Peter Erskine, the head of Britain’s biggest mobile operator, is in unfamiliar
territory. After a string of successes at O2 – the group that he steered
from underdog to the country’s top player and then on to a £17.7 billion
sale – suddenly there are problems.
The one-time powerhouse of the British mobile phone industry conceded last
week that it had added an unimpressive 34,000 customers in its second
quarter. Vodafone, its rival, added more than 200,000. Moreover, O2 has been
forced to cut its forecasts for its key German division and has had to ditch
i-mode, its much-trumpeted “mobile internet” service, after it flopped with
customers.
So, unusually, the 55-year-old former Mars marketeer who defied City
scepticism to work his magic on the former BT Cellnet mobile unit, has been
forced on to the defensive. “We are the largest in terms of customer numbers
in the UK and by the end of the year our margins and revenues will be
stellar,” Mr Erskine responds, firmly.
Those numbers will have to sparkle in an environment hugely different from the
mobile heyday of the 1990s. Then, calls cost up to 50p a minute and
operators merrily splurged a combined £22.5 billion on the licences for
“next-generation” 3G technology – a technology that has yet to reap the
hoped-for rewards.
Today pretty much everyone who wants a mobile phone has one (or two, or three,
since there are now more mobile devices than people in this country) and,
instead of targeting new customers, the likes of Vodafone, O2 and Orange are
working frantically to lock-in their existing ones while wooing over rivals’
subscribers. It is, as they say, a dog-eat-dog world out there.
Mr Erskine does have a few unique weapons at his disposal, however, not least
a sponsorship deal of the former Millennium Dome, now The O2 music arena.
The association of his group with the 20,000-capacity entertainment venue,
which has already played host to a string of big-name acts, including Bon
Jovi and Justin Timberlake, will, he confidently believes, give a powerful
boost to the“ O2 brand. Whereas other blue-chip companies approached about a
tie-up could not move quickly enough to steer clear of the white elephant
beside the Thames in Greenwich, Mr Erskine, who spent years in marketing
with companies such as Polycell and Colgate before joining BT, saw the
potential immediately. O2 ’s link with the venue is, he says, a “strong
driver for retaining existing, and attracting new, customers”.
Mr Erskine’s next move to keep O2, with its 18 million subscribers, in pole
position is to start to offer broadband. Once customers are signed up to two
products with his group (which is now owned by Telefónica, of Spain), they
will be more inclined to stay, he hopes, rather than jump to a rival.
Critics might argue that this is easier said than done. With 100 providers,
including giants such as BSkyB, Carphone Warehouse, BT and Virgin Media,
already firmly cemented in the sector, is it not a touch late to be just
starting out?
Mr Erskine, who has already delayed the launch of the service twice,
disagrees. He nods to the debacle at Carphone Warehouse, where an inability
to cope with demand for a service that was marketed as “free” triggered a
stream of customer complaints. “You might come early and muck it up,” he
says, bluntly.
Like his former parent company, BT, Mr Erskine says, he is looking to opt out
of the vicious price war and instead seek to attract customers who have
suffered poor experiences elsewhere to a reliable product backed up by
strong customer service. “People are very wary about ‘free’,” he argues.
“Broadband is now as important in the home as electricity. People need a
reliable service and high speed and people will pay for it.”
Fear of spoiling the O2 name was also, Mr Erskine says, the key reason for
ditching a planned deal with Disney to sell a “family orientated” mobile
service in the UK. “One has to be awfully careful when marketing to
children,” he says. “It is a real hot potato.”
Speculation is rife that the next goodie that Mr Erskine will pull out is a
deal with Apple, the Californian consumer electronics giant, to run its
iPhone exclusively on its network. O2 is in pole position to secure the
deal, although industry insiders reckon that Apple’s notoriously opaque
negotiating techniques could yet see it switch tack at the eleventh hour.
Already, rival players that appear to have missed out on the deal are busy
talking down its potential impact. Arun Sarin, the head of Vodafone,
recently expressed “concerns” that the phone was not a 3G phone.
“Those who don’t win it will trot out reasons as to why they would not want
it,” is Mr Erskine’s response, “but it is a good one to have on your side.”
The iPhone, he reckons, will be a huge catalyst in encouraging consumers to
spend on more lucrative “data” services, such as the downloading of videos
and music and surfing the internet.
Mr Erskine adds, however, that the ideas and tie-ups are not enough to steer a
business of O2 ’s standing. A certain kind of management style is also
critical. “The major thing is an attitude of mind – not being encumbered,”
he says. “You need to be willing to learn and listen and steal ideas.” The
biggest killer for a manager, he believes, is ego. “The day when you believe
your own hype is when you are in trouble,” he says.
If Mr Erskine is clear about his route to sustained success, he is also
unambiguous about where some of his rivals are going wrong. He argues, for
example, that BT is at a “colossal” disadvantage by not having a full-blown
mobile division in an age of “converged” services and bundled packages of
phone, broadband and television. Recent research from Analysys, the
consultancy concluded that half of all European calls will be mobile by next
year. “Mobile,” he says, “is what people want to use.”
Curriculum vitae
Born November 10, 1951, Essex
Education Bancroft School, Woodford Green, Essex; graduated with a
degree in psychology from Liverpool University
Career 1973-80 Marketing roles at Polycell and Colgate-Palmolive
1980 Joined Mars. Became European vice-president of sales and customer
service
1990 Sales and marketing vice-president of Unitel, the mobile phone
operator
1993 Appointed head of BT Mobile
1995 President and chief executive of Concert, BT’s joint venture with
MCI
2000 Head of BT Wireless, a new single unit of BT’s mobile interests
2001 Helps to steer demerger of BT Wireless to form mmO2, which was
sold in 2005 to Telefónica, of Spain
Family Married with four children. Lives Henley-on-Thames, Oxfordshire
Hobbies Golf, supporter of Tottenham Hotspur FC
The leader questioned
If you could change one thing in the financial and commercial environment,
what would it be?
I’m a firm believer in free competition and would like to see less
bureaucratic intervention in our industry. Competition has delivered
enormous benefits for telecommunications customers, and we want those to
continue.
What does leadership mean to you?
True leaders listen, understand and then act on the needs of those who rely on
them. As a company, we firmly believe in allowing consumers and markets to
decide what solutions and services best suit them.
Which businessman or woman do you most admire?
It is hard to single out an individual. So many people from many different
businesses and walks of life have profoundly influenced me over the years.
Who is or was your mentor?
I learnt a great deal from the founding chairman of O2 , Sir David Varney, who
proved to be an inspirational giant at the time we were demerging from BT.
I’ve also received sage advice from too many people to name here – from my
schooldays to my time as VP of sales for Mars.
Which is more important: what you know or who you know?
I’m not sure if one is more important than the other – perhaps a
combination of both. And being in the right place at the right time can
help, too!
Does money motivate you?
No. Overcoming challenges to achieve your goals should be a far more important
motivation.
What is the most important business event, good or bad, to happen in your
working life?
My proudest career moment was becoming chief executive of O2 Telefónica
Europe. The successes that we as a company have achieved since then are the
icing on the cake.
What gadget must you have?
I guess it would have to be a toss-up between my sat-nav and my BlackBerry. I
can’t choose one outright, but I know I’d be really lost without one of
them.
How do you relax?
Playing golf badly and relaxing with my family. I would like to say my
football team, Tottenham Hotspur, but it would be easier to unwind if they
finished higher in the table than Arsenal this season.
