Mainline positive on future as part of EE

Airtime distributor will have more than 150,000 mobile connections by the end of the year

To say it has been a tumultuous 12 months for Mainline is an understatement. The EE airtime distributor started out 2014 as an independently run company offering resellers connectivity with the operator but, in December of that year, EE decided to increase it’s 26 per cent stake in the firm to become sole owners.

The acquisition led to a wave of management changes, which included the departure of managing director Andrew Boden after 23 years with the distributor, and the appointment of his successor Martin Tufft, who joined from EE.

Fast forward a little over a year and Mainline has another owner – BT, following its £12.5 billion acquisition of EE completed in January – and expectations are high.

Happy with structure
“Mainline is run as a completely separate business, and since I took over I’ve had the opportunity to do what is right for Mainline,” Tufft, who became MD in October, told Mobile News. “There are no limitations on where we choose to go or what we choose to do. It will remain that for the foreseeable future as far as we know.

“BT were aware of what EE was doing when we took over Mainline and they seemed to be happy with the structure and our relationship with the channel is not set to change.”

That reassurance to the channel was a key part of what Tufft wanted to express when we met at EE’s headquarters in Paddington. Note EE’s base, not Mainline’s office in Burton, which he said will remain as the distributor’s main HQ.

At Burton, Mainline has around 35 staff, “roughly the same” as when EE’s buyout was completed. Tufft refused to say if this is likely to grow, but was certain staff levels will not be reduced.

A good fit
So if it wasn’t to make “efficiencies” in staff levels or to move it’s base in-house, why did EE opt to make Mainline a wholly-owned subsidiary?

At the time, the EE director of small business Mike Tomlinson called the move “a no-brainer” as the operator attempts to up it’s drive into B2B.

Though Tufft was keen to point out he wasn’t involved in the decision making when EE made it’s bid to buy Mainline, he did share his views on why it was a good fit.

“They (EE) owned 26 per cent previously but one of the things was to get Mainline much more focused on what we have began delivering – partner satisfaction, delivering EE’s proposition and message through to the end customer,” he explained.

“Also, using our expertise and getting the benefit of what we can do through to those direct partners more than EE could have done through a direct partnership – those results have been quite positive.”

Tufft: Initial feedback has been positive

Benefits

Partner satisfaction was a key metric for the Mainline MD, who first joined as sales director in January 2015.

When EE bought the airtime distributor, the operator’s channel strategy was under review, and it was receiving a lot of anger from dealers who accused EE of missing commission payments, leaving many struggling with “tens of millions of pounds” owed in some cases.

One of the benefits of becoming a part of the wider EE machine, according to Tufft, is that Mainline’s  150 plus dealer partners no longer have to worry about drawn-out attempts to resolve payment disputes.

Payments
In fact, since the acquisition over a year ago, the distributor has seen payment enquiries fall by more than 70
per cent.

He said: “I’m aware of the issues with commission payments and we’ve done a lot of work to get those resolved. The number of queries we’ve had about these issues has dropped by 70 per cent over the last year, and that is evidenced by our satisfaction scores.

“It is absolutely vital that our partners are getting paid the right amounts on time, because if they’re not, then they won’t give us good scores.

“One of the benefits of being a wholly owned subsidiary of EE is that we have a close working relationship with EE’s finance teams who are running the commission system. So if we don’t see something appear on our report, we are very quickly on that with the people in EE to make sure it never becomes an issue.”

This, Tufft said, has helped contribute to a much improved approval rating from its dealer partners. Mainline contacts dealers every quarter to find out their views on the airtime distributor, measuring it using a Net Promoter Score (NPS).

In these surveys, Mainline asks dealers to score out of 10 how likely they are to recommend the service it offers to a friend or colleague (10 is likely, 0 is not at all).

Dealers who give an approval rating of 8,9 or 10 are “promoters”, while anyone who gives a score of six or below is a “detractor”. Detracts are subtracted from promoters to give an NPS score.

According to Tufft, the first NPS review taken after the acquisition saw dealers give Mainline a score of -5. But by October, when the latest survey was carried out, this had improved substantially to +41 NPS score.

He credited his staff with the turnaround, but said the ability to work more closely with EE had also seen dealers gain a much stronger experience.

“There has been a big focus on partner satisfaction. We’ve done a lot of work based on what the partners have been telling us, both on how we interact with them and the proposition to give them a much better experience. We’ve also started measuring that from the start of the year and have had some really encouraging results.”

Major concerns
One of the major concerns for EE’s partners following the Mainline acquisition was what would happen to its direct channel. Indeed, perhaps not a surprise to anyone, EE soon axed the majority of its direct dealer base, moving all but 10 through distribution.

Once the review of EE’s dealer channel was completed in July, Mike Tomlinson told Mobile News that 80 per cent of EE’s direct dealers would be handled through Mainline. In order to assuage these dealers, the operator offered a year long price freeze.

With that year almost up for the earliest partners who moved over, we asked Mainline what will happen to commissions once the feeeze ends.

“There was some concern (about moving) at the outset, but we’ve done a lot of work to show partners that the service we can provide and the expertise will give them a better experience.

“Initial feedback has been positive as we can get close to the partners and give them a much closer level of account management support; keep them informed more easily and look more closely at the deals they are putting through.

“All partners who have moved across are on the same terms we moved them over with, although that is under constant review based on performance. Nobody has had their terms changed, and there is no plans to make wholesale reviews over commission. It is business as usual for them.”

Mainline employs 35 staff, which new managing director Tufft maintains will not be reduced

Positive experience
A number of dealers who Mobile News spoke to confirmed they had found the move to Mainline a mostly positive experience (see boxout) and the acquisition has certainly added numbers to the distributors core dealer base.

When EE acquired Mainline, it had around 100 partners, but this has grown by more than half to surpass 150 when we met with Tufft.

Of these additional 50 partners, 20 were direct dealers, the last of which moved over in January.

The other 30, says Tufft, have been part of a real success story that has seen both Mainline’s connection base and revenue grow “significantly”.

In 2013, Mainline’s last recorded results as an independent company, it posted turnover of £25.5 million. Tufft would not share a figure for last year, but did say it had seen “double digit” growth.

“We’ve got a big focus on growing the connections we process through Mainline. ARPU has grown, and we’re focusing on making sure we get the right mix of business at the right value. To some extent that is driven by the EE proposition we’re selling through.

“Last year, we went out trying to recruit new dealers to complement the ones we’ve already got. We added 30 new dealers last year and we’re pushing for the same amount this year. We’re going to grow the business further.

“We’ve got to get Mainline continuing to grow, but I suspect we are the biggest Airtime distributor for purely EE. We need to sell more of the EE value added services through Mainline, so not just increasing the number of connections but also the value of those
connections.”

It’s time to step up
So what does the future hold for Mainline? After a year in which he has mainly been focused on integrating the business, Tufft said it is now time for the airtime distributor to step up and show stronger growth.

This means doubling it’s connection base from when it was acquired but also improving ARPU for its partners.

“By the end of this year, we’ll be doing double the volumes we were doing when the business was purchased, operating with double the base, and our levels of partner satisfaction will have dramatically improved. That will have been a successful year for us.”

Its ambitious target is to have doubled its number of connections by the end of 2016. Tufft said this was already happening as the firm has seen monthly connections double since EE completed its acquisition at the end of 2014, while its number of dealer partners has now topped 150, after adding 50 new partners (30 of which were EE direct) over the past 12 months. It also expects similar additions this year.

Mobile News understands the airtime distributor now has a base of 100,000 and is currently averaging around 5,000 new connections per month. Neither Mainline nor EE would confirm these figures.

He added its recent success had been aided by heavy investment from EE, which has helped change its perception in the market, claiming its customer satisfaction scores are at an all time high.

Investments made include employment of additional staff to better support partners and upgrades to back office systems used by partners.

Tufft also claimed the number of dealers experiencing issues surrounding the accuracy of commission payments from EE has fallen by more than 70 per cent since it acquired Mainline. EE blamed the issues on problems caused by switching partners to payment system “SAP” in 2012, after the launch of 4GEE.

The platform, later branded “unfit for purpose” by EE, had resulted in a number of dealers being underpaid, with some claiming at the time to be owed “millions”.

Major opportunities
Integration with EE and it’s core offering was one the major opportunities that he discussed, saying it allowed dealers to get closer to EE’s proposition and have a better relationship with the operator.

“This year we will look at EE’s value added services that are not yet available through Mainline to enable our partners to earn more and for us to grow in-value to our end users.

“If you look at some of the services EE offers to businesses – things like rapid site set up – it’s something that gives a service wraparound, so we’re selling a proposition rather than just connectivity.

“That’s an example of what EE offers and it is something we might consider selling through to the channel. It would help our partners bolster their revenue and give them a stronger proposition to sell to the end user.”

He also said there was a great opportunity for dealers around machine-to-machine technology and selling SIMs for these services.

According to research from Ovum, M2M is set make up 10 per cent of all SIMs sold in the UK by 2020 – up from four per cent at the moment.

Part of this drive will also be through helping partners transition into offering a more unified communications based service, including IT and fixed line, which Tufft said Mainline fully supports.

“There’s a lot of dealers out  there who are broadening their product set into fixed telephony and IT.

“Those guys are offering a one stop shot for connectivity and some are really thriving,” maintains Tufft.

“A lot are becoming very successful, but there are a lot of challenges at the lower end. The ones going into a broader product set are the most successful ones.

“We support EE’s M2M proposition and we’re looking at further opportunities at ways of improving that.”