O2 ceo says large groups can have diseconomies of scale
O2 ceo Dave McGlade is adamant that there is a role for an independent operator in a major European market, and that the operator actually benefits from its smaller size.
Speaking to Mobile Europe shortly after the rejected bid from KPN triggered another round of “02 for sale stories”, this time with NTT DoCoMo as the main proposed buyer, McGlade put up a spirited defence of the “small is beautiful” philosophy.
“Our view is that we will not compete on size and scale because that’s not the play we have. We’re not trying to be Vodafone where they do more of a cookie cutter approach across regions in the world. Arun Sarin said if they had won the (AT&T Wireless) bid they would have introduced all the brand and approach that they do at Vodadone. Our approach is exactly the opposite. Everything is about getting closer to the customer, closer to the local market, being more British in the UK, more German in Germany and using that as our advantage.”
McGlade said being smaller actually helped get products to market quicker.
“I actually think at times there’s a diseconomy of scale and that diseconomy kicks in where you get more beaurocracy. It’s slower to move, you’re waiting for a standardised product set that maybe the Germans are developing and it might take six months longer to go to the rest of the world. We can be more fleet of foot and be a bit more customer-centric by being a smaller player with just three countries throughout the group.”
McGlade said that the O2 digital music player, a mobile music player recently launched in the UK, was an example of being able to target an area and deliver the end product.
“We determined that music is a key area we were going to address. There was not a product in the market that we needed. DRM (digital rights management) hadn’t been dealt with as well as it should have been, and we also brought in the compression technology that really works well in terms of spectral efficiency over GPRS. So we went after it and we did it.”
As regards the KPN offer, McGlade had this to say,"We had discussions, we got a proposal, we’re no longer talking, and honestly the hype around this issue has gotten out of hand.
I mean, all I know is we’re staying focussed on delivery and that’s what’s important to us and let these things happen as they do."