Making a Play

Chris Bannister is CEO at Polish carrier Play, which launched into a saturated market two years ago. He talks to telecoms.com about the trials of the small independent and the dirty tricks he believes are being employed by powerful international incumbents.

Now on his fifth start-up mobile operator, Chris Bannister, the British CEO of Polish carrier Play says he is temperamentally unsuited to a ‘maintenance’ role; his description of a chief executive position at an established operator. His career history includes stints at a number of carriers tasked with disrupting or progressing their markets-Mercury One2One in the UK (now T-Mobile), M1 in Singapore and WCDMA pioneer 3, where he launched operations in Sweden and Denmark, before taking the helm at the Hutchison outfit’s Austrian property. “For me,” he says. “the excitement is in building an organisation that is up for a fight.”

Play certainly looks to fit Bannister’s bill. The firm launched its WCDMA network a little over two years ago into a Polish market that-with penetration a whisker away from 100 per cent-was already at saturation. The market was an even, three-way split between Orange Poland, Polkomtel (an affiliate in the Vodafone stable, with 24 per cent held by the UK-headquartered player) and Polska Telefonia Cyfrowa (PTC), 93 per cent owned by T-Mobile. None of the incumbents had launched 3G services, which was the flag under which Play was sailing to market.

The smallest member of any group always has to shout the loudest and Bannister is a vociferous critic of what he perceives as deficiencies in the Polish mobile sector. A triangular market in which each player has an almost identical share (Informa’s WCIS has the share for Orange, Polkomtel and PTC at 33.88 per cent, 33.38 per cent and 32.46 per cent respectively at March 2007) would raise the eyebrows of anyone judging competitive efficiency in Poland and Bannister stops short only of alleging outright collusion.

“Their pricing structures two years ago were so very similar,” he says. “Whether it’s collusion or not I don’t know. And certainly it would be difficult for me to prove. But I think these guys kept the market profitable for a long time.”

As a 3G-only player, Bannister positioned Play to take advantage of the capacity advantages of WCDMA technology. “It’s a dense network, so you just need to fill it up with cheap minutes,” he says. It’s the same perspective that was eventually developed by Hutchison’s 3 group, Bannister’s former employer. For 3, though, the insight came at a cost; the firm’s various territories had originally tried to sell 3G on the strength of services and content, at a time when the proposition was underdeveloped. The firm was slow to build momentum as a result.

“I learned from my five years’ experience at 3,” he says. “I started where they are today. When I launched 3G with Hutchison, it didn’t really work on the internet. Five years ago 3G internet was no better than EDGE. It was only when HSDPA came along-and my network today is HSDPA-that 3G suddenly had an advantage over 2.5G. So I was lucky when I launched 3G in Poland, because it worked and because the handsets were good.”

Price, then, was Bannister’s competitive differentiator; a familiar strategy for a market newcomer. He was aided, he says, by a regulator keen to see retail prices driven down. The first obstacle presented to Play was the Polish market’s mobile termination rates (MTRs). When he launched, says Bannister, Polish MTRs were the highest in Europe by some distance. Today they are in the lowest quartile.

While the MTRs charged by the incumbents to one another were also high when Play took to market-around ?0.20 wholesale-Bannister suggests that his three opponents “netted them off” because they all charged the same amount. This kept consumer prices high, he alleges, and allowed them to generate substantial profits from fixed to mobile calling.

“We’re now seeing MTRs at around ?0.05 for the incumbents,” he says. “That reduction over the past 12 months has left Orange saying that revenues will be flat and Vodafone [Polkomtel] saying it expects a reduction of between six and seven percent.”

Cut price tariffing has allowed Play to make inroads to the Polish subscriber base. Informa put Play’s subscriber base at a little over two million at the close of 2008, a market share of 4.6 per cent. But Bannister denies that majoring on price has brought him low quality customers.

“The margin on our post paid customer base is actually above the market average,” he says. “For the first two years we’ve focussed on the urban, internet-savvy individual; mainly because that’s where we were building the 3G networks. In Warsaw, up until about three months ago, there was no unemployment. The disposable income for someone living in Warsaw is probably not dissimilar to Stockholm or Vienna.”

He says that “pretty much every single one of our customers” is churning from another carrier to join Play, unsurprising in a market with a current penetration well in excess of 115 per cent. Today he’s pulling most of his customers from PTC, which is also Play’s national roaming partner. Churn in the Polish market has doubled to 25 per cent since Play launched, he says.

And it is the fact that the majority of his signups have to be poached from a competitor that has given him another axe to grind: mobile number portability (MNP). In Poland, says Bannister with a sigh, the MNP turnaround time is 51 days. Hardly any customers who have joined Play on prepaid accounts have bothered to port their numbers, he says, and of the 60,000 net post paid adds he’s doing monthly, only some 8 – 10,000 go through the porting process. More customers indicate that they want to port, Bannister says, but are put off by the length of the process or offered incentives to stay put during the 51 days.

“The other three carriers are surprisingly inept at changing their systems to improve the porting process, even though they’ve done it in every other country in Europe,” he says. “The regulator is trying to force one-day porting, as per the European guidelines, but it’s a bizarre situation.

“Poland’s previous Infrastructure Minister issued a public statement saying that there was no hard evidence suggesting that consumers wanted MNP,” he continues. “He even put that into an open letter, so I passed it to Vivian Reding. There has been a concerted effort by the incumbents to completely confuse and complicate MNP and consequently we’re still stuck with 51 days.”

It’s not often that you hear of a mobile operator CEO happily engaging with Viviane Reding, the European Commissioner for the Information Society and Media. The public battles she has waged on MTRs and wholesale roaming charges have made her the industry establishment’s bete noire, and she has traded jibes with the GSM Association for some time.

But Play is not an establishment carrier; which explains its membership in the Mobile Challenger grouping, a band of smaller carriers looking to amplify their anti-competitive concerns by voicing them in chorus. Wind, Base, 3, KPN, E-Plus, Avea and Bouygues are Play’s fellow Challengers and their collective stance is at odds with the GSMA, of which they are also all members.

“The GSMA say it’s a worry that mobile operators are seen as abusing their position. But I don’t have that much sympathy because I think everyone knows they did abuse their position on international voice roaming before the regulator got involved,” says Bannister. “I don’t want the EC to regulate retail, but I do want it to regulate wholesale and MTR on a cost plus basis. The incumbents have abused their position for the last ten years, and that’s where the GSMA doesn’t agree.”

If the regulator is successful in forcing MNP turnaround times to levels closer to other European countries, then Play’s postpaid additions might improve. As Bannister says, however, number retention is less of an issue for prepaid users which, until now, have not been his focus. This, he says, is because the prepay market is predominantly 2G and his only access to 2G has been through his national roaming partner.

But Play won a 900MHz GSM licence in December last year and built out a network to 40 per cent population coverage within eight weeks. In early March the carrier launched a SIM only prepay tariff priced at 40 per cent below competitor offerings. The GSM network was overlaid on the WCDMA network. “It’s terrific technology, with 3G and 2G in the same box,” he says, “so it’s very quick just to plug and play.”

While Huawei supplied the technology, Bannister’s own team managed the roll out, with Play eschewing the outsource model so beloved of many cost conscious carriers. He took the same approach with his WCDMA network. “In Poland, given the amount of administrative problems and restrictions, I think you need to take the [deployment] battle on yourself,” he says. “With 3G I had the desire. I was calling all of my roll out managers all over Poland every day, six days a week for six months. I just don’t think you’ll get Ericsson or Nokia Siemens doing that.

“I used to be a great believer in outsourcing to manage cost but, when you’re in a low wage country, you’re better off managing the cost base yourself. A vendor would only charge me 30 per cent on top of the contractors fees. But I can negotiate every contractor contract myself and squeeze until I get the best prices. The vendors aren’t that passionate about doing that. Supposedly they can get synergies from other parts of the business but when you’re doing a roll out, I don’t think those synergies really exist,” he says.

And so he prefers to go it alone on the rollout. It seems to be a characteristic stance; Bannister, it seems, is not wholly comfortable being a member of any particular club. Not a particularly comfortable fit with the GSMA, he’s at pains to stress that the Mobile Challengers group is a “loose association” at best, useful only for the issues on which the members are more or less aligned. And he dismisses suggestions that any more formal alliance could evolve from the group. Perhaps this is partly because, privately, representatives from other members have suggested that not every carrier involved embodies the challenger spirit to the same degree, an assertion that Bannister concedes may be true.

But how does he feel about the prospects for independent carriers in a sector that has come to be dominated by scale, which is functioning in a global economy that seems to be driving consolidation? He describes the structure of the industry as “against the new challenger,” but says that his concerns are not primarily focussed on getting swallowed up by a larger player or forced out of the market altogether.

“One big problem for the independent is handset procurement, and I don’t just mean pricing,” he says. “I can’t get the iPhone today, and I know I’m not the only one. But those exclusive deals, the iPhone, the G-phone (Google’s two Android handsets have been taken to market through deals with T-Mobile and Vodafone), mean that the small independents will be the last carriers to get hold of the new phones. And I’m starting to build scale. I’ve got two million customers and that number’s rising.”

But he returns to his theme of protectionist pricing from incumbents as the most serious concern facing the independent operator. While European regulatory activities may have forced down wholesale roaming charges for voice, Bannister predicts that incumbent carriers will use data charges to compensate for their losses.

“In two years’ time the battle will be over data,” he says. “Vodafone charges me a wholesale rate of ?7.00/MB for my customers to use data when they’re in the UK, for example. Hutchison [a fellow member of the Mobile Challenger group] charges me ?0.25/MB. Why do I get charged ?7.00 by Vodafone? That, to me, is the principal worry for the independent player. These big alliances, Orange, Vodafone, T-Mobile, Telefonica, have 80 per cent of European customers between them. And they use MTRs and wholesale roaming rates to lock out people like me. And, ultimately, that will keep prices very high.”

Chris Bannister has a long list of complaints. But he gives the impression that he wouldn’t have it any other way. He readily admits that he thrives on the ‘David and Goliath’ competitive dynamic and, were all of his requests to suddenly be met by competitors and regulators alike, leaving Play free to grow unhindered, you get the feeling that he’d probably go looking for another tussle.

Chris Bannister as been involved with telecommunications for over 20 years. He has extensive international and start up experience, having worked in Asia and Northern and Central Europe.

He started in 1986 with Motorola before moving to join his first start up operation, UK carrier Mercury One2One.

After this he moved with Cable and Wireless to Asia were he worked in Vietnam before starting his second mobile carrier, MobileOne in Singapore.

Having launched this he moved to Malaysia with Swisscom were he was the sales, marketing and customer services general manager for Digi, a fixed and mobile telecoms operator.

After more than three years with Digi he moved back to Europe to become the CEO of the Hutchison company  3 Scandinavia. He launched 3 in Sweden and Denmark before moving to the group’s Austrian operation.

Bannister left the Hutchison group in 2005 to become CEO of PLAY in Poland.