This month Katina Hristova had the privilege of interviewing the newly appointed Chief Financial Officer of O2 – Patricia Cobian. She became CFO of O2 in August, taking on the role when the corporation’s new CEO Mark Evans appointed her to his board.
O2 is the commercial brand of Telefonica UK Limited and is a leading digital communications company with the highest customer satisfaction for any mobile provider according to Ofcom. With over 25 million customers, O2 runs 2G, 3G and 4G networks across the UK, as well as operating its nationwide O2 Wi-Fi service. The company owns the successful giffgaff brand as well as half of Tesco Mobile and has agreements to provide the network service for other leading mobile brands including Lycamobile, Sky and TalkTalk. O2 has over 450 retail stores and sponsors The O2, O2 Academy venues and England Rugby.
Over the next few pages, Finance Monthly hears about Patricia’s experience within the telco sector, how her work at Telefonica has helped towards becoming O2’s new CFO and her next steps and goals at O2.
You were recently appointed as O2’s new chief financial officer – what’s your vision for the company and what goals are you arriving with as a CFO of the telecommunications services provider?
Although new to the CFO role, I’ve worked in the telco sector for 17 years – 10 of those with Telefonica.
Throughout that time, O2 has shown that it’s a special brand and business. It has a strong track record of taking bold and disruptive business moves on behalf of its customers – from bringing the iPhone to the UK in 2007 to ripping up the rule book on tariffs by launching O2’s Refresh – the UK’s first contract that allows customers to upgrade their devices whenever they want.
I’ve long believed that if you look after your customers, the bottom line will take care of itself.
Our strategy of putting our customers at the heart of everything we do has brought success: we have just celebrated seven years of the highest customer satisfaction scores in the industry, as measured by the regulator. As a result, we have the most loyal customers, proven by having the lowest churn figure in the market. We now connect more than 25 million people to their passions and the people and they love and work with.
We will continue to be customer-led. We will keep being obsessive about our customers – truly understanding what they want and need, and delivering a best in class customer experience. But all of this is not the preserve of the marketing or business insights team. I’ve challenged all of my team to know and understand our customers – only then can we as a finance function make informed investment decisions and deliver value for the business.
Secondly, I want us to continue to be mobile-first. For a number of years now, companies have moved towards quad play strategies – bundling TV, fixed line broadband, landline and mobile. And they have been bundling fixed technology because they have it on offer, not because consumers want it. We are different. We have always been technology agnostic, and we will continue to focus on offering what customers need, not assets that we have bought and need to find a way to monetize.
Today, customers want mobile connectivity. Four in five adults own a smartphone and for the first time, more people are choosing their phones rather than laptops or computers to access the internet. People are no longer simply relying on mobiles for functional calls. They are becoming the remote controls for our lives: for shopping, entertainment, business, news, home life. In fact, people are three times more likely to say they can’t do without their mobiles than a fixed internet connection.
It’s clear evidence that fixed telecom businesses need to be in mobile, whereas we don’t need to be in fixed line.
It is this mobile-first approach, coupled with our understanding of the customer that means we are the best-positioned operator in the UK to capture and drive the opportunities of an increasingly mobile and connectivity-hungry economy.
You have more than 15 years of experience in the TMT space- can you tell us a bit about your previous positions and the lessons that they’ve taught you?
I have not followed what some would call a traditional route to get to where I am today. Rather than qualifying as an accountant, I began my career as an engineer. Although I have taken a different path to most CFOs, my experience has put me in good stead – I am a strategist, comfortable with evaluating the big picture and taking the long term perspective, I am commercial and understand the drivers of value in the business, I am methodical and I am obsessive about details (and of course the numbers).
In further education I studied maths, fluid mechanics, operations research and electronics for six years, but it wasn’t long before I was focusing on corporate finance and TMT at McKinsey & Company. I spent seven years with the firm, working in Madrid, New York and London and building in-depth knowledge of the TMT sector and corporate finance. I credit McKinsey with giving me the opportunity to develop an international career, and I still count on great friends and mentors from that time.
I initially joined Telefonica in 2006 as SVP Strategy & Development for O2 Europe before becoming Chief of Staff to the Telefonica Europe CEO in 2009. In that role I developed a deeper understanding of Telefonica’s European operations and focused on stakeholder management. In 2011 I joined the Executive Committee for Telefonica Europe as Business Development Director, overseeing a period rife with key partnerships and M&A activity. Key milestones over that period were the sale of the Irish business and of Telefonica Czech Republic, but also the IPO of Telefonica Germany and the acquisition of ePlus. I then joined O2 as Strategy and Transformation Director in 2014 before becoming CFO.
Looking back on my career so far, I would highlight the importance of being open to learning and seeing that as the key source for development. And equally importantly, the value in surrounding yourself with brilliant people. Some people might find that threatening – but for me, only by being open to understanding a new angle and by surrounding ourselves with people who can bring a new perspective and different skills can we continually challenge the status quo, think innovatively and deliver for our customers.
Your appointment comes at a crucial time for O2 considering the on-going debate about the business and the upcoming spectrum, what challenges have you been faced with so far?
I have spent most of my career working in the telco sector. It’s one of the most dynamic and innovative around. But it’s also one of the most fiercely competitive and regulated markets.
People’s demand for connectivity is clear for everyone to see. Almost 40 million people have already signed up to 4G in the UK so they can work, do business, watch videos and shop on the go. Data use on our network continues to accelerate year on year. It presents a huge opportunity for businesses both within and outside of our sector, as people and businesses demand mobile-powered products, apps and services.
With Britain’s economy in a period of uncertainty, finding ways to unlock growth is vital to our ability to compete on a global scale. The digital economy is already growing around 30% faster than the rest of the economy, according to think tank Innovate UK. Meanwhile Deloitte’s 2016 Mobile Consumer survey revealed that 4G adoption has more than doubled in the past year from 25% to 54%. It is clear that mobile connectivity is the invisible infrastructure that has been powering our economy.
But for individuals, businesses and communities to use mobile connectivity to its full potential – particularly in a post-Brexit Britain – we need to set the right conditions to ensure a competitive and fair mobile marketplace. We need to work together to build a digital infrastructure that’s fit for the future.
First, we need a regulatory environment that delivers a level playing field for businesses and supports a competitive market for customers. Creating the right incentives to invest and roll out superfast networks as we move to 5G will be critical to ensuring we capitalise on the opportunity for mobile to secure our economic future.
Secondly, we need a spectrum auction process that encourages the quickest and fairest deployment of spectrum. The next auction, due in early 2017, is an opportunity to rebalance spectrum across the mobile sector. This would promote competition and benefit customers. Ofcom has made it clear that it wants a market in which four strong operators can compete fairly. Measures should therefore be taken to guarantee that the auction does not increase of the current imbalance, does not enable spectrum hoarding and does not allow for strategic bidding, which could force up prices over and above the intrinsic value of the spectrum. This isn’t about getting spectrum cheaply, we believe operators should pay the market rate. It’s about efficient and effective use of spectrum to deliver for consumers and UK plc, and help reboot the economy.
Finally, outdated analogue planning laws and regulation need to be updated so we can build the invisible infrastructure people want. As it stands, rights of access to mobile phone masts are inadequate and affect mobile phone customers when network faults need to be fixed or new sites need to be installed. Solving this issue not only requires a bold, long-term vision, it requires leadership, partnership and collective effort by industry, government, local authorities, regulators and the public. The Digital Economy Bill sets us on the right path but we all need to work together to deliver the country’s digital infrastructure and secure an economic future for everyone.
What are your responsibilities and what does a typical day in the office look like for you?
In my role as CFO I look after all aspects of Finance, Strategy and Procurement. And it sounds clichéd but in these first three months I still have not worked a single “typical” day. Clearly some activities follow a monthly or weekly cadence but every day is different in terms of how I need to support my team or my colleagues around the board table on a key negotiation, a commercial decision, or allocating capital across the wide array of demands.
I am passionate about the role of Finance in helping the business understand the interdependencies across different actions, the impact of activity across the business but not just with the goal of explaining what happened and examining past performance, but in a forward looking way, supporting decision making.
In your opinion, what might the future of financial directors look like in the upcoming years?
The digital revolution has already disrupted entire industries, shaped new operating models and created a whole raft of roles that simply didn’t exist when I first started out my career. Almost every role in every company in every sector has been touched by new technology in the last decade. The role of the CFO is no exception.
I believe that CFOs have a central role to play – I don’t just mean by appreciating the ability of digital technology to drive cost efficiencies or streamline operations. I mean in truly understanding and championing how technology can add significant value within your business model.
To truly add value to our businesses we need to be as close to our customers as we are to the numbers. That means we need to be anticipating their changing needs and responding to them quickly. It shouldn’t only be the responsibility of the customer insight teams. The modern day finance function should be equipped to understand customer demands and expectations, and we must also better embrace collaboration with colleagues from across the business. Just as we expect our marketing colleagues to understand financial limitations and implications for a business, so too should financiers stretch their creative capacity to find new and adaptive ways of doing business.
Forward-thinking CFOs should seek out creative solutions and embrace bold decision-making to overcome business challenges and deliver for customers.