the times in its own way. Surrounded by rivals bent on eating into its share of the home market, Faroese Telecom (Föroya Tele) seems to have spotted the writing on the wall just in time, as management has been pushing to embrace changes on a level that has earned the respect from observers.
After realizing it was on the priority list of the government’s privatization plan, Faroese Telecom moved to change its corporate structure, in an attempt to block the competition’s drive to separate the core communication network from its commercial service operations. Balancing pressures on the home market, the company’s International division meanwhile took steps to establish itself in foreign niche markets, capitalizing on its own digital TV broadcasting software. With what may look like an unbeatable core competence in ICT services for scarcely populated or underdeveloped markets, the division is deploying new and advanced technologies to offer digital voice, data and video transmission services.
Faroese Telecom’s main competition in the home market is Kall, a subsidiary of Iceland’s Dagsbrún. Having gained market shares in mobile telephony and Internet services, Kall has arguably acted as a de facto guarantor for competition in the Faroe telecommunications landscape since its rise a few years ago. But as VoIP (Voice over Internet Protocol) technologies mature, new players are popping up to exploit the free phoning world, companies like startup iConcept, a provider of competitive VoIP solutions for the business and consumer markets. With the threat of erosion of their traditional markets, telcos in the Faroes as elsewhere are forced to move fast in order to establish new business platforms.
Raising the stakes: As to the interplay with Iceland, one Faroese businessman has been hugely successful in taking on the whole world via Iceland. Jákup á Dul Jacobsen, owner of the home textiles retail chain Lagerinn, started out with his first shop in the Faroes, a franchise with a Danish home textiles magnate. Today he ranks among the Faroes’ and Iceland’s richest persons, ruling his own investment, real estate and retail empire. Lately he received the blessing of the municipality of Tórshavn for a spectacular development featuring trendy apartment and office buildings, a large shopping mall and sports and recreation facilities.
Icelanders are becoming ever more present with the new trade agreement between the Faroes and Iceland, in the words of Prime Minister Jóannes Eidesgaard, “creating in effect a Faroese-Icelandic common economic area.” But nowhere is the Icelandic connection more tangible than in the transport-logistics sector. In March 2006, the third government owned enterprise to be privatized—the road cargo division of public transport operator SL—was sold to Heri Thomsen Transport Service, which had been purchased by Iceland’s Eimskip in the summer of 2005, some nine months after Eimskip acquired national shipping icon Faroe Ship.
Iceland’s other major in transport logistics, Samskip, moved in to seize a substantial share of the Faroese market, buying Kloosterboer’s cold storage facility at Kollafjörður as well as in other places in Europe. A few months into 2006, Samskip acquired Safari Transport, a domestic courier service provider—its founder, Knút Lützen is the chairman and a shareholder in Faroe Jet, a new private airline seeking to lure a portion of the passengers flying between the Faroes and Denmark away from publicly owned market leader Atlantic Airways—another company set to be privatized.
Smyril Line, owner and operator of superferry Norröna, has become a crucial link for the tourism industry in the northeast Atlantic islands. With the cargo services of the ferry contracted to a joint venture with Denmark’s Blue Water Shipping—named Smyril Blue Water—the company was strengthened in the spring of 2006 by fresh investments from the Shetland Development Fund (SDT), some six months after the Faroese and Icelandic shareholders increased their investment and the Danes raised their stakes too.
The SDT decided to invest a further gbp 1.5m (eur 2.2m / usd 2.6m) into Smyril Line, bringing its share up to about gbp 6m (eur 8.7m/ usd 10.5m). The investment “ensures that the company’s flagship is calling at Lerwick,” wrote the Shetland News Agency. In spite of reporting record losses of dkk 52m (eur 7m / gbp 4.8m / usd 8.4m), Smyril Line expressed confidence that, thanks to strong bookings, the company could be in profit by 2007.
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