EE's Olaf Swantee: In Britain’s super-competitive mobile space growth can be the hardest game

 
Oliver Smith
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Olaf Swantee on Wednesday unveiled EE TV, a set top box that will compete with BT, Sky and TalkTalk in the living room
As chief executive he’s overseen two re-brandings, launched 4G in the UK and now plans to take on rivals in the living room with EE TV – but Olaf Swantee’s greatest challenges may still lie ahead
Jogging through Richmond Park most mornings couldn’t be further from Olaf Swantee’s day job. The boss of Britain’s largest mobile network describes himself as a fan of endurance sports, running, cycling or swimming, and savours this morning ritual as he prepares for the day.
“The mornings at the moment are getting particularly spectacular because it’s getting dark and you have all these deer walking around,” Swantee enthuses.
“This is really a fantastic experience, because you’re actually part of nature during that time of the day.”
For the rest of his day the chief executive of EE is distinctly disconnected from nature. Ensuring some 31m mobile data connections run without a hitch on his network, while striving for revenue growth in what he describes as one of the most competitive telecoms markets in the world.
It was two years ago last month that the Dutchman took a huge gamble by unveiling Britain’s first 4G network, which would launch nearly 10 months ahead of its rivals.
At the time his network – recently rebranded for the second time in three years and now called EE – was mocked by pundits who claimed the speeds and higher prices it offered were unnecessary, and criticised by rivals who were unable to launch 4G until they had acquired 4G spectrum. Spectrum that EE already had.
Over 4.2m 4G customers later – in a world where streaming video accounts for over 60 per cent of traffic on his network – Swantee is confident his gamble paid off as EE races towards the target of signing up its six millionth 4G customer by the end of 2014.
“We will exceed it, we keep exceeding our targets in this area. It’s not that we set low targets, it’s really that in this market there’s an incredible appetite for a great 4G service,” Swantee says.
Building a network that can handle Britain’s 4G hunger is something Swantee is clearly passionate about.
The topic of network perfection brings out his enthusiasm as he explains the minutiae of how his engineering team, under technology chief Fotis Karonis, roam the country tweaking the exact angles of antenna on mobile phone masts. All in the hope of improving EE’s drop call ratios by fractions of a percentage.
“To be able to offer a better, stronger network really is a key part, a key pillar of our plan and our vision,” he explains, an intensity in his Dutch accent.
“Over the last 10 weeks alone we’ve seen a 21 per cent improvement in our drop call ratio. Our engineers are working around the clock to improve that further, they are already at world wide top benchmark levels.”
Despite his network topping independent performance benchmarks from both RootMetrics and Ofcom – something Swantee is noticeably proud of, with a collection of trophies that adorn his corner office overlooking the barges along Paddington Basin – revenue growth in the mobile telecoms game has proven a bigger challenge.
“The UK is a highly competitive market with a very strong negative impact from the regulation. We’re one of the only businesses that reports its financials in two ways, excluding regulatory impact and including regulatory impact. How many industries talk about that?” Swantee asks.
Indeed operating revenues in the business fell 1.3 per cent during the first half of the year, to £2.99bn, but excluding regulation those same revenues would have grown 0.1 per cent during the period.
“The impact is so big, it comes from Europe, it comes from Ofcom and it comes from the government. We have three constituents all driving an impact on our top line,” he says.
Swantee admits that a lot of the regulation from Ofcom, while he might not always agree with it, is generally sensible.
“The challenge is that regulation plus all the others from Europe and the government, then you get to the point where we’re over regulated.
“We are confident we can continue to improve our profitability, but I would be very reluctant to make any predictions on revenue growth because this industry is very mature and hasn’t seen much revenue growth over the last couple of years.”
One market where Swantee thinks EE could see significant growth is in its broadband business.
While it currently only counts 775,000 broadband customers, the business saw nearly 20 per cent revenue growth in the second quarter.
“Our broadband business is now around four per cent of our revenue… While our mobile business is much more focused on retention and reducing churn, but in this market [broadband], I think we have a huge acquisition opportunity. We’re now the fastest growing UK broadband business according to our second-quarter results,” Swantee says.
This, Swantee says, is what spurred the company into developing EE TV, a set top box it revealed on Wednesday, which it hopes will bolster broadband sign up growth.
EE TV offers a mix of Freeview TV channels, on-demand services such as BBC iPlayer and the ability to watch four different live or recorded programmes on four smartphones or tablets within the same house simultaneously. The operator plans to offer it free in order to entice EE mobile customers to sign up to a home broadband and landline plan.
“We started the project less than a year ago, which shows how fast we can bring these things to the market, we built a very small team less than 20 people, and I travelled to Korea to speak with our suppliers and manufacturing partners to see what was possible,” Swantee says.
But just as EE look to move into the TV space, encroaching on BT’s territory as the upstart premium TV challenger to Sky. BT is poised to enter the consumer mobile space, EE’s territory, having promised to launch a consumer mobile offering this year.
Unlike BT Sport and the former state monopoly’s success in the television space, Swantee does not believe they will enjoy as much success in the mobile market.
“I think there are enough mobile operators, it’s a colourful market. I think the consumer market is now a crowded place, are there other opportunities for BT in the business market? Definitely,” Swantee says.
Despite his scepticism, Swantee says he is proud BT has chosen EE upon which to build its mobile product.
Swantee has faced numerous challenges during his time as chief executive of EE. From the rebranding of Everything Everywhere (a name that he has publicly labeled as “silly”), to dealing with the controversy that erupted after EE convinced the Government to let it retool old spectrum so it could launch 4G with a significant head start.
But many believed 2014 would be the year that he faced his biggest challenge yet, bringing EE to the public market.
This time last year speculation was rife that EE’s joint owners, France’s Orange and Germany’s Deutsche Telekom, were preparing the joint venture for an imminent initial public offering (IPO).
But just as quickly as the momentum behind a float had risen, Orange and Deutsche Telekom in January announced that a strategic review of the business had found that its existing ownership structure was the “best option for value creation.”
Then in June EE’s chairman Gervais Pellissier told reporters that the company had been instructed to “position EE either on dividend or return or growth,” over the following six months with a decision on IPO plans coming “when we return from vacation”.
Swantee declined to discuss any details of an IPO, adding that any decision would be for EE’s shareholders to make.
“At the moment there are no IPO plans, it’s not even putting it on ice and then bringing it back, there are just no plans,” he says.
“Our shareholders are happy with our business and its performance, we have met our objectives and our targets. So the reason that the IPO did not happen were reasons with Orange and Deutsche Telekom that were outside the UK.
“It’s not an urgent need to do something, our business works and we have a good financial model. We are definitely not over-leveraged, our debt to Ebitda (earnings before interest, taxes, depreciation, and amortization) ratio is far below two, so there’s really no urgent need for a lot of capital. We’re in a good position.”
While IPO plans may indeed be on ice, as a fan of endurance sports, Swantee will no doubt be ready to take up the race if plans thaw.

CV: OLAF SWANTEE

■ In the 1990s Swantee was a product manager at Compaq, rising to work in senior strategy and marketing roles
■ By 2002 he was senior vice president for Europe, Middle East and Africa for enterprise sales and software at Hewlett-Packard.
■ In 2007 Swantee worked as Orange European executive vice president heading the division which covered a mobile and fixed across Europe.
■ He was appointed chief executive of what was then Everything Everywhere in 2011, later rebranded to EE, taking over following the sudden departure of Tom Alexander who had overseen the merger of T-Mobile and Orange in the UK

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