While the mobile results reported by Deutsche Telekom in its Q2 figures were acceptable--year-on-year revenue growth of six per cent--T-Mobile UK looks set to come under the cosh as its newly appointed MD, Richard Moat, prepares to turnaround the struggling subsidiary by dramatically cutting costs and revamping its confusing array of cell phone tariffs.
In an effort to move from being the fourth-largest UK mobile operator to the third, Moat has admitted that any talk of cost reductions invariably involves job losses. Already T-Mobile is dropping its contractors but Moat does not shy away from the fact that some of the nearly 6,400 people who work for the business in the UK will likely need to go. "I think that every single aspect of the cost base has got to be critically examined and jobs are obviously part of the cost base."
Accepting that to become the No. 3 UK operator might take several years, Moat intends to reshape the company dramatically within the next few months. This will involve:
- Remove all contractors--he has already cut 100 staff not on fixed contracts;
- Push his direct reports to remove staff who are not reaching the objectives of their roles;
- Introduce a radical new model for handset purchasing;
- Set higher targets for T-Mobile's direct stores; and,
- Improve and simplify the company's tariff structure
Handsets have become a critical issue for T-Mobile UK, as seen with it importing iPhones from around Europe to offer to prized customers. Presently, the company has a portfolio of around 400 handsets-- each with a range of different tariffs--leading to thousands of charging permutations.
Insiders claim that Moat will cut the device portfolio to a much smaller range, with more emphasis being placed on stocking generic phones, rather than handsets customised for its network. One interesting option being considered includes T-Mobile UK asking manufacturers to adopt a new business model--where it auctions slots for its product range, and where it defers payment on handsets. One executive with a large handset manufacturer said: "They are saying, "pay us if you want to keep the business". I would prefer the strategic relationship I have with the other operators, but I understand the T-Mobile predicament."
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