Business leader of the year: Jack Matthews

By RICHARD BRADDELL

"Don't be fooled by his charm, he's very intelligent," a colleague from a rival telephone company once observed.

If the observation is flawed in suggesting an easygoing manner cannot coexist with shrewd business skills, it still gives some insight into how his competitors regard Telstra Saturn's chief executive.

Nobody has accused Jack Matthews of being a clot.

With an entrepreneurial bent - he prefers start-ups to mature businesses - Mr Matthews regards himself as achievement-oriented.

The example was set by his parents. "Both my parents are very successful people. My father was a general in the US Army with a PhD from Princeton. They are both very much achievement-oriented folks," he says.

Nevertheless, it was only two years ago that Saturn's Wellington telephone and cable television network was greeted caustically by a sharemarket analyst, who shrieked that Jack Matthews had blown $250 million of his shareholders' money.

It wasn't necessarily a minority view. While other new entrants were working on high-value business customers, Saturn was making a head-on assault on the residential market.

The high capital cost of building a network and comparatively low average customer revenues meant most saw this as the preserve of Telecom.

"Now I'm blowing $1.5 billion," an unrepentant Mr Matthews reflects, secure in the knowledge that since the merger with Telstra at the end of last year and $900 million in debt-funding in his back pocket, Telstra Saturn has a chance to become No 2 to Telecom in the New Zealand market.

With a third of serviceable homes in Wellington, Saturn's rapid penetration in the telephony market is unprecedented for a new entrant.



Telstra Saturn's $140 million in annual revenue can only grow as it enters the Christchurch market early next year, with Auckland to follow.

The focus on the residential market has been vindicated, Mr Matthews says, because margins are good, unlike the business market, where much more favourable interconnection arrangements are still not enough to counteract the cost of reliance on Telecom's network.

In his six years in New Zealand, Mr Matthews has built a company of 700 employees, surviving Telecom's street-by-street price-matching as Saturn established its network - an approach he contends would be illegal anywhere but in New Zealand.

Mr Matthews' reaction to Telecom's strategy, when it filtered out at the Saturn launch party, was visceral but he swiftly turned to the attack, painting Telecom as the bad guy, an assessment with which many customers agree.

And if he has ever felt disillusioned about his move from the United States to an office on Petone's windswept foreshore, he has not shown it.

Saturn's evolution is vastly different from the original plan.

"I laugh about it now," Mr Matthews says of the frustrations involved in working out that a pay television network servicing the Kapiti Coast to Taranaki was not going to work and then deciding that Saturn needed to be where the people were.

That, for no other reason than that it was close to hand, was Wellington.

The next realisation was that if Saturn was to have a future, it needed income from sources other than pay television. A telco partner was vitally important and it is no secret that discussions went on long and hard with Clear Communications.

In the end, a small Canadian state-owned enterprise, Assisted, injected capital and expertise, making a killing on its $30 million investment when Saturn's parent, Austar United, was floated on the Australian Stock Exchange.

For Mr Matthews, coming to New Zealand to set up a pay television business was the opportunity to capitalise on 10 years of running pay television start-ups in the US.

He has been on the move most of his life, and his six-year stint in Wellington is among the longest periods he has spent in one place.

He recalls growing up in Europe, mainly Germany, and a mix of sophisticated European cities and small-town Army bases in the southeastern US.

"It was a great childhood." He remembers "getting in the back of the Renault and driving across the Alps with my Mum when I was 10 years old and going to Italy."

After graduating in philosophy from Virginia's William and Mary University, Mr Matthews put his education to the best possible use, by becoming a roadie with one of America's hottest bands at the time, the Allman Brothers.

"I like to say, jokingly, two years there proves that you can get too much sex, drugs and rock 'n' roll." From graduate school and a masters degree in journalism, he moved to pay television, a fast-evolving industry enjoying freedom from regulatory shackles.

A decade spent in building or managing networks, and it was time to move on again.

"And that was my infamous time at Playboy," Mr Matthews declares of a stint in which he turned the struggling pay television operator into a successful pay-per-view business that still operates on the model established then.

"Again, it was not something I wanted to do for an extended period of time. I'm a guy who likes to start things as opposed to managing mature businesses ... So I went off and started my own company with some investors."

It was a hands-on business installing interactive TV and voicemail in hospitals. The chief executive was salesman, installer and service tech.

For someone at the head of a rapidly growing business in a highly competitive market, Mr Matthews can be surprisingly open about his intentions. But he can stitch together some big deals without details leaking out.

He takes pride in delegating and leaves his senior executives to get on with it, even to the point of two popping off to Britain without his knowledge on a research mission.

His one stipulation is that they have to be right, at least 65 per cent of the time.

In keeping with the openness, he also maintains a reasonably public profile. In Wellington, he has been involved in the Chamber of Commerce, and he regards a chief executive's role as being the face of the company. But he encourages media contact with other executives.

While delegating, he still takes a staff member's observation that "Jack doesn't know everything, but he knows enough to make you feel uncomfortable," as a compliment.

A chief executive has to understand the big picture and the weaknesses in that picture, but he doesn't have to know everything, he says.