Inside Vodafone's restructure and what comes next

Vodafone NZ boss Jason Paris defends his decision to outsource jobs, and opens up on his company's looming new owners, a move that could shake up the mobile industry, and a Spark Sport decision that could rile long-time partner Sky TV.

After number-two roles at TVNZ, MediaWorks and Spark, perennial bridesmaid Jason Paris finally landed a top role in November as he started as Vodafone NZ chief executive.

How was it to finally sit in the big chair?

"It's awesome," Paris tells the Herald as we settle into a wide-ranging interview.

"I drive to work and think what a privilege it is to lead a company that can change people's lives through technology," Paris says. But he adds:

"It's fair to say that the business wasn't quite where I expected it to be.

"It was at about 80 per cent of where I expected it to be."

The company was missing targets. Customer service was falling short. New services weren't being introduced fast enough. Vodafone NZ was last to market with an unlimited mobile plan.

"I don't like organisational change. It impacts people. It impacts families and it's a really tough time … It wasn't the first thing that I wanted to do when I came into the organisation," Paris says.

"It's the last thing you want to do; put an organisation through that when you're the new leader and everyone's looking at you as someone who's going to make positive change to the organisation, then giving them uncertainty."

Nevertheless, that was what he had to do - following a goal-setting process that involved staff and customers that took placed against the backdrop of a planned listing on the NZX.

Arriving at the Herald without any minders, Paris says no question is off the table - in the same manner that, unlike most CEOs, he fronts to all-comers on social media. But that's not the same thing as answering every question. He refuses to say how many of his company's 2800 staff were left at the end of its recent restructure (Unite and insiders say several hundred roles went to Indian outsourcing and offshoring giant Tech Mahindra).

"I don't think anyone likes hearing 'outsourcing' [or] 'offshoring," Paris says.

"My message to customers though is that we're not doing anything that won't improve our customer service."

But why not improve and automate customer service inhouse? Why ship jobs to Tech Mahindra (which will employ some ex-Vodafone staff at an "in-shored" facility in Christchurch as part of its contract). Doesn't that seem more about cost-cutting?

"No. I think you go where the expertise is. Organisations that we work with do this for the companies that bring some of the best service to customers around the world and so if they've got techniques or expertise or tools or experience that we think we'll give us a significant step-change in customer service, then clearly we'll take it."

Earlier this decade, Tech Mahindra won a quarter of a billion contract to run Vodafone Australia's IT services. It's also done major work for Vodafone in the UK, and won a $20m restructure-assistance contract with Spark (back when it was known as Telecom), among hundreds of other corporate clients worldwide.

Paris stresses that Tech Mahindra is"just one part of our customer service transformation. There are a lot of other areas we're adjusting as well. You're probably aware that 24/7 live chat, 24/7 social that we've stood up so it's in its infancy, but it's building."

He says for basic queries, top-ups and plan-tweaks, many people would rather work through an app than speak to a person these days - but he adds that humans will always be on hand for technical issues that have to be worked through. He says a multi-hour call centre meltdown on May 16 was the result of a problem with a contractor in Manila - who is being cut as part of the reorganisation - which in turn put pressure on others.

He praises the way staff engaged in the restructure, and says Vodafone has done as much as possible to support them, but there's no denying it was a grim way to begin.

And so far in the new era, bad new has been the general theme. Along with news about job cuts, price rises have been on customers' radar. The cost of all broadband plans was increased by $3 a month from February. In July, global roaming charges will increase from $5 to $7 a day (the former was pegged on accumulated wholesale price increases by Chorus, the latter on increased costs; the number of countries covered by global roaming also increases from 70 to more than 100).

But now Paris has reached the point where he can start talking about what's next - the good news.

It starts with a change of ownership, which should give him a freer hand.

The initial aim of the restructure was to whip Vodafone NZ into shape for an IPO early next year. Now that's been superseded by a $3.4 billion trade sale to 50:50 partners Intratil and Brookfield (a Canadian infrastructure investment company), with Intratil chief executive Marko Bogoievski set to become Vodafone NZ chairman if the deal is approved - which most legal pundits think it will be, by August.

Off the leash

Under Infratil's ownership, Vodafone NZ will get to keep the Vodafone brand, access to Vodafone technology, procurement services and global roaming - albeit with a fee attached to each.

Paris says Vodafone NZ's UK parent has all that and more to over, "but it's also true there are a number of things that have been on our agenda for quite some time that we haven't been able to do because they've been at odds with group strategy."

We'll see a switch to a New Zealand-centric strategy, he says, with a greatly accelerated push into fixed wireless (a hit area for Spark, that involves using a mobile network to deliver broadband into a home as a replacement for internet delivered over a landline), and a push to expand the internet-delivered Vodafone TV.

A nod to Skinny, and ethnic communities

"Mutlibrand is another one that Vodafone New Zealand hasn't been able to execute for a number of years now," Paris says.

It's become fashionable in recent years for telcos to launch sub-brands aimed at specific market segments - such as an ethnic minority with its own language, or a market segment like youth or budget-conscious buyers.

The latter two are both targeted by Spark's "Skinny" brand - which largely presents itself to the customers as if it were a separate company, and which analysts rate a success, after some initial wobbles.

"There are a number of new segments in the market that I think would be worth us evaluating - that either the Vodafone brand hasn't resonated with or it wouldn't have been commercially sensible for the Vodafone brands to enter," Paris says.

"We do we believe there are multibrands that could appeal to different ethnic segments, which are growing,

"There's an increasing number in the lower-cost segment that brands like Skinny have been resonating in that Vodafone hasn't been playing in that space.

"And then I also like multibrands to try and test new things so whether it's customer service experience change, an IT or process change - you can do it in a less risky way with a sub-brand than you can with the master brand or big brand like Vodafone"

Vodafone TV's Spark Sport test

"As soon as I started at Vodafone, I saw this as a platform that had real potential," Paris says of Vodafone TV - a box that sits beside our TV and feeds it Sky TV channels delivered over the internet rather than via a satellite dish. It also supports Netflix, TVNZ OnDemand, 3Now and YouTube apps.

Paris says Vodafone probably took it to the market "a little bit too early," - and Vodafone TV did draw some complaints about sluggishness when it was first released, in its latest form, in late 2017.

But he's keen on where it's at today, and its potential.

"We're going to scale it over the next couple of years and have a real crack at this being a major platform in the home for New Zealanders," he says.

"I love that it's an aggregation and curation tool as content is being fragmented and watched on different platforms, this is a platform that can bring it all into one place,"

But can it, though?

When Paris first started Vodafone in the New Year in November, the Herald asked him if he would like to see the Spark Sport app added to Vodafone TV.

That would be a clear marker that Vodafone TV was striking out in its own direction, not just offering a rebadged, internet-delivered version of Sky TV, which some apps attached (and Sky TV will shortly add a decoder for internet delivery with Netflix as an option, putting the pair back on a direct par).

Paris was enthusiastic about putting Spark Sport on Vodafone TV, and said early-stage talks were underway.

Today, he says Spark's wholesale terms for Spark Sport have emerged as a potential stumbling block (Vocus and 2degrees have also criticised Spark's wholesale terms, saying Rugby World Cup tournament passes are being offered to them at an uneconomic rate). Spark Sport's proposed wholesale deal is "a bit challenging" he says.

He's also been a bit taken-aback by the number of World Cup games that will be made available through Spark's free-to-air partner TVNZ (which will show the opener, the All Blacks' pool games and the All Blacks' assumed quarter final on a one hour delay, and the semis and the final live).

But if the wholesale pricing issue is resolved, *could* Vodafone put the Spark Sport app on Vodafone TV? Would Sky TV allow it? Back in the days before Vodafone bought TelstraClear, TelstraClear boss Allan Freeth complained that Sky's wholesale contract was a "pain point" in that it severely limited what non-Sky content the TelstraClear T-box (the predecessor to Vodafone TV) could carry.

Paris is fuzzy on this point. "I'm still having conversations with Martin about it," he says - the Martin in question being the Brit Martin Stewart, who took over the reins at Sky TV in the New Year.

Stewart, who has flagged a big shift in direction toward streaming, is "super-impressive. He's got a really clear plan," Paris says..

"Sky will continue to be our number one and preferred partner for content, because if you look at the content they own, they've done a great job at acquiring and maintaining a whole range of rights."

Which is great, but it's still not sure that the new Sky TV boss will let Vodafone TV carry Spark Sport.

Paris says he's still hopeful the wholesale pricing issue with Spark, and any contract constraints with Sky TV, can be worked through before the RWC kicks off in September.

"The Rugby World Cup is a really important part of the New Zealand DNA. The nation stops when the All Blacks are playing," the Vodafone boss says.

"We are committed to getting the Spark Sport app on Vodafone TV … if the deal makes sense."

Buy a $2000 Huawei handset?

Spark and 2degrees both use Huawei gear heavily in their 4G (fourth-generation) mobile networks today, and are in a state of flux given the GCSB's decision to block the Chinese company from Spark's 5G mobile network upgrade (Spark has yet to decide whether to submit a revised proposal).

In terms of network infrastructure, this is not a problem Paris will have to wrestle with.

He says Vodafone NZ has been happy with its 3G and 4G technology partner Nokia Networks and "they'll be our 5G partner too. So it's less of an issue for Vodafone than it is for 2degrees and Spark."

But on the consumer side, Vodafone does sell Huawei handsets.

Paris says he'll leave the "is Huawei being used as a weapon in the trade war?" question to politicians, and stick to the technical issues. On that theme, he offers:

"All existing Huawei devices are as good as gold - you don't need to worry about them. All the ones that are in stores at the moment.

"The ones that are coming through though, in the next few months - that's the time you'll need to take a bit more care on making a decision on whether you buy a $2000 Huawei or an alternative."

(Huawei's flagship P30 Pro costs around $1500).

A shared 5G rollout

Chorus got roundly bashed by 2degrees, Vodafone and Spark last year, after the networking company proposed that a single 5G mobile network be built on the UFB model (which sees, in most parts of the country, one fibre network built by Chorus, and retail ISPs buying access).

It would be cheaper and faster than building three separate 5G mobile networks, as is the case for the 4G mobile networks in place today, which cost 2degrees, Spark and Vodafone more than $400 million each.

Infratil chief executive Marko Bogoievski told analysts soon after the Vodafone deal was announced that the nation can't afford to invest billions of dollars in new technology when there are opportunities to rationalise that spending through cooperation and sharing.

"I think our regulators understand that. I think our politicians understand that. I think our customers get that," he said.

"I think we've got a role to play in helping people get their heads around those sorts of ideas."

Paris amplified that theme when talking to the Herald .

"When you look at the New Zealand market and you see three lots of infrastructure, I think that money could be better invested in bringing innovation forward that is customer-facing so I'm a big believer in that," he says.

"You look at the best ways to cost-efficiently bring network benefits forward then you compete aggressively over-the-top with your brands, with your service, with the value of the services you put on top of that network."

Today, there's a degree of playing together. 2degrees, Spark and Vodafone already share cell-towers constructed under the Rural Broadband Initiative. But that's in part because public funding is involved. And while 2degrees piggybacks on parts of Vodafone's network, that's after some nudging by the Commerce Commission.

What's on the table now is 2degrees, Spark and Vodafone sharing infrastructure in the core urban markets where they make their money - and potentially starting with 5G upgrades as early as next year.

"The range of infrastructure-sharing is pretty open," Paris says.

One thing he can say for sure is that it will be between Vodafone, Spark and 2degrees.

"I don't really see a role for Chorus in mobile infrastructure. I think they've still got a lot of work to do in retiring old copper and investing in fibre and continuing to do a good job on fibre uptake," Paris says.

2degrees and Spark were both bluntly hostile to a Chorus-built 5G network.

But a 2degrees-Spark-Vodafone cooperative that builds on the trio's Rural Broadband Initiative cooperation appears to have more appeal.

"We are open to considering infrastructure sharing, where it makes sense commercially and is appropriate under competition law," Spark spokesman Andrew Pirie says.

And a spokeswoman for 2degrees echoed the same sentiment - though added that things were still very much at the speculative stage.

Paris said Spark and 2degrees' issues with Huawei would have to be sorted first (Vodafone's 3G and 4G networks were built with Nokia Networks gear, and Paris - unsurprisingly - confirms his company will stick with Nokia for its 5G build).

Regardless, even if Spark and 2degrees eventually convince the GCSB to green-light Huawei gear, there are two levels of infrastructure sharing - active, where radio electronics are shared, and passive, where only the basic elements - the cell tower and its power, backup batteries and air conditioning - are shared.

A Commerce Commission report on the state of the mobile market, released last month, noted that infrastructure-sharing - common in Europe - could lead to faster deployment of mobile network upgrades and at lower cost.

It also said it could be attractive given that 5G would otherwise lead to a higher density of celltowers in urban areas.

The downside could be higher costs to the consumer, and less innovation, the watchdog said.

Paris maintains Vodafone, Spark and 2degrees would continue to compete fiercely in the services offered over shared infrastructure.

Telecommunications Users Group head Craig Young is also onboard with the plan.

"We encourage infrastructure-sharing where the providers can without reducing competition and the ability to offer differentiated services," he says.

"The benefit of 5G is that there is likely to be more ability to manage each provider's services at the tower much more smarter than in 4G."

Young says regulators need to assess 2degrees, Spark and Vodafone's celltower-sharing under the public-private Rural Broadband Initiative, which is still in progress but can give an indication if costs really are being reduced - not just for the mobile trio but consumers too.

New beginning

"I don't think we could have done any more for our people through a really challenging time," Paris says of the recent restructure, which saw union criticism over some staff being given only a week to consider Tech Mahindra contracts - a deadline that was later extended.

"And now what I'm really happy about is that everyone's got certainty. And now we can focus on the future, because we're in shape.

"We've got money to invest and we've got a clear plan and I'm very confident our customers are going to see a significantly better Vodafone moving forward than they have seen in the past."