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MediaJune 9, 2016

The Sky and Vodafone deal: a modern business fable

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The only universally understood business in Auckland today is housing. So what better metaphor for Tim Murphy to use to describe the motivations and implications of today’s Sky-Vodafone deal.

The Parable

Vodafone New Zealand and Sky TV are happy next door neighbours. Two houses.  One with a view, the other with a sprawling yard. Both valuable. Both relied on by the passing public for access to the beach.

Sky wants the view too, so makes a generous offer to buy out Vodafone NZ. And it does. But Vodafone’s parents overseas want their child to stay living in this market so decide to stump up the money to invest in both properties, unite the title, and let the parties stay living in harmony next to each other. Sky is left with just under half the overall value. The fence is torn down, Sky gets to see the view and go swimming and Vodafone NZ gets the run of the vast property.

The parents get the benefit of any capital gain in the years to come. The other neighbours are promised there’ll be no big fences and everyone will be welcome to access the beach. There’ll be savings for the two households.  Two gardeners, two arborists, two pool cleaners will become one. Sky will be able to use Vodafone’s drainage network. Vodafone will get to share the Sky family’s home entertainment centre. And the whole suburb will benefit from the splendid combined property.

Vodafone has already bought up neighbours like Telstra, who had in turn bought their neighbours, Clear Communications, and iHug and World Xchange. Eventually those houses disappeared. On Sky’s other boundary, homes built by Netflix, Lightbox, TVNZ on Demand and other wannabes invading the neighbourhood need to be somehow kept out of public view.

This sale and purchase is probably a bit of a defensive move in general.

John Fellet, Peter Macourt and Russell Stanners at the Vodafone / Sky merger press conference
John Fellet, Peter Macourt and Russell Stanners at the Vodafone / Sky merger press conference (photo credit: Tim Murphy)

The Press Conference

And that in a modern Auckland housing fable, is kind of what’s happened with Vodafone NZ and Sky buying each other.

Yesterday’s press conference in the splendour of the 32nd floor offices in the Vero Building of Craig’s Investment Partners, was an unusual affair. The parents, Vodafone Plc weren’t in attendance, leaving their son, local CEO Russell Stanners flanked by three members of the Sky family.

Stanners who will take charge of the combined entity was strangely separated at the table from his old mate and the Sky patriarch John Fellet by Sky’s chairman, Peter Macourt. There was no overt buddying up. It was a very grown-up, very male affair. Stanners, a habitually tieless executive, even draped himself in a Windsor knot to oversee proceedings.

It is a big play. Sky paying $3.4 billion for he NZ Vodafone in cash and shares. And competitor Spark,with its Lightbox subsidiary, seeing its shares hit in value two days in a row. In short, Stanners and Fellet explained, they could get benefits of around $850m from revenue gains or cost savings by coming together.

The communications company would get great entertainment and sports video content for its customers and the pay TV company would get access to cheaper set-top boxes and mobile and broadband channels to sell its content. Stanners will be overall chief. But Fellet, a chief executive with singular dominance over a big listed company in the New Zealand market, will also be a CEO of content and entertainment. Fellet has always spoken of ‘me’ and ‘my’ when referring to Sky and continued that yesterday, adding ‘his network’ when talking about Vodafone and Stanners.

The new business will be able to move from a triple play – its current commercial association offering voice, Internet and video, to a ‘quad play’ which Fellet explained would add mobile phones. It fell to the noted business commentator Rod Oram to ask the obvious question: why did Sky have to buy Vodafone NZ first, then be half-bought out by Vodafone Plc? Why didn’t Vodafone senior just buy Sky?

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The new company line (photo credit: Tim Murphy)

The answers weren’t entirely clear. It did allow Vodafone to hold 51% of the combo and that meant the company could be included on its international books.

Someone asked about job losses but it seems, as usual, there’ll be too few to mention. The two operations are so complementary and distinct there is little overlap.

What’s in it for the consumer that they can’t get now if customers of both Vodafone and Sky?  “More innovation, new devices, new networks” said Stanners. Would consumers have to be Vodafone customers in future to watch the rugby? No. Would Sky still offer its content to others, like 2 Degrees? Yes. Would Vodafone still deal with Netflix? Yes. Could Spark seek Sky content? “Yes,” said Fellet. “I’ve been trying to sell to Spark for five years.”

Is Vodafone a majority shareholder in a listed company in other markets? “Yes,” Stanners said, offering our fellow developing nations of South Africa, Kenya and, in the past, Fiji. No one asked if Sky, which has been in a PR funk of late, will lower its prices to warm the hearts of those paying $100 a month but who see great stuff on other, on-demand services.

Sky TV will continue its use of satellites under a deal running until 2021 – so dishes will remain. Fellet did say Sky will look to add Internet-only packages, implying they might be cheaper. Stanners flagged premier content being more available to his mobile customers in ‘the medium term’.

The combo company would help accelerate uptake of fibre, and that would have a wider national benefit. Between them they serve 3.7 million New Zealand customers. But those hopes were as consumerish as it got.

There will continue to be two brands under one corporate umbrella. No ‘Skodafone’. One big property under one ownership. With, on yesterday’s evidence, not even much of a taste for renovation of the two homes.

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MediaJune 9, 2016

Podcast: Business is Boring #6 – Dion Nash on zigging when others zag

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‘Business is Boring’ is a new weekly podcast series presented by The Spinoff in association with Callaghan Innovation. Host Simon Pound will speak with innovators and commentators focused on the future of New Zealand, with the interview available as both audio and text. This week: Dion Nash, creator of male cosmetics brand Triumph & Disaster.

Triumph and Disaster is a real kiwi success story, doing the most untraditional of kiwi things: selling blokes moisturiser and skincare. They’re fantastic products, helmed by Dion Nash, well known as a former international cricketer, but also a long time marketer, working in with some of the iconic brand-led New Zealand companies, with stints at Charlie’s and most importantly time with Geoff Ross and the team at 42 Below. Along the way Dion launched a water brand, 420, learnt about owning and making a business happen and nurtured his dream to start something of his own that wasn’t a vodka you had to drink to sell!

Dion is a top bloke, who has helped grow a great business culture and who keeps an eye out for other business people getting going, having given me some great guidance in the past and being someone that thinks deeply about business and shares the highs and lows to help people know what it’s really like.

Either download  or have a listen below, subscribe through iTunes or read on for a transcribed excerpt.

You worked with Geoff Ross at 42 Below and you’ve spoken in the past about how his approach to business was really inspirational and the way that you were able to create 420 Water while you worked there and learn more about the ownership side of things. What is the importance of mentors and people being able to extend people?

They’re huge. 42 Below was my business 101, having come from a complete cold start. In terms of mentors, there was Grant Baker as well and Steve Sinclair and Geoff. They were an amazing group and they all had different skill sets. It was a hotbed of learning, really. A really exciting business and time to be involved.

There were guys like Stefan Lepionka at Charlies who I have huge admiration for how he ran his business. You pick up bits and pieces and I still see those guys. Another one would be Don Braid and Bruce Plested who run Mainfreight. They’re all quite different businesses and those guys all give their time willingly and openly and they love to check in and see how you’re doing. Quite often you can just sit down and have a cup of tea or a coffee and you’re not really even sure what your problem is but by the end of the coffee you’ve worked something out. Because they’ve been there, they understand it. And just by talking, they raise things that are probably on your mind.

It’s as simple as that and sometimes it’s more direct. Even just simple things that you carry with you, like I remember Bruce Plested from Mainfreight always saying “Just keep taking small steps forward and the big problems become much easier to deal with if you keep walking towards them rather than stopping and looking at them.” Shane McKillen, who was another guy at 42 Below, he always said “Business is just solving problems.” I remember both of those things all the time because there’s hardly a day that goes by where there’s not another issue to deal with. If you let that overwhelm you, you’re not in the right place. You have to have coping strategies and a belief that that’s just what you do.

You mentioned a couple bits of advice. Do you have  some words you live by or are there a whole raft of these things that you check back in on? Have you got some favourites that you’d share?

Jonty Kelt, who is another I check in with, he’s based in New York. Again, he’s in a totally different type of business, it’s all tech and a great Kiwi success story based out of New York. He always said “Business is about survival and if you can out-survive your competitors or your enemies, hope for something good to happen.” I know that sounds a bit flippant and a bit basic but really, sometimes you can over-complicate it and I think if you can keep staying alive, keep focused on getting better, always getting better at the things you do, then you’ve got your best chance.

That’s the biggest challenge in business, isn’t it. You see all the advice and it says “Just keep going” and you think, how much survivor bias is there in this? How many people making fish ice cream kept going and failed miserably? Is that what part of the benefit in checking in with people who’ve been successful is it reassures you you’re not crazy when you feel crazy?

I think you have to have a little bit of a self-check. I think generally, to get a business off the ground you have to be a half-glass-full type of person but you do have the ability to temper that with taking the rose tinted glasses off sometimes and going “Am I just fooling myself here?” I’d be a liar if I didn’t say you had the odd night where you wake up in the middle night and the rose tinted glasses are well and truly off. But you always wake up the next day going nope, that’s all cool, got that covered. But you do need to have that balance and sometimes the people can help you.

A great thing I did pick in cricket was one coach, when I was about 16, he said to me “In the end, Dion, you have to be your best own coach.” And I think that’s a piece of advice I’ve always carried with me and it’s as true for business as it is for sport. In the end, loads of people will give you advice but no one knows your business like you, no one knows the vision of what you’re trying to create quite like you. As much as you try to articulate it to staff, to mentors, or to investors or whoever, no one can really see it as clearly as you can. So that’s part of your job as the founder or the leader, to make sure you’ve got your eyes on that prize. And I think the moment you stop coaching yourself and being answerable to yourself, that’s when you start losing the thread.

Let’s look at the thread. You were developing the idea of a men’s skincare range well ahead of the curve. You identified a gap between the hyper-masculine Gilette razorblades and jetplane make grooming and very metrosexual. That was years in development. Since launching, how’s that gone?

The conversation is entirely different. When I first started the over 40s were really a little confused. They were open to talking about it but they didn’t really know what they were using, very few did anyway. Guys from 30-40, they just didn’t want to engage with you on the conversation. They felt that there was not a conversation to be had there. But the guys from 20-30, they were like “oh yeah I use this and I use this and I use this”. So they were open to it. 

I would say it’s entirely changed so now there’s very few people who’ve taken the mickey out of us in the last two years. It’s just not a thing anymore. In fact, the odd bloke who tries to have a go or say something, they’re the dick now, you know? So that’s a nice change. It feels like we’ve been part of that and maybe we’ve caught a bit of that.

But equally I think we’re at that point now where when you have some of the big brands out there having bearded guys with chainsaws selling man cream and stuff, I think we’ve intuitively pulled back from saying “man” on everything. One of the great things Geoff Ross was always about was zig when everyone else is zagging. The one thing as a small business and a small brand, and I think this is true for just about all New Zealand businesses, is you’re boutique. And part of being boutique is that handmade artisan nature to it and part of that is authenticity. I think that the more you can continue to have an authentic story and maintain that and not fall into the trap of what everyone else is talking about, the more authentic you can be.