O2 ceo Dave McGlade is adamant that there is a role for an independent operator in a major European market, and that the operator actually benefits from its smaller size.
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Speaking to Mobile Europe shortly after a rejected bid from KPN triggered another round of “02 for sale stories”, this time with NTT DoCoMo as the main proposed buyer, McGlade put up a spirited defence of the “small is beautiful” philosophy.
“Our view is that we will not compete on size and scale because that’s not the play we have. We’re not trying to be Vodafone where they do more of a cookie cutter approach across regions in the world. Arun Sarin said if they had won the (AT&T Wireless) bid they would have introduced all the brand and approach that they do at Vodafone. Our approach is exactly the opposite. Everything is about getting closer to the customer, closer to the local market, being more British in the UK, more German in Germany and using that as our advantage.”
McGlade said being smaller actually helped get products to market quicker.
“I actually think at times there’s a diseconomy of scale and that diseconomy kicks in where you get more bureaucracy. It’s slower to move, you’re waiting for a standardised product set that maybe the Germans are developing and it might take six months longer to go to the rest of the world. We can be more fleet of foot and be a bit more customer-centric by being a smaller player with just three countries throughout the group.”
McGlade said that the O2 digital music player, a mobile music player device recently launched in the UK, was an example of being able to target an area and deliver the end product.
“We determined that music is a key area we were going to address. There was not a product in the market that we needed. DRM (digital rights management) hadn’t been dealt with as well as it should have been, we brought in the compression technology that really works well in terms of spectral efficiency over GPRS. So we went after it and we did it.”
Not that McGlade can’t concede some of the benefits of belonging to a bigger club. The recently re-branded StarMap alliance will enable the operator to “get better buying power for devices we bring out,” as well as putting together roaming packages and supporting multi-nationals.
Ovum’s chief analyst Julian Hewett told Mobile Europe that he agreed with McGlade “in the short term” but added, “In the the long term I have to say that will swing the other way.”
Hewett acknowledged the advantages of being able to move quickly. For example Hewett said that mmO2 ceo Peter Erskine had told him the operator was “running rings” round Vodafone in Ireland when it came to certain business customer issues.
But the advantage of being able to amortise the cost of rolling out a service across a huge subscriber base would mean that in the long run the larger economy of scale would win out.
In terms of who might buy mmO2, Hewett questioned the reasoning behind the rumoured interest from NTT DoCoMo.
“I don’t quite understand the motivation. They hope to spread i-mode as if it’s almost a gospel of the right way to do things, but it seems a pretty tenuous reason to want to acquire a business to me.”