T-Mobile’s departing managing director, Jim Hyde, leaves behind a mixed legacy. While the operator is now sometimes a more profitable organisation and has a better ratio of contract customers, it is believed by some to be held back from achieving its full potential by parent group Deutsche Telekom.
The perception remains that T-Mobile is very much a business ran from and for Germany, and needs some personality to work in the UK. Former marketing director Phil Chapman – who left in 2008 – and Hyde (pictured) were thought to be the key to T-Mobile’s relative success over the last five years.
With two of its most senior executives gone, the operator’s stewardship is in the open. As one source says, it may be time to work out what its shareholders want and whether it should take the market by storm, or aim to preserve cash in times of economic struggle.
‘Cashflow,and more cashflow’
T-Mobile appeared to have spent its budget far too early in 2008 – as it has in previous years – and Deutsche Telekom is in a lot of debt. One analyst says: ‘All they want from the UK is cashflow, and more cashflow.
They want to cut costs, and they want to reduce acquisition costs in the UK. If I looked at the UK market my main focus would be to drive down acquisition costs – subsidies and commissions.’
The T-Mobile MD role in the UK is perceived by many close to the business as more of a sales director job. Hyde was therefore more than qualified for the role, having moved to T-Mobile UK in December 2005 from T-Mobile USA, where he held positions including vice president of sales and operations.
One T-Mobile source says Hyde’s departure is ‘not a big surprise’ as he was ‘always planning to go back to the US at some point’. However, he adds: ‘It is now a much stronger business and brand than it was before. The next person to come in has big shoes to fill.’
Executives outside the business agree, and some even go as far as to say Hyde and Chapman were instrumental in veiling the company’s failures. One source says: ‘The thing with T-Mobile in the UK is, they are known to punch above their weight – the service is average but the promotion is better. They have done better than they should have and I put that down to Hyde and Chapman.’
During his time at the operator, Hyde was creative in the face of bigger rivals and a controlling parent company, which flip-flopped on its key priorities. He took an active role in the network sharing deal with 3, carved out a plan around mid-level prepay and pursued Sim-only deals. He was also keen to support mobile broadband and internet on phones, and is credited with raising the quality and number of T-Mobile’s own stores.
On the downside, the financial performance was poor last year, and it lost share and profits fell. A tug of war could ensue after Hyde’s departure, as the UK clashes with its parent group’s global strategy. One source says: ‘It is a very globally run business, but the UK really pushes to get its own way and pulls against the international process, because it is so different from other markets.’
‘The challenge is 3’
But despite criticism, T-Mobile has done well in several areas. Phil Kendall, strategy analytics director of Global Wireless Practice, agrees that T-Mobile is now doing ‘pretty well’ in the UK after it started to turn around a ‘bad few years’ with broadband and Sim-only offerings. He says: ‘T-Mobile are arguably focused on the right side of the market.’ However, he adds: ‘The challenge is that 3 is doing very well in mobile broadband and is quite aggressive at the value end of the postpay market and broadband.’
Hyde also sees the three years of his tenure as positive and, although he hints at goalposts being moved, he says T-Mobile UK made a ‘major contribution’ to Deutsche Telekom. He adds: ‘Our challenge in 2006 was to reposition the brand and we achieved significant growth. In 2007, it was important to maximise EBITDA for Deutsche Telekom, on the back of the foundation we created in 2006. For 2008, it was a balance between good solid profitability and growth.’
In terms of the attributes needed by his successor, Hyde lists the following as vital: ‘Extraordinary leadership skills, able to make an impact in a competitive market and certainly manage the relationship with our parent company!’
However, not everyone in the industry agrees that T-Mobile’s UK brand has the strength it should be capable of. One financial analyst says: ‘A lot of it is poor management – low EBITDA is probably the worst.
‘The inconsistency is what has really let it down. Their market share is appalling – the other T-Mobile regions are market leaders.’
There are challenging times ahead for T-Mobile’s flailing UK arm. With two of its top executives gone there is a need to quickly pick up momentum as it fights hugely motivated operators and a horrible economic climate. Those close to the business say backing from Bonn with a clear, achievable and ?long-term strategy will be essential.
Next T-Mobile MD: profiles of Jim Hyde’s likely successors
Brit outside the mobile industry
With areas such as handset procurement and technology managed from Bonn, the T-Mobile UK operation has been described by some as virtually a sales and marketing function. With that being the case, many observers believe the skill set required for the UK managing director is largely around brand, sales and customer experience.
This logic would see T-Mobile look to, say, the motoring industry to pull in an executive with a track record of differentiating with a brand and proposition in a competitive marketplace. This kind of appointment would be brave and suggest T-Mobile wants growth and is looking to improve its market share.
T-Mobile’s focus on cost control and generating cash will require an individual with proven experience in meeting financial metrics. Market share and growth would be less of a priority under this approach, with margins and profitability as the main focus.
The appointment would involve careful cost-cutting, integrating departments, share deals and out-sourcing.
There is also a theory that there are many talented and ambitious young executives at Deutsche Telekom’s HQ in Bonn, who will be pressing for a high-profile country managing director role for their CV.
This is seen as the safe choice, and perhaps a balance of the first two points. Gordon Ballantyne would be the favourite under this tactic, having quickly developed his career since his appointment in 2003, heading up telesales and online sales under his previous managing director (and former colleague at Dell) Brian McBride. He has been promoted to sales and service director, with a wide remit covering all of T-Mobile’s consumer and business operations, all of its direct and indirect channels as well as customer service.
His appointment would indicate that T-Mobile wants a period of steady continuation of Jim Hyde’s strategy.