Vodafone NZ chief executive Russell Stanners. Photo / File
If there's one he would change about his 13 years leading Vodafone, says company boss Russell Stanners, it's the way the industry treats customers.
"With the benefit of hindsight, we would have gone back and made the customer experience a bigger part ...
"Because it is tough ... when you have two parties involved in it. It's difficult. You would focus more on customer experience and we didn't think about it."
One issue is the process for homes to get fibre installed. That happens through a retailer such as Vodafone, which then passes it on to Chorus, where it is delegated to local contractors.
"Because we're a digital business, people assume it should happen instantly and be easy, but when you're having to dig up someone's driveway or go through a construction process that takes time. And in the end it can come down to how good that technician is, but the customer's view of it might come back to us because it was ordered through us."
Keeping customers happy isn't the only challenge. With lots of competitors, tight margins and flat revenue, Stanners doesn't work in the easiest of industries.
But if he's feeling the pressure, it's not showing. Ask any question on the telecommunications business and he will reel off a handbook in response.
After joining Vodafone as director of business markets in 2002, Stanners took the reins as chief executive on April Fool's Day 2005.
"It's an interesting, challenging industry we find ourselves in, but it's exciting too," Stanners says.
"The technology, broadband, smartphones the internet of things — all of the exciting trends are in our industry, but when you look at where the money goes it would be fair to say we're a challenged part of the value chain."
Stanners doesn't claim the industry is an easy one to work in, and the past year in particular has shown how tough things can be.
Last month, Vocus NZ, which owns Slingshot and Orcon, was withdrawn from sale. Its parent company wanted about $500 million and in a statement it said none of the offers received "appropriately reflected the fundamental and strategic value" of Vocus NZ.
In the past year, the local market's third largest player, 2degrees, saw its parent company, Trilogy International, lose more than half its value on the Toronto Stock Exchange.
A proposed merger between Vodafone and Sky TV was vetoed by the Commerce Commission last year, and plans for a potential Vodafone sharemarket listing appear to have cooled, although its parent company says it is continuing to explore the possibility.
In an industry with 108 fibre retailers where competition is strong and consumers continue to expect more for less, efficiency and cost-effective strategy are key, Stanners says.
"There is an extreme level of retail competition in our market and there's not a lot of margin up for grabs.
"The industry here in New Zealand has probably had flat revenue growth for quite a while and so if you can't grow revenue then you have to do what every other company does with flat revenues and increased requirements to invest — you have to cut costs."
Results this week from Vodafone's parent, Vodafone Global, showed that its fully-owned New Zealand subsidiary suffered a 0.5 per cent fall in service revenue, while total revenue, which includes handset sales, increased by 0.6 per cent in the year to the end of March.
The decline in service revenue was attributed to pressure on fixed services offsetting mobile growth. Vodafone NZ made a net profit of $57 million last year but results for 2018 won't be known until its Companies Office filing.
Over the year, Vodafone NZ added 3000 broadband customers to its network, taking it to 426,000.
In terms of mobile customer numbers, Vodafone and Spark are neck and neck. Vodafone increased numbers from 2.45 million in the first quarter, to 2.56 million in the last quarter of the financial year, with 63,000 more prepaid and 12,000 more contract users.
In Spark's full-year result in February, it reported 2.44 million mobile connections, while 2degrees reported 1.42 million mobile customers in its latest figures.
Operating in such a small market may have its issues, but Stanners is optimistic about the industry.
"What is really pleasing is 10 years ago, people would say our industry was characterised by not enough competition, prices were too high and the network was too slow.
"Fast forward to today, competition is high, prices continue to drop and we have three of the best mobile networks in the world."
Fixed-line investment has been handled largely by the Government through Chorus and other local fibre companies, but when it comes to this investment, Stanners isn't afraid to pull any punches.
He is clear in his view that the major telcos have invested heavily in their mobile networks and will continue to do so with 5G — the next generation of mobile networks — but is concerned that the local fibre companies are lagging behind.
He said the electronics or speed capability of the country's fibre networks were several generations behind, and more investment to upgrade this was needed.
"At the moment they're not investing anything and I do find it quite duplicitous, particularly with Chorus, that they then talk about doing 5G when they're not doing work on their own network," says Stanners.
Chorus disputes Stanners' position on network investment.
"It is not correct to suggest that Chorus is not investing anything in its network. This financial year alone we will invest around $800m in our network," a spokesman said.
"According to the most recent Commerce Commission data, which was released late last year, total investment by the entire telecommunications industry was around $1.6bn annually, so it would be more correct to say that Chorus is investing more in New Zealand's infrastructure than any other industry participant by some distance," he said.
The Ministry of Business, Innovation and Employment has forecast that the rollout of 5G will happen through incremental individual investments from the likes of Spark, Vodafone and 2degrees, rather than through a single shared 5G network, and Stanners says this will probably happen in large deployments by 2020.
As well as being faster than the current network, 5G has low latency — less delay, in other words — which will be key for supporting things such as robotics and driverless cars.
Stanners says the challenge he is putting to Chorus is to invest in the network before 5G takes over fibre.
His gripe with Chorus is also based on extended lag times for fibre installations.
Russell Stanners:
Age: 56
Job: Chief executive, Vodafone NZ
Lives: In Greenlane
Family: Married to Michelle, with three young adults — Jessica, James and Nathan — plus Riley the boxer
Career: Started in sales at IBM, progressing to global head of telecommunications solutions based in New York; returned to NZ as CEO of Unisys; moved to Vodafone as director of business markets; promoted to CEO in 2005
Last book read: The Four: The Hidden DNA of Amazon, Apple, Facebook and Google
Favourite holiday destination: Hahei
Best advice you've ever received: "Don't expect it to happen; work hard and make it happen."
Mentor or someone you admire: "Everyone who has ever given me guidance, correction and feedback! Much appreciated."
Rival Spark may be aggressively chasing new content opportunities, but Vodafone's Russell Stanners says he is happy to live with whatever wins partner Sky TV can manage.
The Commerce Commission last year declined a merger between Vodafone and Sky TV, mainly on the grounds that Sky held a near-monopoly on the country's sports rights.
Since then, Spark and partner TVNZ have managed to wrest the rights for the Rugby World Cup away from Sky and are reportedly about to sign a deal for the English Premier League football rights, proving any monopoly might not be as strong as previously thought.
While Spark focuses on expanding its content offering, Stanners says Vodafone is still in the lead.
"Everything TVNZ and Spark are doing is to compete with Vodafone and Sky," he says. "We were first with Vodafone TV and today we have more paying subscribers of content over telco networks than anyone else in New Zealand by a long way. We're Sky's largest partner and we're doing very well."
Vodafone has more than 115,000 pay TV customers and this month launched its entry TV package with free channels and the ability to integrate add-ons like Netflix and Neon.
"We have a great partnership with Sky and their business is content, so we will live with what they can win," Stanners says — adding that if Sky lost major pieces of content, Vodafone would consider wholesaling it from whoever had the rights.
"My own view is that we try to be good at what we're good at and not pretend to be good at everyone else's business," he says. "We're not making that investment to become a content company in terms of bidding for things."
With the rugby rights up for renewal and several players reportedly in the bidding mix, all eyes will be on who can win that fight.
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