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O2: Enjoying its bite of the 3G apple

Tags:
Race,
Steve,
Operator,
Niche

Natasha Lomas silicon.com

Published: 22 Sep 2008 16:35 BST

Ronan Dunne, O2 UK's chief executive, is a softly spoken Irishman who heads up the operator's UK operations from a glass-walled office above an open-plan atrium where staff sit and sup bottles of O2-branded water in the company's Slough HQ.

Promoted from his role as chief financial officer, Dunne was appointed chief executive of the UK operator on 1 February this year, taking over from Matthew Key, now chief executive of Telefónica O2 Europe (Telefónica acquired the UK operator back in 2006). His office is airy and uncluttered, though he manages to find room for a coffee-table-sized table football.

It's not all about perks though, as Dunne only received his iPhone 3G on the day of this interview. "One of the things that was a challenge for us in the early days was just getting enough iPhones," he explains. "So nobody inside the business was allowed to switch until this week because we now have free supply."

He adds: "It was a very important point for us that, where there was a shortage, customers absolutely came first. And so you'll see nobody round the business with a 3G device."

Despite clearly enjoying the fruits of winning the iPhone contract, Dunne is also keen to stress O2 is not an "Apple house"; nor is Apple's touchscreen phone a BlackBerry killer in his view, though he believes it has certainly shaken the industry up. From an operator point of view he says it would be "fantastic" if all the other handset manufacturers delivered hardware as sexy as Apple's, too.

Any chief executive of any mobile-phone company anywhere in the world would bite my hand off to have a contract with Apple

The chief executive of the UK's number-one network operator is clearly not a man to court controversy. "Broadly I'm ambivalent as to whether a customer takes a BlackBerry or whether they take an iPhone. I just want to make sure they have a great experience with us," he says diplomatically.

Natasha Lomas of ZDNet.co.uk's sister site, silicon.com, recently sat down with Dunne to discuss his thoughts on winning the iPhone contract, working with Apple, bugs and more.

Q: Was it open warfare among the operators when it came to fighting to get the iPhone contract?
A: It may well have been the case that some operators were not in the race but we weren't the only ones in the race. What we understand is that after a period of time of talking to a number of people it wasn't clear to [Apple] that they had exactly the right partner in the UK so then we took the initiative and in a very short space of time — say over a period of eight or nine days — we went from no contract to signing a contract. And actually the contract was signed on this table in this office on a Saturday morning over sandwiches from M&S.

It wasn't Steve [Jobs, Apple chief executive] himself [signing the contract] but we do deal with Steve and also Tim Cook, who's Steve's number two, the chief operating officer, but Steve was intimately involved in the details.

Matthew Key who is our European chairman, and César Alierta, who's the chairman of Telefónica, flew out to Cupertino to Apple to sit down with Steve and really set up the initial dialogue. And then we put a team from the UK with a team from Apple to really drive through the detail.

What we found was we had a lot more in common with Apple than perhaps they'd seen with other operators and we were able to move quickly to getting a deal done, which was great.

How long is the contract with Apple? Is it true that it's moved from a revenue-sharing model to a non-revenue sharing model?
We have a multi-year contract with Apple which has an exclusivity within it. We don't comment on the length of the term. Generally details of the contract are commercially sensitive and confidential but it's fair to say that the initial launch was a revenue-share model and in discussions with Apple after we reviewed the initial launch we looked at an opportunity to grow the market and particularly to be able to offer the product across a wider segment base — so right across business, corporate, consumer, pre-pay and post-pay.

To do that, we thought we should evolve the model [from the initial revenue-sharing one] so we went for a more traditional model with a handset manufacturer, where we pay for the device and then sell it. […]

Without going into too much detail, we have said in public that [the iPhone] has significantly higher average ARPU [average revenue per user] than other equivalent devices, so that'll give you a clue that it's a profitable business and an attractive business.

What's it like working with Apple?
To be very honest, any chief executive of any mobile-phone company anywhere in the world would bite my hand off to have a contract with Apple, particularly an exclusive contract, so for us it's great. Also I think what's important is it's brilliant for the industry so every operator…