TelecomFinance’s Guy Ferneyhough speaks to new Tele2 CEO Allison Kirkby, who was promoted from CFO to CEO at the start of September. She shares her thoughts on disrupting the Dutch market, ensuring transparency, network sharing, competition and innovation, and content creation.
TelecomFinance’s Guy Ferneyhough speaks to new Tele2 CEO Allison Kirkby, who was promoted from CFO to CEO at the start of September. She shares her thoughts on disrupting the Dutch market, ensuring transparency, network sharing, competition and innovation, and content creation.
Guy Ferneyhough: How have you found your first few months as CEO?
Allison Kirkby: We have had a lot going on. In the first two months we announced our third quarter results, the intended merger with Altel in Kazakhstan, and we accelerated our 4G launch in the Netherlands, so it’s been busy. But having already been in the business for 18 months as CFO, it was obviously a much easier transition. It was just a slightly different emphasis as I transitioned into becoming the CEO. It’s been exciting, lots going on, and fun so far.
GF: You recently launched a 4G network in the Netherlands, but I know you were previously an MVNO – how did that come about? Going from an MVNO to a network operator isn’t that common.
AK: Three years ago the Dutch regulator decided they wanted a hungry challenger to come into the market to disrupt the three larger players [KPN, Vodafone and T-Mobile]. We took that challenge, we were part of the auction, we won the licence and then we started the rollout of our network in early 2013.
Some of our sites are shared with T-Mobile Netherlands because as a challenger, we must be very cost conscious. We started migrating existing customers in the spring of this year onto our network and in November we launched what we believe to be the first 4G-only MNO in the world, because once we launch VoLTE in the first quarter of 2016, our customers will be able to get LTE Advanced and voice over the 4G network.
We’re now just over 90% for outdoor coverage, and just under 70% for indoor coverage. 2016 is all about reaching 99% outdoor coverage and 90% indoor coverage, so that by 2017 we will have dramatically reduced our need to offload onto T-Mobile’s 3G network.
It’s all about stimulating data on the mobile network at a great price that encourages customers to stay on their mobile network rather than rushing to a Wi-Fi hotspot. That’s how we have proven to monetise data successfully in Sweden, and it has proven to be a great and valued experience for the customer.
GF: As we know, T-Mobile is up for sale at the moment – how do you view their position as a mobile-only player? How important is it to have fixed?
AK: In the Netherlands we believe we need mobile and fixed, and we’ve always had fixed, which has been a very strong business there. We also have a very large B2B business in the Netherlands, where fixed plays a very important role.
We are mobile first and foremost in all of our markets, but where we’ve had a strong fixed business, we maintain that, as we do in the Netherlands. As for T-Mobile, I can’t comment on their strategy of being mobile only. We want to maintain a mobile and fixed presence.
Not all of our fixed customers have mobile because we’ve not been able to offer a particularly good mobile service up until recently. The 4G launch is an opportunity for us to start reselling again into our fixed base.
GF: Do you see fixed-mobile convergence as the way forward?
AK: It varies market by market. Obviously fixed-mobile convergence has been very popular in southern Europe where the players have chosen to discount one of the services in the bundle to cross-sell more services into the home. In the markets where it has really taken off it’s been a churn prevention measure, and a way of driving up ARPU. We haven’t seen that in our biggest mobile markets outside of the Netherlands. We haven’t seen that in Sweden or any of our Baltic markets or Croatia, where we’re mobile only.
Certainly here in Sweden a lot of the convergence has been driven around operators using content to drive penetration of either mobile or fixed into their base. What you see is that content is increasingly going over the top, so it is not a way to monetise fixed in the same way as in countries like the UK.
Our priority is to offer the best quality mobile network and to partner with OTT services such as Viaplay or HBO Nordic as we’ve done in Sweden, and that way encourage content consumption and data download on the mobile network as well as the fixed network.
GF: Moving away from Europe, can you tell us about the merger with Altel in Kazakhstan. The rationale for that deal is that the JV will capture demand for data – how big is the demand?
AK: The demand for data is huge in Kazakhstan because people are using mobile broadband as an alternative to fixed. The mobile networks are very good, they’re still fairly empty, and the 3G network is actually fantastic today.
There is a massive demand for data. We’ve seen data on our network more than double in the last year. Part of that has been driven by the price war that Altel started earlier this year, which has very much stimulated data on mobile networks.
This will give us a much stronger platform, enabling us to become a much stronger number three in competition with the number one and number two, which very much act like incumbents and have kept pricing high for many years.
GF: Am I right in thinking Altel has the only 4G licence in Kazakhstan?
AK: Yes, it does today, but there is lots of discussion going on about tech neutrality in the markets at the moment. There is discussion about everyone getting access to the 1800 MHz band and that being allowed for 4G, so I would expect Altel’s position to change in the coming year. But obviously Altel has had first mover advantage, and we will benefit from that when we merge.
GF: When the deal was announced, there was a lot of emphasis on corporate governance and certain safeguards being put in place. Are you confident with the framework? Your peers TeliaSonera and Telenor are still dealing with the fallout of bribery allegations in Uzbekistan.
AK: We went into Kazakhstan at a different time to when some of our competitors went into Uzbekistan and I can’t comment on Uzbekistan. Before we went into Kazakhstan, and once we were already there, we did significant due diligence on the market, on the players, on our partner, and on the ultimate beneficiary owner of our partner. As soon as we merged and set up the operations we put a huge priority on driving the Tele2 way of business and code of conduct with all our employees, with all our partners, and with all our suppliers.
We set the highest standards in all of our operations, including Kazakhstan, and whenever we have had issues we have a zero tolerance policy. Contracts have been ended when we have felt any violation towards our code of conduct, and that will continue in the new JV.
In addition, we put some specific things in place to ensure the new JV will operate to the highest of standards. So, for example, if [Altel’s parent] Kazakhtelecom were to violate our code of conduct, we have the right to serve a put option on them and exit.
We also have warranties on the key minority shareholders of Kazakhtelecom so that if the information they gave us around their ultimate beneficiary ownership were misleading in any way, we could take action.
Kazakhstan is a market that’s far away from Sweden, so we put a lot of emphasis on ensuring that further flung markets are governed in exactly the same way as we govern our businesses here in Sweden.
GF: Sweden is seen as a potential market for four-to-three consolidation, but the collapse of TeliaSonera and Telenor’s planned merger in Denmark appears to signal the European Commission’s hardening stance on in-market mergers. What’s your view?
AK: Denmark was unique, and Sweden also has unique elements to it. The deal in Denmark was always going to be difficult because they were going to create a new number one player, and the number one and number two would then have had more than 80% of the market between them, and it would have meant the market would have ended up with only two B2B players.
When you look at Sweden, it does have some unique elements to it today that would make in-market consolidation a little bit more complex than some other markets. The network sharing agreement between ourselves and Telenor [Net4Mobility] and Telia [SUNAB], and between Three and Telenor [3GIS] means there are already only three 4G networks. So any in-market consolidation would have to take into consideration the implications of that on the number of networks that would then remain.
That being said though, network sharing has been fabulous for investment and consumer experience here in the Swedish market, because the network sharing agreement allowed all of us to invest faster than any other market in Europe, and as a result the Swedish consumer has one of the best 4G network in the world. Infrastructure consolidation has been good for the Swedish consumer and good for investment.
GF: You were saying how Swedish infrastructure agreements led to more investment in networks. Do you think that consolidation leads to more investment? What if there were only two networks?
AK: How I look at it is that as a result of the Swedish network sharing, we were able to move faster in our investment cycle, and therefore customers got a better experience faster than they would have if all four players had tried to invest and roll out independently. When new technologies come along, it is easier for three networks covering all four players to move fast and for it to be less of a capital demand for any one player in the market. That can only be beneficial to consumers.
Whilst markets remain competitive there will always be innovation, and with innovation comes investment. You can’t just look at the mobile network in isolation of everything else that’s going on in terms of connectivity and over the top and the demands coming from outside our own industry.
The most important thing is that there’s an enough competition to stimulate innovation and that will stimulate investment, and competition doesn’t always just come from our own industry.
GF: You’ve had experience in content when you were CFO of TV production company Shine – do you see a compelling case for telcos to own content?
AK: I don’t believe telcos should get into content ownership, unless they are very, very large. I believe telcos should stick to what they are good at, and that’s providing great communications. The premium content that is generally around sport, live entertainment and high quality drama is very expensive. You need scale to be able to invest in, create and buy that content.
I believe that more and more content will be made available over the top – we will provide the best quality network so that the viewers of that content get a great experience when they are on our network.
