Strategy & Operations » Leadership & Management » Interview: O2 CFO Mark Evans

Interview: O2 CFO Mark Evans

O2's finance director says that a financial skillset will help you go far in his business

PUT BLUNTLY, it looks like Mark Evans made a sideways move to become O2’s CFO, having held the same role at Vodafone for seven years until 2012.

Evans, in the matter-of-fact and open manner in which he answers all his questions, says: “I think so. I love this industry.”

While Slough is not known as a cultural epicentre, that hasn’t stopped many IT and telecoms businesses taking root there, and didn’t stop Evans joining O2 or – despite his words – seeing it as a step up. Having seen its ultra-modern office space, and what he describes as its position as the “brand leader in the UK”, his decision was clear.

Where the two roles noticeably differ is to whom Evans answers. When he was Vodafone UK’s CFO, its head office was down the corridor making it a short walk to speak to CFO Andy Halford. However, O2 is the UK subsidiary of Telefonica, based in Spain. Popping down the corridor to speak to group CFO Pilar Lopez is just not going to happen like it would have at Vodafone. But Evans says that the experience is “similar”.

The group appreciates that “not one size fits all”, allowing local divisions some latitude – particularly if the division does the hard yards by hitting its targets. For example, the O2 brand is unique to the UK. “They recognise [its strength] is to the shareholders’ advantage,” says Evans.

He reports to the UK CEO, Ronan Dunne, but understandably a ‘matrix ‘ organisation structure sees him working closely with the European and global CFOs.

But, can you build rapport with someone thousands of miles away? On the formal side, Evans reports to his bosses, but “if you left it purely to that mechanism you wouldn’t build a great rapport”. So the UK involves its masters by engaging them in the decision-making process, “rather than, ‘Here are the actions we’ve taken. This is the outcome’.”

In what has been a tough year for the group, and UK subsidiary, there appears to be some light at the end of the tunnel. O2’s revenue slide is easing, with it posting €7bn (£6bn) in 2012, with operating income before depreciation and amortisation at €1.6bn. The group as a whole saw business unit value readjustments wipe €2.5bn of its €6.5bn net profits.

An area in which Telefonica units still operate separately is its internal business and finance technology. But that is to change. The group has standardised its reporting system, but now comes the big rollout of an SAP platform which will begin in Germany.

Where other businesses have a finance department, O2 has finance and professional services. The function handles core accounting, reporting, tax and treasury. But, Evans is also in charge of a division known cryptically as ‘commissions’. However, it’s not particularly sexy: this finance team oversees and administers the contracts that have been agreed with its partners and retailers.

Split loyalties

Of more interest are the finance people that sit in business partnering teams alongside O2’s other divisions and help them understand the financial implications of their decisions. This includes a consumer team, a business team and a digital team. But while they may report back to Evans, where do these teams’ loyalties lie?

“You often find that they want to be loyal to the business partner they serve and I think there needs to be a constructive working relationship – but we’ve all got a role to play and sometimes they’ll be there to challenge the decision-taking,” says Evans.

The most unusual unit, in a finance sense, that sits under Evans’ jurisdiction is the “specialist technology team”. Many of the staff have an engineering background, rather than accounting – but are “bright financially”. They support making its network function for customers, but crucially with the lowest cost.
“Like most good companies, great decisions result from when you partner well together – it’s one person who makes a judgement call but it’s when you are able to draw two or three skillsets together from across the company,” says Evans.

But in a well-oiled machine, particularly one taking on a global finance platform, the questioning moves to that of outsourcing.

O2’s payroll function is outsourced, and “we’re exploring where that line should be drawn”, says Evans. “The concept of shared service in a global organisation is certainly one that can bring about benefit.”

Roll call

While such moves can incur efficiencies, in such circumstances the spectre of job losses can loom. Evans, understandably, doesn’t talk about whether job losses are possible, but says that roles will “change”: “O2 has always tried to protect the employees of the company as a priority but, like every other business, we can’t sit here and guarantee that the same role will exist in perpetuity.”

While “protecting employees” could be taken as glib, Evans points out O2’s finance function produces what he describes as “more rounded finance professionals”.

“Probably more people leave finance and join the wider business, in O2, than any other organisation I can think of,” he says.

Evans also points out that there is no fixed timeline to rejigging parts of finance: “The direction of travel will support it from behind, and much will depend on the existing objectives of the operating business unit. Is that the key priority for us? Will that add value to the shareholder or are there other priorities? And if there are, will that be taken into consideration?

“So we have outsourced a number of functions and will continue to look at the balance of what should be in-house. I’m sure it will evolve – but we’re not going to be bound by any rigid targets or deliverables.”

Finding his voice

So we know how Evans works with his bosses, and we know that a strong structure exists around O2’s finance. But where has he had his input since taking on the role at the beginning of 2012?

The voice of finance around the table has grown during his tenure, Evans believes. How much of that has come through during Evans’ personal discussions with management in the decision-making progress, or through a changed attitude of his team, is unclear. But Evans says that a step-change has occurred.

“If you have a subservient finance function that’s here just to address the needs of its customer but without challenging in a constructive way, you could end up with sub-optimal decisions,” he says.

“I would like to think that during 2012, there has been more of a balanced dialogue behind some of our investment decisions and that we’ve had some input on that debate.”

Did a stronger attitude meet with a frosty reception? He believes not, citing the senior individuals in the business that started in the finance function. “Some of the most senior individuals across the group have a financial skillset and discipline,” he explains.

For Evans, the biggest change in his business unit has been the launch of Smart Steps, born out of Telefonica Digital. The aim is to capture much more detailed data about customer behaviour in tracking their footfall and purchasing patterns. Essentially, it is a corporate service.

But the technology must work, the customers must demand the service, and the handset must deliver a good user experience. This sounds obvious, but often one of these crucial aspects is missing and may take months or years to solve – or be superseded.

Evans, for his part, uses an iPhone 4S – packed with O2 features. Of most interest is the O2 ‘wallet’, which doubles the phone up as a payment device.
Candidly (and diplomatically), he says that “I don’t think anyone yet has quite perfected it – [but] you realise it will take place and will explode”.

But O2, and others, must make this an easy, effortless process. The O2 wallet is “probably the first major commercial launch as something that is really at the start of that process”.

Evans obviously isn’t in a position to be a fuddy-duddy when it comes to his company’s product, and he has a look that you would diplomatically describe as that of the new generation of FDs: Younger, fitter and sans tie.

In fact, Evans doesn’t look old enough to have twin boys that have headed off to university. But he is, and they have. But not wanting things to be too quiet, his family has expanded with the arrival of Jessica, now 28 weeks old, “and that’s been great”. But an FD of an operator would be expected to be on call 24-7, as Evans breathes out: “It’s a big job.

“You’ve got to decide how you want to live your life and create space and time. I’m an early riser so the alarm clock goes off at 5.30 in the morning – but that’s self-inflicted. I will then hit the gym and that perhaps clears my conscience about being office-bound, I’ve at least done some physical work. I’m usually in the office by 7.30-8 o’clock.”

But it’s not necessarily Evans trying to be macho, and he reins in talk of working 24 hours a day.

“I’d like to believe, particularly with the arrival of Jessica, that I can get home a number of days a week to see her. Isn’t that one of the fantastic things about the technology that we offer – that we can give people that flexibility of how they want to live their life?” he asks.

“That balance will vary for every individual so you’ve just got to decide whether you’re comfortable with the decisions you’re making for your life. I am for mine and that’s why I like this industry and I like the flexibility.”

Waxing lyrical about accounting standards

CIMA-qualified Evans doesn’t regard himself as the “chief accountant” or “expert on financial standards and accounting”.

“I need to be knowledgeable but I have members of the team that are far more up-to-speed than I would be,” he says.

Evans sees his role as that of providing the right stewardship and “financial guidance”, such as understanding the commercial performance of the business. The standard of which O2 is most mindful is the one concerned with revenue recognition, “and whether that will change the shape of our industry”.

O2 auditors Ernst & Young pass on the business’ feedback on the matter to the accounting institutes. His relationship with the auditors is a good one. While all talk is of mandatory tendering and making the auditor/FD relationship more transparent, Evans believes E&Y must feel able to push, but its knowledge of his business and the industry defines and influences that ability.

“If they understand our industry and our business, they’ll probably appreciate why some of the options we’re putting forward are appropriate,” he says.

“They do [push] and I like that because, to some extent, they’re my conscience, making sure that I am compliant to the standards and that the standards do move. They’re the experts so they should rightly come in here and assess whether they think something is appropriate or needs to change and then we can have that discussion.”

CV
Mark Evans
2012 – present CFO, Telefonica UK (O2)
2005 – 2012 CFO, Vodafone
2001 – 2005 Chief financial controller, Vodafone
1994 – 2001 Group financial controller, Virgin Media

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