Ever since the European Commission put the kibosh on Three’s multi-billion pound takeover of O2, we’ve been wondering what will happen to O2. Will Spanish parent Telefónica keep it, float it or flog it to another interested party? Now a fourth option has emerged: a management buyout.
The Telegraph reported that O2 boss Ronan Dunne was ‘open’ to approaches by private equity firms about a debt fuelled buyout. Official lips have remained shut, naturally, but it’s watching brief. While we’re waiting, let’s learn a bit more about Dunne. MT caught up with him in May 2015, when the Dubliner talked Brexit, Quadplay and why he spends a full 20% of his time on CSR.
You were there when BT spun off its mobile division as O2 in 2001. What was that like?
It was really interesting. You don’t often get the chance to set up a new business as a big business. BT had never run mobile as a mobile division, so it didn’t have the structures in place. We set up a company that was (at the time) a FTSE 100 firm.
You’ve been at O2 for nearly 15 years now, eight years as CEO. You must like it.
The pace of change in society in general is amazing, but when you’re at the cutting edge or the bleeding edge of it, it’s absolutely fascinating. I also really enjoy working with a brand that’s a household name. O2 serves more customers as a single brand than any product or service in the UK, almost 25 million customers. The sheer scale and breadth of telecoms means it affects everyone and therefore you have a real opportunity to be a powerful force for good in society.
You spend a full 20% of your time on CSR – that can’t have been an easy sell to the board.
I always describe it as enlightened self-interest. People do business with brands they trust, and what ultimately differentiates you is customer experience and innovation. What we found is that employees who are proud of O2 and what it does tend to be more engaged, more passionate and therefore deliver better experience to customers. The 20% of my time I spend on these matters is generating a very positive return for shareholders as well as other employees and customers.
For the sector as a whole, customer loyalty’s a fairly rare commodity. Are quadplay bundles another good way of reducing ‘churn’?
Customers in UK are very savvy. If anyone can bundle the best broadband with the best of fixed line, tv and mobile, then that might be attractive. But the danger is you bundle the 2nd best offering of one with the third best of another. If that’s the case, it’s no wonder customers look for a discount when they bundle. At O2 we to be a mobile champion in the market. If you want the best you can come to us. If you want to have a bundle...
Is it fair to say price competition in telecoms has led to underinvestment? My load times aren’t getting any shorter.
We need more capacity, more spectrum available. But sometimes we get into a bit of an arms race around speed. How fast is enough? If your 4G connection is good enough to stream music, Lady Gaga doesn’t sing any faster. When it’s good, then it’s good enough.
You need sufficient economies of scale and an adequate return on investment. We make less than £1.50 a month per customer, give or take. That’s after tax profits of £340m in 2014 – a relatively big number, but we’ve invested £11-12bn in the last 15 years in the UK. As a return on investment, that’s tiny. It’s about making sure we always get that balance right between providing choice without losing sight of the fact that if you don’t innovate and invest, you’ll die as a business.
What do you make of Brexit?
I’m an Irishman, running a British company owned by a Spanish parent. Personally, I’m very pro European. I’m not naive enough to say everything works as it should, but a Britain in Europe is a more attractive investment opportunity for European and international businesses.
We should reduce the amount of red tape and bureaucracy, I completely agree, but we should fight to make Europe better rather than taking it all home. Europe would be a poorer place without Britain and Britain would be a poorer place without us taking an active part in leading Europe. I’m very much for us staying in.
What was your top business lesson?
Successful business people aren’t defined by their own personal talent but their ability to harness the talent of others. When I was working in banking in the late 80s as a head of department, I’d work every Saturday and Sunday and take work off the desks of my colleagues, so we could be ahead the following Monday. I realised that unless I managed to invent the 8th day or work more than 24 hours a day, as a model it wasn’t going to work.
Building great teams is the way you’ll be successful. Everyone around the table is better at doing their job than I would be at their job. I used to be CFO [at O2], but I can say without a moment’s hesitation that my CFO is better at being CFO than I could be.
Are you worried that Google or Facebook might disrupt your sector?
They may provide a challenge for businesses like ours in terms of how we get paid, but it’s creating an insatiable demand for data and online connectivity. That’s a brilliant backdrop for any industry. For lots of businesses, the challenge is that there’s not enough demand. The telecoms industry has more demand than it knows what to do with. The challenge is how to monetise that demand, but I see that as a high quality problem.
Ronan Dunne Quick facts
Career in a nutshell: Trained as an accountant at Touche Ross (now Deloitte) in Dublin. Became a City banker at BNP (now BNP Paribas), before qualifying as a corporate treasurer, which took him into roles in waste management and logistics. Joined O2 in its finance department, becoming CFO after the Telefónica acquisition in 2005 and CEO in 2008.
Strategy: Under Dunne’s watch, O2 has focused heavily on customer loyalty. It pioneered SIM-only rolling monthly contracts (‘if you give people the freedom to leave, you give them the confidence to stay’) and customer perks (through its O2 Priority scheme, ‘we distribute more tickets to live events in the UK than anyone other than Ticketmaster’). It also engaged in network sharing with Vodafone and offering the mobile component to Sky and TalkTalk’s bundles.
You may not know: Dunne used to play rugby and has over 29,000 followers on Twitter.