T-Mobile - building the lean machine

T-Mobile - building the lean machine

The network operator talk at Mobile World Congress centred on data capacity issues, and the question of whether Google's Sim-free phones would hit future revenues.

T-Mobile UK MD Richard Moat takes a relaxed attitude to both threats, saying: 'We are seeing a massive increase in data traffic and revenues; we are in a very good position because we have the MVNL joint venture with 3 and we are ahead of the curve in terms of investment. We will have the largest 3G network in the UK by the fourth quarter of 2010 - 13,000 sites.

'We have invested to cope with the data growth, while some other operators have obviously been struggling in recent times. There is room for everyone in the digital and data space. There may be new players, but the key message has got to be that the data growth is enormous and that being able to invest to keep up with that growth is vital.'

Having that firepower to invest is a theme Moat keeps returning to. In the nine months he has held the post, Moat has transformed T-Mobile UK's fortunes.


'Value-led attack strategy'

He introduced his 'value-led attack strategy' in the middle of 2009. The strategy has four pillars, the first of which is to provide best value to customers. This is exemplified by the launch of a suite of simpler, more flexible postpay tariffs in February designed to attract and retain customers.

The second centres on smarter investment - driving the optimum possible return from the commercial investment. Unlike some of his rivals, Moat says he always tries to ensure he gets a positive return on investment.

For Moat, smart investment means choosing the right channels, handsets, prices and tariffs. T-Mobile's latest devices portfolio shows it has firmly nailed its colours to the Android mast in the shape of the T-Mobile Pulse Mini, Sony Ericsson X10, HTC Desire and the LG inTouch Max GW620.

The third pillar is to drive the greatest possible share through T-Mobile's direct channels. 'We've increased the productivity of our retail stores by something like 40% in the second half of 2009,' says Moat.

The last pillar is to continue to invest in the network by creating a 'lean machine' that provides the strongest cost base for the company. In other words, cut out unnecessary programmes and reduce costs.

Moat explains: 'The point of the lean machine is that by reducing overheads you have the ability to invest more in the market. If you don't reduce your costs then you have to reduce the market investment, and that is not what we want to do.'

Moat admits that in recent years, T-Mobile has focused heavily on the bottom line, but has been in and out of the market at various times.

'We have not shown the level of consistency we would have liked,' he says. 'That meant we left some customers on the table for other networks that we could have taken, given the strength of the tariffs we were offering and the way we were pushing the brand.'

Certainly, the enterprise side of the business has perhaps suffered from an inconsistent approach in the past, but the company is in the process of reorganising its business division, especially with regard to the SME market.

'The business market is tough generally speaking,' says Moat. 'The public sector is big, but margins are low and the corporate sector is enormously competitive, so that is why the SME sector is becoming the battleground.

'It's an area that is expanding despite the recession and it is the area of business that provides the highest ARPU. Therefore, it is an obvious area of focus for us, as we are under represented in the enterprise market, but we have the ambition to move that up.'

Moat says his approach to reviving the business would be almost the same whether it remains a standalone company or part of the proposed joint venture with Orange, 'so we don't need to tear it up and start again'.

The joint venture with Orange, announced last September, will bring many benefits says Moat, not least of which is the scale to continue that level of investment he sees as vital to ensuring a sustainable business.


Joint venture

Nonetheless, the actual merger is some way off and O2 and Vodafone will be doing all they can to ensure the two operators take their eyes off the ball, as the tricky task of integrating the companies takes place.

Moat is sanguine about this, saying: 'If you go into something like this joint venture you are bound to have competing pulls. On one side you're thinking this has fantastic potential for the future, and on the other you've got to keep tremendous focus on "business as usual", or it won't work properly.'

Much about the merger still has to be worked out. Moat says that high level talks with Orange are happening as far as they can without breaching any competition or confidentiality issues.

'At the same time, I try to keep everyone at Hatfield completely focused on achieving the targets we have for 2010. Yes, there are tensions between those two, but we continue to compete vigorously against one another and will do so until we find out what the result is going to be with the merger,' says Moat.

Asked what he thinks his main achievements have been so far after nine months in the job, he replies: 'There has been a significant turnaround in the business and it has happened a lot quicker than I anticipated. Our profit margin rose from 13% in Q1 to top equal with Orange at 21.4% in Q3. I thought it would take longer to get to this stage. People have seized the challenge and bought into the strategy.'

But Moat isn't letting it rest there. Looking ahead to 2010, he says there is a lot more work to do. 'We have significantly reduced our indirect cost base, but I think there is another significant reduction that is possible. We are working on this right now and that will create the flexibility we need to continue our market investment - that is what we are entirely focused on.'

Written by Mobile Today
Mobile Today


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