T-Mobile's UK Head Confronts Challenges
Richard Moat likes to get away from it all with a round of golf. But after his first eight months in charge of T-Mobile's (DT) UK business, the clubs have been gathering dust. Since June, he has overseen the start of a turnaround at Britain's fourth-largest mobile-phone operator, invested in infrastructure to support the expanding data needs of the population, and pushed through the prospective merger with Orange (FTE), a move that will shake up the industry.
The deal has reached a delicate stage. A possible roadblock emerged last week as the Office of Fair Trading requested it be inspected in Britain. This spells trouble for T-Mobile UK and Orange as the process is likely to drag on longer and demand more remedies than if it stays with the European Commission.
"The key question is whether it's returned to the UK. I don't want to speculate on that. A quicker process would be better for all concerned: not just for the joint venture and the customers, but for the industry in general," says Mr Moat. Others in the industry disagree; O2 and 3 have both called for the deal to be scrutinised in the UK.
The issue for regulators is not the market share, with the 37 per cent of UK customers lower than incumbents in France, Spain and Germany, but mobile-phone spectrum, crucial to being able to handle the rise in mobile data. The merger would hand the group twice the spectrum owned by the two leading players. The EU regulator will decide whether to refer the investigation by 1 March.
Speaking in the run-up to next week's industry trade show, the Mobile World Congress in Barcelona, Mr Moat's statements about the need for the merger to go through have become more and more urgent. He said that without serious changes, the smaller operators cannot compete with O2 (TEF) and Vodafone (VOD).
T-Mobile UK and Orange announced the 50/50 joint venture in September. Mr Moat said the companies want to deliver a "better network, better services, better value and better choice for the customer", as well as £3.5bn in cost-savings at the merged entity. Mr Moat joined T-Mobile after 17 years at Orange, during which time he launched the group in Thailand, turned around performance in Denmark and lifted Romanian revenues from second to first.
While it was a hard decision to leave, he says the offer from T-Mobile was just too good, and, after being out of the UK for such a long time, there were also personal reasons to return home. What he found at T-Mobile was a firm in disarray, and a problem for its parent company Deutsche Telekom. "T-Mobile had been without a chief executive since the end of 2008, so there was a bit of a vacuum. I wanted to bring more focus to the business."
Mr Moat launched a major cost-saving drive – he slashed indirect charges by 21 per cent – and made the products more appealing. The firm recently changed its tariff structure, which included simplifying the options to help "bewildered" customers. The third-quarter results showed that T-Mobile had lifted quarter-on-quarter earnings before charges by almost 20 per cent, boosted efficiency, and attracted new customers.
When he joined, Mr Moat was unaware of talks over the future of the business. Three months later, the deal was signed with the company he had just left. He had started working in the finance department at Orange in 1992, before the company even had a name, and played a crucial role in preparing its flotation four years later. Before that, he had worked at oil group USX/Marathon Group. He changed to mobile telecoms when the oil industry hit the doldrums, with the price of a barrel down at $9.
When he joined Orange, only 1 per cent of the population had a mobile phone, and people would stop and point at him using his in the street. On the company's launch day in 1994, 428 customers bought one. The company now has 16 million customers. "Very few saw the real potential in the business at the time," Mr Moat says.
The mobile industry now represents 1.2 per cent of GDP in the European Union, and has more than 600,000 employees. Within telecoms as a whole, mobile revenues have risen to almost two-thirds, up from 47 per cent in 2002. In the UK, mobile penetration is 120 per cent, and the industry has to deal with a different conundrum: the rise in demands for mobile data brought on from smartphones, including the iPhone – which T-Mobile UK doesn't offer in the UK – and Android phones. Research company Gartner predicts that by 2012, half the mobiles sold will be smartphones. T-Mobile is betting heavily on the Android family. Mr Moat himself carries a G2 handset, a Nokia (NOK) N86 and the staple of the boardroom, a BlackBerry.
Network investment is crucial, as says: "Capacity is an issue for all of us." Yet the €147bn of capital expenditure Ofcom expects from operators across Europe, largely in network investment, in the next few years has become problematic. In the UK, revenue growth has slowed to 2.2 per cent in 2008 from 8.9 per cent the previous year. Mr Moat says the margin pressures "are altering the competitive landscape and altering the ability to fund the future".
So T-Mobile has looked at tying up with rivals over network-sharing, most prominently with 3, which will see the two companies have 13,000 3G cell sites across the UK. "We have ring-fenced that because we believe it's vital for the future of the business." The trend for network-sharing has risen as companies look to cut costs, especially with Long Term Evolution, or 4G, services just round the corner. "It can deliver data speeds of 160 Mbps. It's another revolutionary step in the industry," he says.
In the shorter term, Mr Moat hopes the merger will go more smoothly than the one up the road from where he lives, near Bournville, Birmingham, in a house once owned by a member of the Cadbury family.
He says: "This business combination will drive greater levels of competition rather than reduce it. Everyone will want to expand their market share and they'll be fighting just as hard as they ever did." He will be chief operating officer, with Orange's chief executive Tom Alexander taking over at the enlarged group.
Their contact was "very irregular" when they were both at Orange, but "I've got to know him a lot better over this process and we are developing a strong relationship". Much has been made of their different management styles, but Mr Moat says they are complementary. "He's got great leadership and communication skills and is very visionary, and is good at brands and marketing. I'm a nuts-and-bolts guy, I understand what it takes to achieve something in the business." He might finally get time for that round of golf as well.
Richard Moat: Who You Gonna Call?
He has two children and lives with his partner, Mary, who also has two children from a former marriage.
Read law at St Catharine's College, Cambridge. Has an accounting diploma from London Business School.
1977-1980: Analyst at Sedgwick.
1980-92 USX/Marathon Group.
1992-2009: Various roles at Orange.
2009: Managing director, T-Mobile UK.
Interests include sport, especially golf, marathons and playing the piano.
from London, for Independent minds