Vodafone boss: Social media’s a good thing – it tells us what’s happening
The bosses of customer facing businesses have good reason to be fearful of social media.
It’s not always a pretty place when an airline delays flights, a train company cancels a late-night service or a mobile provider’s network goes down.
But not the chief executive of Vodafone UK.
The affable Ahmed Essam believes it is actually a “valuable insight” into what is happening on the ground.
“It’s an immediate kind of probe on what’s going on,” he told City PM, sitting down for an interview the morning after a network outage struck Vodafone users last week – not their fault, it might be added – his feathers unruffled.
“If you use it as such, then it becomes a very valuable tool. You know what’s going on, you know what really matters to your customers and you can act on it straight away,” he explained.
Essam must possess a strong notion of what makes his customers tick as he is something of a Vodafone veteran.
His tenure stretches back to 1999 and since then he has flown through a variety of roles, landing at the helm of UK operations in February 2021.
Now, he is piloting the UK telco through what could go down as a game changer in the sector; a major tie up between Vodafone and Three UK, announced in June, and awaiting approval from Britain’s competition watchdog.
Together the companies say they will invest £11bn in the UK over the next ten years to roll out standalone 5G.
We’ve started engagement with the CMA
Ahmed Essam
When prodded about whether he is confident an increasingly activist Competition and Markets Authority (CMA) will find the merger’s rationale compelling, Essam responds diplomatically.
“We’ve started engagement with the CMA, as you can imagine,” he said.
Vodafone’s case goes something like this: two large networks, BT-owned EE and O2 are able to operate at scales that allow them to operate over and above the cost of capital. Vodafone and Three, the other two mobile network operators (as opposed to virtual network operators, who operate their customer-facing networks through the network operators) do not.
Essam, then, says that the deal isn’t about four-to-three, but two-to-three; increasing competition, not the other way round. He’s honest that without the deal, the finances are not sustainable in the long-term.
Despite his conviction, not everyone sees it this way, with some arguing it could rack up prices for consumers.
National security concerns have also been thrown up by the Chinese-owned stake in Three UK, although the telecoms giants were quick to dismiss concerns.
Crucially, the Vodafone boss firmly believes the merger will infuse vitality into the UK’s limping telecoms sector.
Vodafone are not expecting the deal to sail through the CMA’s processes; it is highly likely that the deal will at least be pushed through to a more in-depth ‘Phase 2’ inquiry. But Essam remains chipper nonetheless, and doesn’t wish to go down the route of working out what compromises Vodafone or Three may need to make.
“It’s too early to speculate on what remedies are needed there because a difficult scenario such as this one would go into: how do you make sure that there’s enough level of competition in the market?”
He said: “We have a very strong case to bring to the UK consumers, to the UK businesses, to add to the competition and to elevate the digital infrastructure in the country.”
The investor case
Essam also sees a strong case for the merger from a shareholder perspective, given the industry’s struggle with a cost of capital that outstrips its returns.
“Businesses such as ourselves are not immune from inflation, as might be perceived.
“We’re building towards sustainable return, which encourages investment, and the investment is what’s needed to really sustain this business going forward,” Essam explained.
Philip Jansen, outgoing boss of rival telecoms firm BT, recently said his company’s ailing share price was thanks to investor ‘short-termism’ when a far longer-term vision is needed for the sector to prove returns.
It’s a once in a lifetime opportunity for the UK
Ahmed Essam
Similarly, Essam reckons the UK needs to look beyond the horizon if it aspires to lead the global digital infrastructure race.
“Working on a purchase such as this one is extremely exciting because it’s a once in a lifetime opportunity,” he enthused, “not for me but for the UK to really get ahead of many other countries in Europe and in the world.”
In terms of physical infrastructure and 5G technology, the UK lags behind some global benchmarks.
It ranks 39th out of 56 advanced and developing markets in 5G availability, only connected to a dedicated 5G network 10.1 per cent of the time, according to a recent report by research company Opensignal.
However, Vodafone argues the UK needs their merger in order to reap the rewards from 5G standalone, helping it reach its net-zero goals and become the science and tech superpower it wishes to be.
5G standalone operates separately from the 4G network and allows for the lower latencies (or higher speeds) needed for the vast amounts of energy that new technologies like artificial intelligence (AI) are ferociously glugging up.
In its Wireless Infrastructure Strategy, published in April, the government said it is working with mobile network operators to bring 4G coverage to 95 per cent of the UK by 2025.
And Vodafone say their £11bn investment plan with Three is poised to do even better, delivering 5G standalone to 99 per cent 5G of the UK.
Essam’s vision is clear: “We have to work on something like this merger to make sure that we really get ahead of chasing the cost of capital and have enough space to invest and build something that everyone in this organisation and hopefully everyone in the UK would be proud of.”
Covering rural areas is also critical, he said, as it stands to benefit customers, businesses, schools and hospitals across the UK who are in need of greater connectivity.
It would probably be good news for Essam too. An avid cyclist, he spent his summer break in the saddle on a lengthy jaunt to Cornwall. If the likable Essam gets his wish, he’ll have 5G coverage all the way next time he goes.