Taking One2One from 4th to 3rd

The news was of cutbacks - but Harris Jones has his rivals in sight
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The Independent Online

Harris Jones leans back in his chair, the smile fading from his face, and responds grimly: "Yes." It's Tuesday afternoon and the managing director of One2One confirms that he will have to make significant redundancies.

Less than 24 hours later he greets staff and colleagues with the bad news that 900 people will have to go. It's a moment every boss dreads and the subject is clearly playing on the mind of the normally ebullient Jones. But the American-born manager insists that the "business review", as One2One describes it, is about more than just reducing headcount. It's about ensuring One2One's survival in what has become a ruthless and highly competitive market.

Britain's mobile phone industry is in a state of flux. Virtually everyone who wants a mobile phone now owns one. New sources of revenue – from transmitting internet data – are still months, if not years, away. And the City has fallen out of love with telecoms companies. Being the boss of a mobile operator isn't a job for the faint-hearted.

"We are fundamentally repositioning our business," he says. "The mobile industry has been through an amazing adolescence. But like the teenage years, it was a period of wildness and irresponsibility." Adulthood, he says, brings difficult decisions: "We know margins will be tough. We know it will be difficult to extract customers from other operators. We know that we are all fighting for the high-value customers. Given all these pressures, we have taken a very good look at our business."

Jones denies that the review and redundancies are as a result of pressure from One2One's parent company Deutsche Telekom. He admits, however, that the review is designed to reduce costs. By how much? "We're not disclosing that. Suffice to say we're talking hundreds of millions – even up to billions of pounds. It is very significant."

One2One's move to adulthood will be marked next year with a name change to T-Mobile, fitting in with Deutsche Telekom's other mobile businesses. This will herald the launch of a new service called GPRS, which will allow mobile users access to the internet at relatively quick speeds. GPRS will become the next battleground for One2One, Vodafone, Orange and mmO2.

Keen to avoid it suffering the same fate as the much-hyped but spectacularly poor WAP, One2One has delayed its GPRS launch. "If you had asked me six months ago, then I would have said about now," says Jones. "The launch will now be in the new year." The reason is that the applications and handsets, while currently available, are not "so convincing that we are ready to say: 'Hey, folks, this is a step-change in your mobile experience'."

Jones joined as boss of One2One in June 2000 after moving from US mobile company Omnipoint. Bringing his wife and children with him to the UK, he arrived when One2One still had a reputation for operating a poor-quality network. Jones argues that today One2One's voice network, after a period of heavy investment, is as good as its three rivals. But he says that One2One "is still perceived as a laggard".

With the launch of GPRS he hopes to put this reputation to bed. "We are told by our infrastructure providers that we have the largest and fastest GPRS network that has been deployed anywhere in the world. We have an absolute Ferrari of a data network sitting there for our customers."

That's all well and good, but an efficient network alone won't tempt customers to sign up to the new services. The real selling point will be applications – and fancy ones at that. On this subject Jones is cagey. He doesn't want his rivals to get a whiff of what he's planning. One2One's offerings, he concedes, will be divided into three categories: audio, video and business applications.

But what about 3G? Wasn't this supposed to be the great panacea that would keep mobile phone companies in clover for decades? The five companies who shelled out around £4bn apiece for a licence last year certainly thought so. Jones admits the hype surrounding 3G (also called UMTS) got out of hand. He now predicts it will take 10 years to recoup the licence cost.

For this reason, One2One has asked the Government for a five- to 10-year extension. Its argument is simple: other countries have done it, so Britain should follow suit – but the Government has yet to respond. Jones isn't holding his breath.

One2One plans to switch on 3G by the end of 2003, something we may not even notice. "The transition [from GPRS to 3G] will be very quiet," Jones continues. "We will be offering a similar set of applications [to GPRS] that will move much faster when you are on the UMTS network."

Despite these cautious comments, Jones believes One2One has an opportunity to shed its tag as Britain's fourth mobile operator. He won't comment on One2One's rivals, but sources close to the company say that it has drawn up plans to overtake mmO2 – which only last year was pushed down to third place by the surging Orange. Many telecoms analysts believe that five years down the line there will have been at least one merger between operators.

Some believe that One2One and mmO2 would make a good fit. While agreeing that consolidation is inevitable, Jones will only say of mmO2: "There is a lot of conjecture out there."

One2One and mmO2 are currently working together on rolling out 3G masts. One2One believes that the venture will save about 30 per cent of the £5.5bn it has earmarked for building the network. However, sources close to the project claim the venture has already run into difficulties. One2One and mmO2, it is said, are squabbling.

Jones concludes: "The two businesses will have to learn to work with each other. Squabbles? I think that is a bit strong. Was it ever going to be absolutely perfect right out of the gate? Never. We are having to merge our thinking and there is going to be some reasonable conflict. I am comfortable with the progress we're making." But the hardest test for Jones and One2One is yet to come.