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Looking forward to life after Phonebox

Paul Withers
May 10, 2012

After selling the B2B dealer, managing director Nigel Harrison is exiting the industry after 27 years. In an exclusive interview, he talks about the highs and lows, his views on the channel and what newly-formed dealer PMGC Technology can achieve

Did you achieve everything you wanted to at Phonebox? 

Yes, for the most part. We wanted to provide a decent livelihood for ourselves. We didn’t really imagine we would be creating a business that was of some value that we could then sell.

What were the highlights?

We built a chain of high street stores. In 2004, we won Solihull Business of the Year, beating the likes of David Lloyd Leisure and John Lewis. Being appointed as one of One2One’s first business dealers in 2001 was also a highlight. We were made an Orange business specialist, Orange federated partner, Orange principal partner. We became one of Orange’s best B2B dealers.

Is there anything you would have done differently?

I would have bought a bigger retail chain when I watched the likes of Simon Jordan build a retail estate of some 120 (PocketPhone) shops and reap the benefits of that. However, to achieve a sale at the end of it all is fantastic, so I couldn’t have wished for more.

How has the mobile industry changed?

In the earlier days we were able to generate profits. Now it is extremely difficult to make any profit upfront in a sale. You have to invest more in building a customer base that will give you some lifetime value.

As most of us had relationships with all the networks, there was an ongoing fight to get dealer business. Dealers are now aligned with fewer networks – they have to go with whatever the networks tell them to.

Is it more difficult to compete than 10 years ago?

Absolutely. If you were ranked well with the networks, you expected to have better commercials than those that were doing less business. Now most dealers can enjoy the same commercials with the networks.

You have to acquire new business yourself. It means you’re spending money, investing in customers, and even then it is difficult to compete.

If I was to just carry on offering mobile as well as a bit of fixed line and tracking, it would soon cease to be of interest to customers. You now don’t want to be competing solely on prices. You need to compete on offerings.

Did your interest in growth by acquisition fade when a deal to buy Wire Communications collapsed?

I explored growth by acquisition. But there is always a difficulty in establishing a value that can be agreed. We’re an industry of many strong personalities. It’s very difficult at dealer level to get those personalities to merge or agree anything. I looked at it with Link Telecom in the North East and I looked at it with Premier Mobile, and the effect of that was we stopped the merger talks and the rest is history.

What effect did the launch of Vodafone Partner Services (VPS) have?

When Vodafone bought Yes Telecom, we were in acquisition mode. This was attractive to Vodafone as the premier partners concentrated more on keeping their base intact. When VPS was created, their model was similar to Yes Telecom. They wanted acquisition and to grow the base quickly, so we slotted in well. VPS provides a strong and secure vehicle that I had absolute confidence in.

Your relationship with Orange broke down last year. What happened?

I had relationships with (sales director) Duncan Hay and his team. I still count those people as friends. It was not their fault I moved to Vodafone. With the merger of Orange and T-Mobile, everyone was fighting for their jobs. No decisions were being made. It seemed their plan was too long term for me. I was looking for an exit and felt this situation would delay that. I had to make a business decision and became a Vodafone solus dealer.

Did you have many approaches from others to buy Phonebox?

I was very close to selling the company on two occasions. One was by an internet company and the other by a public company. I felt they weren’t the right deals for me or Phonebox. We had a few approaches from inside the channel. I needed to ensure it was a ‘win-win’ all round. If I sold to someone who was looking at the number of connections we had, that would put the staff at risk. The buyer would probably have just been able to take that base, get rid of staff and run it themselves. It took a while to keep the staff convinced that what we were doing was to their benefit as much as mine.

What can PMGC Technology now achieve?

They have an extremely good foundation with great revenues and strong base that will enable them to buy complementary businesses. They want to build a company that will give the customer first-class service.

A lot of thought is being put into integrating the two companies and how future acquisitions will be integrated. I can see PMGC Technology being a £50-£100 million company.

Will the channel consolidate much this year?

Telecoms is flavour of the month with equity houses. There might be people that have taken their business as far as they want to and have something there that will still be of value to someone that has the appetite.

A mobile dealer not investing in other strategies won’t survive. Radical change is being pushed forward by companies like Vodafone. They want B2B dealers to be measured on core skills like One Net and their IT abilities, and not just be a mobile dealer.

The industry is shifting away from pure mobile connections to a complete communications sector.

This has accelerated in the last 18 months. At fixed-line conferences people were moving away from selling phone systems to selling a seat in the Cloud, which is more in synergy with mobile. Vodafone is talking about people like (PMGC and Premier Mobile MD) Jason Yeomans, who have an appetite for 10 years of growth. That’s where they want to invest.

Did this rate of change encourage you to quit?

It had a significant bearing. It will involve risk and investment. But there is a tremendous upside, which is a good thing to have when you’re looking to sell up. It gives the buyer something to gain from the whole process.

Will you ever return to the industry?

I’ve been offered a couple of non-executive roles. I’m also interested in consultancy roles for people who want to achieve what I have done. I’m happier working on my domestic and commercial property portfolio. There are a lot of things I’ll miss about the industry. It used to have a very low barrier to entry and there’s been an absolute tsunami explosion across the industry.

I remember how Cellnet hired Concorde to take us to lunch in Venice and bring us back the same day. One2One took us to Vietnam and Nepal. There have been so many dealer jollies that it’s hard to see how anyone had the time to do any work.

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