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Friday, 18 January, 2002, 09:07 GMT
O2 prepares to hit the streets
Graphic showing Peter Erskine, together with old and new logos
BT Cellnet is about to be transformed into the quirky brand O2. BBC News Online's Briony Hale interviewed Peter Erskine, the man who hopes to breathe oxygen into the new venture.

Peter Erskine is slightly late. He has just flown in from a week-long pan-European roadshow.

There's been a lot of persuading to do recently, telling the world that MMO2 - the mobile phone firm spun off from BT - is a good idea.

Changing into O2,
millions of users
BT Cellnet: UK, 10.9m
Viag Interkom: Germany, 3.4m
Telfort: Netherlands, 1.3m
Digifone: Republic of Ireland, 1.1m users
Genie: mobile internet, 5.8m
First BT's own workers and an angry union needed convincing. Then it was investors.

Most recently it's been negotiating bonds.

But all that is just the start of Mr Erskine's path down the persuasion trail.

Now comes the exciting bit. In just a few months time, MMO2 must turn its O2 brand into a household name, synonymous with all the best bits of BT Cellnet.

Mr Erskine's marketing gurus and brand specialists have been working frantically to find the best way to handle the transformation.

"The plans are coming together," Mr Erskine said.

"We're still working out the best way to do it, but our goal is that our businesses in all countries will be branded O2."

"Once O2 starts to emerge, our intention is that people become very aware of the brand as quickly as possible."

Money persuasions

Ditching the BT Cellnet name may prove to be somewhat of a relief - it simply has not had the same sort of appeal as the likes of Vodafone and Orange.

Banner showing O2's core values
O2's vision: "Enriching lives, whatever they're doing, wherever they are"
"O2 seemed better - looked a stronger brand name," said Mr Erskine, without admitting any dislike for BT Cellnet.

"O2 has researched very well - people don't need to be taught to spell it - they all seem to recognise it across Europe, so it's a good name."

Despite the imminent change, BT Cellnet is still advertising heavily at the moment.

That's because there's another equally crucial battle of persuasion underway - persuading existing customers to spend more money.


Our focus is very simple - we want the customers who want to use the service a lot

Peter Erskine

"Our focus is very simple - we want the customers who want to use the service a lot," he said.

MMO2's marketplaces are pretty much saturated, and so the race is on to convince customers to either upgrade or tap into new personalised services. Preferably both.

And Mr Erskine is banking on data - text messages, football or share price updates, news content - in order to secure that additional revenue.

Teenage ambitions

Data already accounts for 10% of MMO2's revenues - and this is expected to have more than doubled by the end of 2004.

Peter Erskine, chief executive MMO2
Peter Erskine: The real pick-up with data starts around now

"By the end of the decade we're quite confident that data will be 50% of our revenues."

Teenagers are the keenest messengers and information receivers so far, eagerly snapping up content such as showbiz gossip, weekly joke alerts, high speed games or cocktail recipes.

"But teenagers grow up," said Mr Erskine, citing Coca Cola's success in targeting youth and watching them guzzle Coke for a lifetime.

"The real pick-up with data starts round about now with 2.5G launching," said Mr Erskine, referring to the faster network with continual access which was rolled out to the general public last March.

Peter Erskine
Age: 50
Born: East London
Psychology degree
Previous jobs - marketing at Mars and Colgate-Palmolive
Joined BT in 1993
Managing director of BT Cellnet since 1998
Managing director of MMO2 since its creation in July 2000

Meanwhile, the Isle of Man is being used to test 3G - an even faster service that even will allow the transmission of video clips.

"We've proved the technology, now we can get on with understanding about customers and finding out what people are willing to pay."

Vulnerable?

Research so far has found that sports results, high speed games, and e-mail on the move are the most popular features for the islanders.

But there'll be plenty more time to canvass opinion - 3G is, because of a hold up with handsets, not expected to be launched on a wider scale until the first half of 2003 .

Stockley park
Stockley: home to BT, M&S, Apple, Polaroid and Lucent

It must be an anxious time because 3G - and whether people will be prepared to pay for the services that cost so much to develop - is the main reason for the boom and bust share fluctuations of the telecoms sector.

And now MMO2 has become a pure mobile player, the take-up of 3G is all the more crucial to its future.

But Mr Erskine denies that this makes the company more vulnerable.

"What's so great is the absolute focus. We've upweighted the whole calibre of how we run the business by being separate [from BT's core business]."

It's easier to weigh up investments, easier to get better management and incentivise them, he explains, and easier to compare performance with key rivals.


By the end of the decade, we're quite confident that data will be 50% of our revenues

Peter Erskine

Indeed, Mr Erskine's speech is peppered with thoughts about how Vodafone is getting along.

In order to reduce the debt mountain of the parent company, several of BT's stakes in mobile phone firms had to be sacrificed to the more financially sound Vodafone.

And that has left MMO2 small enough to be an attractive takeover target.

Investor confidence returning

But Mr Erskine dismisses that sort of talk to sing the praises of being a medium-sized player instead.

"We're an uncomplicated scale, it's a manageable scale and having control of that scale is very important."

"We obviously want to grow bigger, not geographically, but by growing our existing businesses bigger," he added.

MMO2 share price
Float price: 68p
High: 93p
Low: 72p
Current: 86p

And shareholders - so far at any rate - appear to have liked what they have seen.

"I think investor confidence is coming back slowly," said Mr Erskine, sounding a note of caution about the heady share price heights reached when not valuing mobile phone firms according to profitability.

"I think the industry is much better off now - it knows that it's got to make sensible returns."

"Frankly, we know that we're only as good as last quarter's results," - which in this case means operating losses of 94m.

There's going to have to be a lot more talking - and messaging - done in order to turn MMO2 into a money spinner.

 WATCH/LISTEN
 ON THIS STORY
Peter Erskine, chief executive MMO2
"People recognised it - it's a good name"
Peter Erskine
"We've got a good footprint in Europe"
See also:

05 Dec 01 | Business
MMO2 admits further 3G delay
25 Nov 01 | Business
MMO2 mulls German exit
19 Nov 01 | Business
Strong start for BT's MMO2
23 Oct 01 | Business
MMO2: A risky investment?
03 Sep 01 | Business
BT unveils new mobile brand
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