A new CEO for Telecom New Zealand
Farewell Teresa Gattung
The government announced the operational separation of Telecom and the company finally started to see some results from its retaliation against Vodafone in the mobile market. We have seen Alan Freeth lamenting the appalling condition of TelstraClear and through the acquisition of ihug, Vodafone moved into the fixed market.
Teresa Gattung’s period in office must be seen as the end of Telecom’s era as a monopolist, and her brief (from her – former – chairman) was to maximise that monopolistic position. While many of us may not have liked it, that was the job she had to do for Telecom’s shareholders, and some of the decisions made by her should be judged from that perspective.
It is very easy for a monopolist to fall asleep at the wheel, and this is what happened when Vodafone bought the Bell South mobile operation and quickly overtook Telecom in that all-important market. The failure of the AAPT acquisition, also, is clearly something for which Gattung is responsible – again taking an arrogant monopolistic approach, thinking the best way to proceed was to integrate the challenger AAPT into the incumbent Telecom, a strategic error of the highest order.
The PowerTel acquisition is Telecom’s third attempt at achieving new growth, which I agree can only come from other markets such as Australia. We have heard some colourful language from Teresa Gattung, which was not well received (especially in political circles) and perhaps that moment in time can be pinpointed as the start of her downfall.
However I am glad it was she who supervised the period following the government’s announcement on operational separation, and I accept that, with a clear new direction in place, a change of CEO is the appropriate decision to make.
What is that new direction?
With the upcoming sale of Yellow Pages and the outsourcing of digital media activities to Yahoo in Australia, I conclude that Telecom is going to concentrate increasingly on its infrastructure. It has brought the timeframe of its infrastructure upgrade forwards from 2012 to 2008 and I predict that the money from Yellow Pages will be used to fund some of the new infrastructure plans.
As I have been saying for the last 15 years, the company has underinvested in its local access network and it is now paying the price for this. Its customers are unhappy – either about the lack of broadband or about the quality of those services.
This situation can’t not be solved by putting a pretty face on television and talking up all the good things Telecom has done in the past. It needs hard work and the delivery of a network that can offer its customers good broadband services.
Telecom must start delivering on its promises.
And this will take time – there is no quick fix – so I think Telecom will continue to cop a lot of flak on these issues for many years to come.
Leading the structural change of Telecom
So the challenge for the new CEO is not the PR or marketing activities but setting up this all-important structural change program, speeding it up and making sure that it stays on course. There are literally hundreds of different systems and projects, all with their own self-interested perspectives, that must be amalgamated into an integrated structure and this is the most difficult operation any telecom operator can face.
Telecom needs to change from a subscription-based telephone company to a wholesale-based/Internet economy/infrastructure company. Its main customers will be those companies whose future rests in digital media and other Internet-based operations. This will include the government, healthcare, education, big business and media, as well as many of the few hundred thousand small businesses in the country.
And the cultural change will be as significant as the technical change. A very firm CEO is needed – one who can lead this process in what may have to be a rather internal ruthless style.
One positive aspect is that this CEO cannot try to operate from a position of monopoly – which is the way Telstra in Australia, for instance, is handling this change. The New Zealand Government has clearly blocked off that avenue and it is important they reinforce this at every opportunity, to prevent Telecom from reverting to its original monopolistic mind-set.
Can-do approach
The fact that Telecom is able to win new mobile customers; the fact that it has made a strategic move in relation to PowerTel; and the fact that it is, I believe, working towards a first-class infrastructure company, indicates to me that they can succeed. But it won’t be easy. Teresa Gattung is certainly leaving behind some unwelcome baggage, but she is a can-do person and I hope that the new CEO will build on her energetic approach.
This is not just in the interest of Telecom and its shareholders. Perhaps even more importantly, it is in the interest of the whole country.
See also:
New Zealand telecommunications market overview
2007 Telecoms Overview, Statistics and Analyses in New Zealand
2007 Mobile and Broadband in New Zealand
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