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Thursday, 25th April 2024 |
| Flexibility and speed are paramount at Eircell |
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| Dermot Griffin, business development director with Eircell, has overseen the evolution of Eircell into a separate commercial entity from parent company Eircom and believes that staying agile is the key to success in the telecommunications world. |
Dermot Griffin was the first accountant at Eircell. As such it was his job to set Eircell up as an autonomous business unit within the then Telecom Eireann group.
‘My job was to set up Eircell as a separate company and to move it out of Telecom Eireann. And that was probably harder than setting it up from scratch.’
At that time Eircell was completely intertwined with Telecom Eireann and it was up to Griffin to untangle it. ‘All the Eircell network was built with the Telecom Eireann network so we literally had to go into the asset registers and split them out.’
‘From a regulatory point of view we had to divide them out. There was a lot of work not just from the financial accounting side but also from the engineering side.’
Griffin moved into Eircell in 1993. He had already been working with Telecom Eireann for three years having joined from KPMG in 1990.
Eircell was set up as a strategic business unit within the Telecom Eireann group in 1993. ‘Then in 1997 we set it up as a standalone company, a separate legal entity.’ It was at this stage that Eircell moved into its own premises in Clonskeagh in Dublin and began to set up their own functions for everything.
Business development
But keeping ahead of the pack in mobile communications in Ireland meant that in 1999 Griffin moved from a purely financial role into his current role as business development director.
‘The reason we set up the business development area was that the finance function had to be very involved in what was going on in the business.’ In order to be able to respond to new trends quickly Eircell needed to have its financial function incorporated with business development.
Now Eircell’s business development works hand in hand with the corporate finance function because of the need to constantly review business proposals. ‘If you stand still in this business’ says Griffin, ‘you’re in danger of loosing your competitive edge.’
Griffin is conscious of having many products in development and says that at any one time there are between 20 and 30 products or projects at various stages in the Eircell pipeline.
Entrepreneurial units
‘The objectives in business development are to identify business opportunities. We also want to achieve entrepreneurial units to be standalone from the rest of the core company.’ While in the past mobile communications have just been voice communications Griffin says this is now evolving to include a range of other data services. ‘What we’ve tried to do in business development is to allow our core voice business to continue while looking at the data world and seeing how we can provide our customers with better services.’
Expanding the range of services on offer means Eircell is having to invest in outside expertise. The strategy so far has been to form partnerships with relevant companies. ‘We identify companies outside and form partnerships with them or acquire or invest in a company that does have the expertise and does have the flexibility and the agility that we need.’
The business development team is split into a ventures unit, a mobile commerce unit, a section for retail subsidiaries, a roaming unit (deals with the foreign operators) and a media unit that deals with WAP and content.
Financial management
Managing the finances of a telecommunications company like Eircell means that Griffin needs access to a large amount of up-to-date information on the business in order to make decisions about how best to manage it. At Eircell this financial management information takes the form of a weekly ‘dash-board’ of business indicators.
The company produces a weekly set of financial indicators through an integrated SAP and customer care system called the ‘dash-board’. The indicators that appear on this extended spread sheet are parameters like operating costs, bad debt, cost per connection and post-paid versus pre-paid numbers. The dashboard also allows Eircell to look the number of connections and an important indicator called the ‘churn rate’. This is the number of customers who have left Eircell to move to another network. The dashboard also has access to customer satisfaction ratings and customer care information.
From the financial indicators Eircell will decide what sort of response has to be made either strategically or tactically. Through these weekly snapshots of the business Griffin can see if customers seem to be moving away from the network and can decide to perhaps hurry the launch of a product in the pipeline. ‘In this business we need to have our finger on the pulse because it can change from week to week.’
Retail outlets.
Part of keeping abreast of the business has been Eircell’s concerted strategy to invest in retail outlets. Although this does not appear to sit well with the nuts and bolts of selling the tariffs to the consumer Griffin is sure that the strategy is a sound one. ‘They are the first point of contact with the customer.’ And he believes it is important both for the brand and the customer.
‘The financial management of the retail sector requires a different type of focus. While Eircell has a stable customer-base, our retail subsidiaries have to generate sales everyday.’ For Eircell that key quality is the management of the retail outlets. Part of Eircell’s retail shop strategy was the recent opening in Cork of a dedicated flagship shop.
Pressures from Eircom
Since Eircell was set up as a standalone entity from Eircom the management of the business has been fairly autonomous. However with Eircell being one of the better performing areas of Eircom (Eircell provided 22 per cent of Eircom’s revenue last year) there must be certain performance pressures from the parent company.
‘We do have pressures as any subsidiary within Eircom would, but we’re lucky in many ways that it (Eircell) is a huge percentage in terms of value for the group.’
Griffin says the relationship between Eircell and Eircom is strictly delineated. ‘The group sees that Eircell is operating in a highly competitive and fast moving industry, and to be able to compete and move quickly the company needs to be agile and needs to have certain flexibilities and freedom to be able to compete.’ This agility Griffin believes is achieved through its small board of directors, there are only three of them. And Eircom is acutely aware of its share price performance. ‘If Eircell is restricted it impinges on shareholder value’ says Griffin.
‘In terms of Eircom’s year-end results Eircell is one of the highlights of last year. The fact that we’re performing well and doing well eases the pressure from the group.’
Raising money
The Eircom group has its own internal bank or treasury function ITI. ITI operates on a standalone from the rest of the group and they provides any debt financing, foreign currency, and hedging facilities for Eircell. ‘They operate at arms length and we negotiate on a commercial basis with them.’ But Griffin is keen to emphasis the Eircell balance sheet. ‘Because the business is profitable it does generate cash so therefore we don’t need to increase our debt. Having said that we do invest a lot in the network side. For instance we’ll be bidding for the 3G license so we will probably require debt in the future. It would all come through ITI.’
Mobile growth
With the explosion in mobile popularity in Ireland over the last few years the country has seen significant reductions in the prices of the phone calls. As handsets and the price of mobile phone calls come down more people are using the systems, but how low can they go?
‘One area that does affect the reduction of tariff pricing is handset subsidies. Our business is strange in that we invest in our customers before they even avail of our services.’ Eircell pays ?50 million per year for mobile handset subsidies, but this can work out at as much as ?70 - ?80 per handset. ‘The original concept behind this was let’s get the handsets cheap, let’s get customers using the network.’ But the handset subsidy has become something of a millstone around the neck of the mobile phone industry. As customers want to upgrade their phones frequently the mobile operators are subsidising more than one phone per customer.
But paying the hefty handset subsidy reduces Eircell’s yearly profit. According to Griffin there is a European move away from the handset subsidies. If these were to go there is the option he says that phone call prices may drop.
Roaming
On the issue of international charges Griffin says there is pressure from consumers to drop roaming prices. ‘What you’ve got now is that internationally operators are talking to other operates to address the issue of the generally high international roaming charges. We’re starting to see bilateral agreements that will allow us to bring down the roaming charges.’
‘We’re talking to a number of the mobile operators in the UK and certainly our objective is to try and get better roaming rates. It is a matter of time but I think it will come.’
Content
Looking beyond voice communications to the growing area of internet services Griffin believes that the content of these services will get more relevant and sophisticated in the future. Finding content providers is not the problem he adds. ‘It is a matter of picking out the most appropriate content for our customers and the best quality. But the likes of location based services will help from a customer point of view.’ These services will mean that in the future when you turn on your phone it will know where you are and provide relevant local information to your hand set.
International consolidation
Griffin is unfazed by the wave of international telco consolidation. Of the number of major alliances that have sprung up internationally ‘ It sounds great to put some of these large companies together, but it does test them in their ability to move quickly. There is an advantage to being small and flexible.’ |
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| Article appeared in the September 2000 issue.
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