Orange and T-Mobile: Best of Both

In terms of usage and technology, the speed of development in the telecommunications industry over the past ten years has been staggering. It is also an industry where behaviour is driven predominantly by users and manufacturers rather than operators. Whether it is the almost accidental discovery of text messages or the craze for apps engendered by the advent of the iPhone, such speed of change demands flexibility and nimbleness that can see medium and long-term forecasts become virtually obsolete overnight.

"For a finance director working in an industry that is this fast-moving it is imperative that you stay as close as possible to the other directorates," reveals Lars Nordmark, FD at T-Mobile UK. "I’ve always been an advocate of a very operational view from a finance perspective. We’re not a finance company, we’re a marketing and sales company. The finance function is here to support, advise and navigate; a business partner that enables others to drive efficiencies and improve customer satisfaction."

It is a noble sentiment, and perhaps all the more important when articulated in the shadow of an impending merger that promises to dramatically transform the UK’s mobile phone market.

The 50-50 joint venture between parent company Deutsche Telekom and France Télécom, owners of Orange, was cleared by the European Commission in March, subject to certain conditions, and will create the country’s largest mobile phone operator, with around 28 million customers and 37% market share. The companies will keep the T-Mobile and Orange brands separate for 18 months.

The pressure on Nordmark, based in T-Mobile UK’s Hatfield HQ, has been to manage expectations and communications, and to continue business as usual.

"The more open and transparent you are in communication, the less uncertainty prevails," he believes. "We’ve consistently told our people that they’ll be given as much information as possible as soon as possible. Our MD has been very good at sending out fortnightly updates, but as important as email and webcasts is walking the floors and listening to people’s concerns. You address those issues in as upfront a manner as you can and, equally, when you don’t know all the answers people appreciate being told as much. Hiding in your office is the worst thing any director can do."

With the deal completed on 1 April, Nordmark is clear on how his department proceeds. "It’s all about speed," he reveals. "If we need to restructure it must be done quickly. You have to be very clear about your expectations of people and the timeline. If you’ve told people that things will work a certain way the worst thing to do is not stick to the plan. They’ll quickly turn against you, particularly at a time of uncertainty."

Efficiency and customer focus

While this merger is perhaps indicative of a recovering business environment, it is clear that the mobile industry was only lightly hit by the economic turmoil of the past two years.

"The slowdown in business travel led to an impact on roaming revenues," Nordmark acknowledges, "and being UK-based but part of a German company we saw an impact in terms of exchange rate. Other than that though, the effect has been negligible. When times get tough scale is a big differentiator. That’s not to say you don’t get niche players, but the key is to continue running a tight ship, remaining efficient and customer focused."

Efficiency and the customer are two topics Nordmark returns to. In 2008 T-Mobile entered into the world’s first 3G network share with UK operator 3 – amending this is one of the conditions on the Orange merger going through – and the FD believes such marriages of convenience are going to become increasingly prevalent in the years ahead.

"This is an extremely capital-intensive industry and network is the biggest investment we have to make," he reveals. "Of course we remain competitors, but it’s about finding mutual wins. Network coverage is a proven driver of customer satisfaction.

"Then there is the environmental aspect: the combined sites of 3 and T-Mobile were reduced from 18,000 to 13,000. That’s a great story and it works for all sides."

Partnerships are a fundamental aspect of Nordmark’s business, particularly when it comes to bringing T-Mobile’s offerings to market. While the emphasis will always be upon maximising the use of one’s direct channels through branded retail stores, website and telesales, forging relationships with other retailers is still a major feature of the organisation’s business model.

"It’s all about building long-lasting bonds and creating contractural agreements that work for both parties,” Nordmark reveals.

"We’re always looking for quality as well as quantity: getting customers onboard who’ll stay with us throughout their contract term and beyond. That means finding the right commercial incentive and business model to encourage indirect retailers to go out and find that quality."

Working the web

In terms of T-Mobile’s direct channels, Nordmark highlights the ever growing importance of the web, but does not subscribe to the view that more traditional forms of retailing will soon become obsolete.

"Looking at the banking sector and air travel, it’s amazing how quickly customer behaviour has shifted," he begins. "People simply don’t go into the travel agent to book a holiday anymore; it’s all done online. I don’t see the phone store going the way of the travel agent, people will always want to see and touch the product, and high street culture is very deeply ingrained into European consumer behaviour in a way one doesn’t find in the US, but we definitely want to push web more."

Cash flow is king and there’s a lot you can do without having to invest tens of millions of pounds. One of our big initiatives is to capitalise on the web experience: how do we drive sales and customer service? This can be done in a very capital-efficient way, but the knock on effects are huge. The fewer calls you drive into your customer service centre, the better that call centre will be. Online services have a big part to play in getting the internal processes right: providing the right information at point of sale, helping people manage their accounts and keeping them updated. We’ve grown quite dramatically as an industry in recent years and in that environment cost efficiencies are not always a high priority. That’s certainly changing.”

It is a process that Nordmark believes the finance function should lead. This can be done both through setting targets and leading by example, but the FD also believes that each business unit should look very closely at where their core responsibilities lie and build from there.

Staffing strategy

"You’ll always have an overall company strategy, but each directorate must also define its own vision," he explains. "What is strategically important to us as a team and what are the tasks we must complete to get there? Equally, are we being burdened with responsibilities that should lie elsewhere? Two years ago we had about 365 full-time equivalents and now we’re down to 200. We saw that many transactional processes could be performed just as well offshore, but at a significantly lower cost. This allows my team to focus on areas such as credit risk management, treasury and tax, keeping those mission critical areas in-house and under constant attention.

"Finance must act as a business partner and collaborate as and when it is needed. We need to show the way and lead by example." In a large organisation this can be easier said than done and the finance department is often saddled with a reputation for being the guys who say "no". Nordmark agrees that forging a positive relationship with marketing and sales is fundamental and believes it all comes down to trust.

"Respect is not going to be given to you; it has to be earned," he declares. "I want to be invited to the table and there’s no point being sat there if you can’t contribute. It’s about being a valued business partner and bringing in ideas that drive the organisation forward.

"Of course we have the standard finance duties to address, but the closer you are to the business as a whole, the more you become involved in the decision making process. That makes it far easier to perform mid- and longterm planning. Having a finance function that is only ever at the receiving end and just compiles information doesn’t interest me. More importantly, it simply will not work in an environment that’s as fast changing as this."

In Nordmark’s eyes, what underpins all of this is people: relationships, expertise and experience. T-Mobile UK conducts one-to-one quarterly objective reviews and the FD tries to engender a culture of openness and feedback.

"In a business model like telecoms it’s relatively easy to have profitability gains in the short-term without growth, but then you’re killing the business," he explains. "It’s about having sustainable profitability increases and you can only do that through constant innovation and making sure you bring the right people along with you.

"The faster the technology is moving, the quicker the market shifts, the more important it becomes that you’ve developed individuals who really understand the business.

"Customers have to be at the forefront of our thoughts at all times, and when unexpected events do occur I want to be sure that I have the right people in the right place at the right time. We need to constantly raise the bar and that’s why there’s an individual development plan for every employee in the company. Everything comes down to them."

It will be interesting to see how this culture develops in the merged organisation. Nordmark acknowledges that a wholesale transfer will be impossible, but hopes that something positive can be created. "The culture will be extremely important," he says. "I don’t think T-Mobile and Orange are so different in that respect, but it is essential that we develop our own identity, taking the best elements of both businesses."

In an industry that never stands still, one can only guess what that might look like.

Since conducting this interview, Lars Nordmark has left T-Mobile UK to pursue other interests.