Cutting Room: First term report card for JV


Everything Everywhere’s move to introduce HD Voice is important as a marker in the sand in leadership terms as competition for UK market heats up

It is, at this stage, a minor development for the mass market, and in fact an Orange initiative as opposed to a joint-venture fruit, but the technology will be pervasive and it is worth considering it now as a sign the biggest UK network operation is starting to behave as such.

The inland roaming arrangement between the Orange and T-Mobile networks is for both operations’ customers a joint-venture derivative.

It is, arguably, disingenuous, now, for Everything Everywhere chief Tom Alexander to admonish the rest of the UK market for not making sufficient issue of network coverage (click here), since it is an argument he has himself only discovered since inheriting charge of an expanded network operation, one with more than double the number of masts of its nearest rival.

But the merger of Orange and T-Mobile’s infrastructure is clearly a useful acquisition tool.

It instantly makes T-Mobile a more powerful brand in the regions, and for its sales agents, and fills in all those Orange blackspots in urban centres too.

Coverage is an issue that went out of fashion a couple of years ago, replaced instead by contrary and disputed claims about network speeds, but one which Everything Everywhere is now putting back on the agenda.

One should question its claims it has a superior network to rivals, however – there is no satisfactory measure, and for every claim of mast numbers and 3G coverage, there are counter claims about depth and robustness and digitisation.

It is perhaps most telling in all this that O2 – as Vodafone chief Guy Laurence alluded to a couple of issues back when he talked of “those that have invested for the future and those that are milking the present” – is the only UK operator that has never claimed outright its infrastructure is the best; only, effectively, that it is not as bad as everyone is saying.

All others have claimed network superiority, at various times, even Three.

The perception remains O2 has got a major job to do on its network if it is not to be found out. Very clearly, the competition is heating up.

There is a real sense within both Everything Everywhere and Vodafone that O2 is, if not there for the taking, then facing an urgent re-structure of its own that might slow it down.

It is much, much closer a ‘level playing field’ for UK operators. Importantly, all now have on their shelves the Apple iPhone – whose sudden and total influence over the market is astonishing, and shows what a mediocre job pretty much every single customer-facing function within it has done to date.

Apple’s influence can be seen everywhere now. O2 has made much of its running in recent years with Apple, which is not to say that it has not independently innovated and  marketed. And certainly there is something of Steve Jobs about Alexander, especially in some of the fluffy feelgood speak.

This Everything Everywhere vision is clearly one that springs from the Apple archive on brand, usability and consumer brainwashing. Vodafone is at it too, with its media-land Newbury overhaul and its service focus.

But we digress. The point is these three are more evenly matched, in their profiles, their philosophies and their performances. Everything Everywhere leads for most things by quite some margin, but O2 retains the leading brand and most profitable operation.

And Vodafone is homegrown and serious, and is laying new groundwork.

It was very interesting to hear both the German and French verdicts on the UK market last week. Deutsche Telekom boss René Obermann sounded relieved to have moved a troublesome UK unit into a very different prospect, and in effect to have halved his risk on a new business with double the resource of the old.

He talked also about how Everything Everywhere will be run by Alexander and his team, without interference from Bonn or Paris, and with a “start-up pioneering spirit”.

Of course, Alexander, Everything Everywhere is not a start-up; it is not Virgin Mobile. As Stephen Fry explains in the voiceover for the corporate video for the venture, the firm has more customers than voted in the last election, and almost as many as the population of Canada.

It is not a brave young thing; it is two creaky old utilities with a useful opportunity to modernise together at the dawn of a new era in wireless communications. And with 30 million customers in tow, the task is tough and the price, for failed experimentation on a grand scale, is high.

Alexander will be required to tread carefully, even with the early optimism he has created around it. “The bad news is, there are no excuses this time,” said Obermann, a barbed joke at the expense of his old T-Mobile UK business.

Gervais Pellissier, deputy chief of France Telecom, explained the lure of the UK to both shareholders, but made clear also it is a particularly difficult market in margin terms.

All the same, within it, Orange UK and O2 UK have been the best-performing units for France Telecom and Telefónica, respectively, which shows also it is a market where the right model and management can find success.