But Russell’s challenges in the UK
market are not limited to operational
improvements at 3. He has spent, he
says, “a disproportionate amount of
time” dealing with regulatory issues
since joining the UK operation. In
particular, the UK’s mobile number
portability (MNP) and mobile termination
rate (MTR) scenarios have,
he argues, left 3 at a competitive
disadvantage.
“We’ve got an MNP system [in the
UK] that’s pretty much in the dark
ages,” Russell says, describing it as
“a fundamental failure”. In Australia,
since 2001, there has been a two
hour lead time on number portability.
Two hours after a customer makes a
request that their number be ported,
it’s ported. “I assumed that was how
most advanced markets worked,” he
says. “Then I came to the UK and found
that it takes five days to port a number.
It’s prehistoric and only ten per cent of
customers port. I was stunned.”
MNP was intended to remove
the principal barrier to churn as
subscribers are reluctant to part
with their mobile phone number.
Russell argues that the four incumbent
mobile operators, O2, T-Mobile,
Vodafone and Orange, which have
roughly equal market share, have
not been motivated to drive MNP
because, “it’s a cosy market and noone
wants to rock the boat.”
A stagnant MNP regime in the UK
creates problems beyond a disincentive
to churn, according to Kevin
Russell. He argues that, because
porting is so difficult in the UK,
some of his customers are retaining
their old contract for inbound
traffic, using 3 only for outgoing
calls. He also argues that 3’s cost of
acquisition is higher than it could be
because the firm has to give more to
the subscriber to persuade them to
relinquish their number.
“I do know that we have lost potential
customers because of this and that
we haven’t benefited from the incom-
Mobile Communications International | First for news, best for business
career history
» Kevin Russell, 40, joined 3 in the UK in January
2007 as Deputy-CEO. He joined from Hutchison
Telecommunications (Australia) where he was
Chief Executive from September 2001. Hutchison
Telecommunications (Australia), which trades under the
3 brand, is listed on the Australian Stock Exchange and is
57.8% owned by Hutchison Whampoa.
» Prior to joining 3 Australia, Russell served as Chief
Financial Officer, at Partner Communications in Israel.
Partner Communications is a leading telecommunications
provider in Israel and 35% owned by HWL.
» Russell joined Hutchison Telecommunications in Hong
Kong in 1995 as Group Finance Manager and in 1996 was
promoted to Director of Finance and Operations.
ing revenue that we should have got, in
some cases,” he said. “And I know that
we’ve paid more than we should have
done to get the customers.”
3 has yet to calculate exactly how
much the MNP situation may have
cost it, in terms of missed potential
customers and inbound revenues.
But, says Russell, the firm will be
putting some numbers down on
paper later this year.
He is also frustrated by termination
rates in the UK, revealing that,
in 2006, 3’s net settlement costs
were in excess of £50m. 3 is appealing
UK regulator Ofcom’s ruling on
termination rates which credits 3
with significant market power. While
Ofcom did bring rates down earlier
this year, the regulator did not bring
them down far enough for Russell.
“There is a fundamental problem
in the UK market on mobile to mobile
termination rates. You cannot have
a new entrant subsidising profitable
incumbents. It has no place in a level,
competitive playing field.”
Russell’s criticisms may be interpreted
by some as excuses for 3’s
performance since it launched just over
four years ago. But he rejects this sug-
MCI INTERVIEW
gestion. “I would be the first to say that
there are things that 3 can do better
operationally and we’ve got a lot more
hard work to do,” he says. “But I look at
the outcome of the current MNP and
MTR situations and I know that they’re
anti-competitive and I know that means
that retail pricing and market share
have been propped up.”
He argues that operators should
terminate with one another on a Bill
and Keep basis, which sees carriers
agreeing to terminate one another’s
calls at no charge. He also feels that
current termination rates, which are
charged by the minute, make it more
difficult for carriers to offer subscription
pricing, which is charged by the
bundle, something he describes as “a
missed opportunity for customers; a
historical legacy in a market that is
not looking at customer interest.”
The UK, Russell says, is two years
behind Australia in terms of 3G uptake
and usage. In Australia, more
users understand the 3G proposition
and more of them are open to
exploiting the kind of services that
the technology enables.
But in the UK, he is not interested
in pursuing the differentiation
strategy that his firm used to
launch service in 2003. Then, 3 was
the mobile media company, the
video mobile company. Now that
its competitors have comparable
capabilities, this is no longer a differentiator.
Russell returns to more
historically recognisable distinctions.
“Your biggest differentiator
will always be your customer satisfaction
and behaviour,” he says.
“It’s about how well we understand
what the customers want and how
well we deliver services to them that
they value and for which they find
the pricing appropriate. That might
sound woolly but that’s what I was
focusing on in Australia. I’m not
bothered about having the latest or
greatest technology or service.”
At 3UK, times have changed. �
25
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