Lebara co-founder made virtual phone network a real money-maker
Yoganathan Ratheesan, 35, says he has no idea how he made Lebara such a success, but admits he is good ‘at running things’
Yoganathan Ratheesan was 25 when he co-founded Lebara. Ten years on and the business of selling cheap international mobile phone calls to migrant workers in Europe and Australia is snowballing.
With 3 million active customers, Lebara is already bigger than Tesco Mobile. The firm made €21m (£18m) in pre-tax profits last year and its operations in nine countries are expected to double revenues to €1bn in 2011. Staff numbers have risen from 500 to 1,400 since the beginning of last year.
But Ratheesan, known to friends as Ratheesh, prefers to be modest. “I’m not an entrepreneur. I don’t consider myself to be a businessman at all. I’m just very good at running things.”
At 35 he still looks almost boyish in his double-breasted suit, and would rather give the impression of being a corporate newcomer than the creator of a rampantly successful money-making machine. “It’s almost scary what has happened in the last 10 years. How did we do it? I have no idea.”
Perhaps Lebara’s biggest achievement has been making the international calls business respectable. While rival Lycatel was warned by regulator Ofcom over misleading advertising and unfair terms, Ratheesan has nurtured Lebara’s good name. Carefully chosen sponsorship has played its part, including a two-year test-cricket deal and three years of association with the Mobos (Music of Black Origin awards).
The speed at which Lebara branding has been plastered on the windows of thousands of street corner phone dealers in recent months suggests not only a wide distribution network, but a brand embraced by sole traders as a badge of trust with which to reassure customers.
Not everyone is a fan. Until a couple of years ago, its call centre waiting times stretched into minutes. But complaints on message boards have died down ,and Ratheesan points out that Lebara won an award for service and for best virtual mobile phone network this spring.
Lebara does not own masts, but rents space from networks including Vodafone and then sells pay-as-you-go sim cards for customers to put in their own handsets. Its London call centre employs 270 staff who field up to 80,000 calls a week, and apparently answer them in about 30 seconds. Ratheesan checks by phoning in as a mystery shopper from his car most days.
The London hub serves all of the European operations in 25 languages officially, 32 unofficially. With 50 nationalities on its payroll, Lebara would seem to be the very definition of diverse, but Ratheesan begs to differ. “I don’t much agree that we are a multicultural organisation. All my management team are from Europe apart from me.”
Non-European middle managers have been asked to pick a mentor from the top team, and will be fast-tracked up the ranks. The idea is to find senior people who, like its chief executive, have similar life experiences to the customers.
Ratheesan arrived in the UK aged 15, his family having taken refuge from Sri Lanka’s civil war. Twice displaced – he was educated at boarding school in India from the age of eight – he took a while to settle. “At the beginning I found it extremely difficult in England. The only person in my circle who could speak English and explain my studies was my uncle, who worked for the Bank of England. I would wait for him all day and ring him up at 8pm.”
For the first two years he saved his pocket money, hoping to buy a ticket back to India to see his former headmaster’s family, who had taken him in during the school holidays.
He survived secondary school. His father, who worked at a clothing factory in London, wanted him to take a degree, and he chose aeronautical engineering “because it had more numbers in it than any other subject”. He says he was not very studious, but pursued a masters and took a year out to earn the £8,000 needed to pay for it.
He worked in a bar by night, and in a shop selling call-time cards in the day. Then the boss came down from head office and Ratheesan told him the company was losing money on calls because of a miscalculation. A couple of days later the boss rang back, with his accountant on the line. Ratheesan talked him through it. “He was screaming for half an hour, and then said, I would like you to come and work at head office.”
Ratheesan said he would come for six months and then return to his studies, but he ended up staying for four years, running the pricing department and working in sales and marketing. The company was ICS, run by another Sri Lankan, Subaskaran Allirajah, who also founded Lycatel.
At ICS, he made friends with two other Tamil colleagues who eventually became his business partners. Rasiah Ranjith Leon had worked in Norway and Baskaran Kandiah hailed from the Netherlands. Lebara – a combination of their names Leon, Baskaran and Ratheesan – was from its beginning in 2001 a European concept.
First they founded a call card distribution business in the Netherlands, selling to independent phone shops. Then Yoganathan went on a training course and learned about the technology needed to produce their own phone cards. In 2004 they launched their first virtual network, in the Netherlands, selling pay-as-you-go sim cards and renting space from mobile carrier Telefort, a subsidiary of KPN. A similar deal was struck with Vodafone in Spain and then in the UK in 2007, and this was soon the company’s largest market. France, which launched last year, is already almost as big as the UK.
While his partners concentrated on sales and marketing, Ratheesan became the administrator and the corporate figurehead. Unusually, Lebara has never received outside funding, even in the form of a bank loan, and each founder owns a third of the shares. Without a chairman or a board, Ratheesan had to invent one. “I have an imaginary boss in my head. I’m still scared if I’m late coming in to work. Everybody else has someone to drive them, I had to find that discipline within myself.”
Lebara’s internal culture is strongly egalitarian. Ratheesan spent a fortune on chairs, after deciding every employee should sit on the same model as the boss. All managers spend one day every three weeks on the front line, working on stands or selling to phone shops. All except the chief executive. “Leon and Karan have never allowed me to put up a poster, hand out a leaflet or sell a sim card. They see that as their role.”
The three are firm friends and their next big ambition is to expand their charitable venture, the Lebara Foundation, which is already building a community with homes, a school and a clinic for local and displaced children in Chennai, southern India. To fund it, they plan to donate half their wealth to the foundation. RBS has been asked to run a review, which it is hoped will lead to a sale at around £650m.
The sticking point is that the founders want out so that they can take up charitable work full-time. Buyers are not sure Lebara can thrive without their expertise. The links to thousands of sole traders around Europe would be hard to replace. Vodafone has already withdrawn from the sale, having submitted an early low offer for part of the business. The few remaining buyers are being asked to meet management to see whether they could be persuaded to stay on.
Ratheesan seems torn. His co-founders are a little older and ready for a change, and the three do not want to be separated. However, he might stay if pressed. “If we did sell and there was a role for me, I would do it. I spent my life building this organisation.”
To mark its 10th anniversary, Ratheesan set out the vision of Lebara as an ethnic brand as well known around the world as Western Union. In March, it began offering money transfer services with MasterCard. Ratheesan wants Lebara to become the “brand of choice” for 1 billion people by 2020. He seems the natural leader for that ambition.
Born 6 December 1975
Education Havering College, Hornchurch; BsC in aeronautical engineering, Kingston University London
Career 1997-2001, head of pricing and sales and marketing executive, ICS; 2001, co-founded Lebara; 2005, co-founded the Lebara Charitable Foundation
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