Business Analysis: Stelios hopes his 'easy' life will get a lift from launch of mobile brand

After the flop of internet cafés and cinemas, entrepreneur looks to telecoms for success
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Stelios Haji-Ioannou's odyssey to make his "easy" brand a serious rival to Sir Richard Branson's Virgin empire took another lurch forward yesterday when he announced plans for easyMobile - bringing to 12 the industries that have felt the effect of his entrepreneurial zeal.

Stelios Haji-Ioannou's odyssey to make his "easy" brand a serious rival to Sir Richard Branson's Virgin empire took another lurch forward yesterday when he announced plans for easyMobile - bringing to 12 the industries that have felt the effect of his entrepreneurial zeal.

He revealed an agreement to license the easyMobile brand to TDC, a Danish telecoms company, that will launch mobile operations in 12 European countries, paying a royalty to Stelios for each customer signed up.

But while Stelios remains an optimist about the lengths to which the "easy" brand can be stretched - or "extended" in his words - the easyGroup that controls his ventures, and of which he owns 100 per cent, is going through tough times.

The flow chart shows the easyGroup empire based on the last available Companies House records, which go back only to 2002 for most of the businesses. It also details the new ventures which Stelios has promised to unleash, including easyPizza and easy4men, a toiletries range.

Few, if any, of the easyGroup businesses launched since easyJet in 1995 are making money. Two in particular - easyInternetcafé and easyCar - have been soaking up capital from Stelios's main source of cash, his remaining stake in easyJet. Both were formed more than five years ago but are still proving a drain on resources.

"They are not they yet but they are getting there," Stelios said yesterday when asked when they might break even.

Stelios has raised £31m in the past year by selling shares in easyJet to fund his loss-making ventures and establish concerns such as easyCinema. As far back as November 2001 he raised £63m from easyJet share sales to invest in new projects including his easyInternetcafé which he has since described as "the most expensive mistake of my career".

However, the publicly quotedno-frills airline, of which he and his brother Polys, and sister Clelia, own 41 per cent of the shares, has itself been going through difficult times of late, issuing profit warnings and generally being buffeted by intense price competition and soaring fuel bills.

Stelios, who has the legal right to reclaim the easyJet chairmanship which he renounced in 2002, has thought seriously about buying back the whole of the airline and taking it private to protect the ongoing value of his main store of capital.

Even his latest mobile phone venture will have to overcome some major challenges before paying customers can start to sign up. For instance, the planned mobile phone business has no network agreement in the UK, so Stelios has no means, as yet, of actually carrying calls.

He is in talks to piggy-back on the network of Vodafone but no agreement has been reached.

Orange, the France Telecom subsidiary, is objecting to easyGroup's planned use of the same corporate colour to brand its new mobile venture. Talks are under way between Stelios and the French-owned operator to try to avoid a messy legal wrangle and work out who, exactly, has the right to use orange as their corporate colour.

The French, however, are sounding ominously stubborn. A spokeswoman for Orange said yesterday: "It is creating confusion. We will do whatever is necessary to protect our customers' best interests."

If going to war with the French was not enough for the Greek shipping tycoon, his phone proposition also faces some tricky technical problems.

Just to round off what is proving a uniquely challenging time for the Monaco-based heir, his strategic plans for Stelmar Tankers, the shipping business where he controls a 27 per cent stake, have been thwarted by the rest of that company's board.

But despite all these distractions, Stelios has still found time to work up plans for easyMobile, even though some consumers will react with incredulity that a company can still find the commercial rationale for launching yet another mobile phone service in the already overcrowded UK market.

So what exactly is Stelios proposing and what difference will it make to the easyGroup's fortunes? "This business model is predicated on the fact that 90 per cent of the population own mobile phones in the UK," Stelios said.

"It couldn't have been launched 20 years ago or even five years ago then Virgin Mobile launched. Before, the business was about subsidising handsets to get them into the hands of the consumer. Now we are separating the provision of handset from the provision of airtime."

In a nutshell, easyMobile will buy capacity on an existing mobile network at wholesale prices and then retail that airtime to consumers using the internet instead of high street shops, making a margin in the middle.

Consumers will receive a new SIM card from easyMobile which they just pop into their existing handsets.

It all sounds terribly simple and in theory it is. One major problem, however, is that handsets are generally sold with a contract to a particular network operator and so are locked-in. Stelios - who admits he is no expert - was at a loss yesterday as to how easyMobile would overcome that problem.

Signing up with an existing network operator willing to carry easyMobile calls will not be a shoo-in either. Hutchison Whampoa's "3" network has plenty of capacity but is not going to help Stelios under cut the industry, a role it has already reserved for itself.

It is hard to see Orange carrying another orange mobile service while mmO 2 already has Tesco as a partner. T-Mobile has Virgin, which leaves Vodafone.

The world's largest mobile company is hardly desperate for the business. It could do it, but may baulk at the rock-bottom price that easyMobile is willing to pay for access to its network.

Stelios needs to keep costs to a minimum to protect wafer-thin margins and preserve his return on capital - the financial measure he respects most.

One advantage for Stelios with easyMobile is that he is not investing large amounts of capital in the business, merely lending his brand. This is the legacy - assuming it gets off the ground - that easyMobile may give to the easyGroup.

"I'm getting better and better at not investing in the capital assets of a company so the higher my return on capital employed," Stelios said.

His rule of thumb for a company to break even is three to five years so the likes of easyInternetcafé is overdue an economic return. But Stelios has shown guts to keep so many "easy" businesses going.

However, if a high-profile easyGroup business should fail completely then Stelios runs the risk of damaging the brand elsewhere. This is why he has continued to invest in internet cafés, for instance, as an insurance policy for the brand elsewhere, as much as trying to turn the online experiment into profit.

"I believe in luck," Stelios said. "I was lucky enough to be born into a wealthy family and a couple of times in my career I have been in the right place at the right time. I believe there is a window of opportunity in mobile telephony."

Certainly if easyMobile is going to produce the sort of returns that other easyGroup companies have so far struggled to do, he will need all the luck he can get.