There is a well known saying at Cable & Wireless that goes, “Jamaica is the battleground and also the graveyard for Chief Executives!” The last casualty, CEO and President Rodney Davis, exited the business last year and was preceded by Errald Miller, Gary Barrow, and Jacqueline Holding, all within a space of 7 years following liberalization.
A few weeks ago, David Leshem wrote a very interesting blog titled “Where revenue assurance stops, a bedtime story”. The article reminded me when Davis was at the helm in Jamaica, and in a desperate attempt to claw back market share in both the mobile and fixed-line businesses, he introduced a mobile tariff called “10/8” and also a pre-pay pots service marketed as “homefone”.
Davis was eventually axed after a disastrous first quarter in 2007, posting significant losses owing to both of these products. In the case of the “10/8” mobile tariff, the profit margin was so low and the volume of off-net traffic to local competitor, Digicel, was always going to be a problem to commercially sustain. In the case of “homefone”, the pre-pay pots service was positioned in the market with free installation, which had disastrous consequences.
The “homefone” service was in fact hugely popular amongst the low income earners in Jamaica, and over 120,000 new subscribers applied. After putting in new line plant to accommodate growing demand, the return on investment would not break even until year 5. Most “homefone” customers could not even afford to make regular calls anyway, but at least they all had shiny new phones, and some even had multiple phones in each household for good measure. After all, everything was free, free, free, even free installation! Subsequently, opex and capex lines soared without any material increases in revenues and brought Davis’ tenure to an end.
This brings me back to David Leshem’s original question in his blog, “Whose role is it to make sure that the marketers come up with the right tariffs?” Well, I often ask myself this question over and over because I was Head of RA at Cable & Wireless International at the time. Perhaps I should have done more? Could I have done more? Who else in the business was noticing this? Why do we continue to provide these services when there is no payback? Why are these tariffs so low? The questions would continue long after the event.
As RA practitioners, we are here to inform the business that these things might happen but when you have a desperate CEO trying to make his numbers before his final showdown at the O.K. Corral battleground, then all rationale (including RA advice) goes out the window. As it happens, Davis was not the only casualty in all this, and the axe later fell on the entire London HQ.