T-Mobile Q&A: Richard Moat

“We had EBITDA ratio of 21.4 per cent in the third quarter. Back in the first quarter it was down around 13 per cent and in the second quarter it was 17, so it’s moving a long in the right direction” – Richard Moat, UK CEO, T-Mobile

What is the latest on the JV with Orange?

The application was submitted to the European Commission (EC) and European Competition Authorities on January 11 for a process which, I think, takes 25 working days and will decide if the EC is going to handle it in Brussels or whether it will refer it back to the UK.

I think it’s fair to say right now, as we speak, no one really knows what’s going to happen.

You have said a decision could be anything from two weeks to a year away. Presumably this is something you, as UK chief executive of T-Mobile, want to complete quickly?

Obviously from our perspective, we would like a decision sooner rather than later because it resolves any uncertainty, for our employees, for the market and for customers. We will just have to see what happens. It’s impossible to know right now if it will be quite quick or a long process, unfortunately

So it’s business as usual at the moment. Certainly, during the first half of this year, we have to make the assumption we run the business exactly as it is now. If it was a longer dated decision then we might be going for the whole of 2010, so we have to keep going and keep our heads down.

How would you describe your first six months as chief executive of T-Mobile?

Really great. There has been a quite significant transformation in the business over that period – some of which had already started before I got here, so I’m not saying it’s all down to my arrival.

There is a great team here and everyone has pulled their weight these past six months. And as you can see from the third-quarter results, we have started to turn around the performance of the business.

We had EBITDA ratio of 21.4 per cent in the third quarter. Back in the first quarter it was down around 13 per cent and in the second quarter it was 17, so it’s moving a long in the right direction and improving substantially.

I think we perform well in the market. We have grown. And grown intelligently too, using what we call ‘value-based dealing’ to make sure we get the best possible return on the commercial investment we make.

We have reduced churn levels and substantially reduced the cost base. The business is performing a lot more effectively than it was a year ago.

Were you aware that a JV deal between Orange and T-Mobile was on the cards when you joined?

I didn’t know. I knew there was speculation about the future of the business, but I had no idea a joint venture with Orange was going to be the outcome.

How have T-Mobile staff, from your office down, taken the news of the JV?

I’m not saying this just because I’m talking to you but, surprisingly, it has been almost universally positive.

We published details of the submission of the dossier to the EU Commission on January 11 on the intranet site, which is dedicated to the JV. [Orange internal communications manager] Paul Wiggins showed me some of the responses to it which were really positive and showed that many are excited about it.

Everybody can see it’s a great new feature to the business.

Obviously back in Q1 2009, there was quite a substantial impairment to take £1.8 billion [out of the business] and if that happens it puts the future of the business in jeopardy.

The shareholders are obviously going to consider what to do with their investment. So we went through that period of uncertainty in the middle of last year, but this JV provides a great new future for the business. And together as part of what is going to become the market leader, it transforms the prospects of everyone who is working here.

There have been many positives lately. Could T-Mobile have continued to progress alone?

We have pulled together this ‘value lead attack’ strategy as we call it. And that’s what we have been implementing throughout the second half of 2009, under-pinning everything we have been doing.

As you can see from our third quarter results, it is bearing fruit. There is no doubt there was an organic route out of where the business was positioned and, back in the Summer when I was discussing it with the Deutsche Telekom board, I argued strongly that was a real alternative.

But I think everybody recognises now that a JV is the option which holds most value.

There are many potential synergies which can be driven out of the combination and gives both businesses scale, larger networks, a larger distribution platform and takes us to a place that realistically we would have been a long way off if we had tried to reach it organically. I think it’s a great outcome.

See the full interview with Richard Moat in next issue of Mobile News (456, February 1, 2010).

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