The new boss is determined to see things for himself
Jeffrey Hedberg was late for our interview because a truck jack-knifed on the Joburg-Pretoria highway, creating a monster traffic jam.
“And I thought Boston was a tough environment,” he laughed when I commiserated with him about having to use this hellway on a daily basis.
There are consolations, of course. For an ice-hockey man the weather was just about right.
“When I woke up and saw the snow in my garden this morning it reminded me of home.”
Hedberg seems to have a marvellously efficient staff because I was informed of his problems immediately, plans were altered and there was none of the mindless waiting around without knowing why, which is what too many local chief executives put one through.
Hedberg came to South Africa a year ago to turn around an ailing Cell C, and when an American voice put me through to the CEO it brought back memories of another American who came here in the role of saviour a few years back.
Coleman Andrews wasted no time surrounding himself with supposedly hot and terribly expensive young consultants from the US, and I wonder how many Hedberg has brought over.
One, he says. A “Finnish gentleman” from London.
Hedberg’s arrival didn’t come a moment too soon for a company which had clearly lost its way and was losing both customers and money.
Moody’s put the boot in last week, saying that Cell C was close to defaulting on its loans.
“We are not close to defaulting in any way, shape or form,” retorts Hedberg sharply.
“We have strong support from the shareholders and we are improving substantially the performance of the business.”
What an earth could the reputable ratings agency have been talking about, then?
“We do have a stressed balance sheet, we are very leveraged,” concedes Hedberg. But he takes “strong exception” to Moody’s comments and their London office has been notified.
They say Cell C doesn’t even have enough cash to pay the interest, I add, always pleased to rub it in if I can.
“We have more than enough,” he snaps.
And “strong support” from the shareholders, he repeats.
Which is interesting in the light of reports that Saudi Arabia’s Saudi Oger Telecom, which owns 60% of Cell C, had lost faith in the company and the South African market and were in talks aimed at selling out.
It’s not going to happen, insists Hedberg.
They’re happy that Cell C is “for the first time doing the things it has said it is going to be doing”.
Are they in talks?
“They have terminated discussions on any sale.”
So they were in talks?
They had been “listening” to “largely unsolicited” offers “because they see Cell C as a company that is in a very difficult environment and hasn’t had a very strong track record”.
But that’s all changed now.
“They’ve regained their faith in the capability of the management team to execute on the strategy that we’ve put in place.”
When Cell C started up five years ago under Hedberg’s amiable but perhaps too easy-going predecessor, Talaat Laham, they predicted confidently that they’d have 20% of the market wrapped up by now. In fact it is 8% .
Were the difficulties of the local environment underestimated?
“It would be difficult for me to give you the perfect and precise answer,” says Hedberg, presumably mindful of the fact that Laham is now the chairman.
But what he can say is that before he came to Cell C he was responsible for all the international activities of Deutsche Telekom and before that of Swisscom International.
“And this has to be one of the most biased regulatory environments in favour of the incumbents that I have ever seen.”
Before Cell C came into the market, interconnection rates were hiked by close to 600%.
“A welcome-to-the-party type of regulatory environment,” he comments sardonically, which made it impossible for the newcomer, 88% of whose traffic terminates on MTN, Vodacom and Telkom networks, to cut costs enough to entice new customers in anything like sufficient numbers.
The interconnection fees charged by the incumbent giants bear no relation to costs and have been called extortionate.
Until they do reflect actual costs, local consumers will continue to pay among the highest cellphone charges in the world, says Hedberg.
He intends to ensure that South Africa’s policymakers know that the best way to reduce prices is to “ensure that the interconnection environment is based on cost rather than smoky meeting rooms”. But don’t hold your breath.
The regulator, the Independent Communications Authority of SA, is “very well managed by Vodacom and MTN”, he says darkly.
“I know from Deutsche Telekom that there are two things you need to get right if you’re the incumbent operator.
“One, you need to be in a position to manage the regulator, and secondly, be in a position to reduce costs.
“With respect to the former,” he continues pointedly, “MTN and Vodacom have done a very good job.”
Hedberg emphasises that he doesn’t want to lay all the blame for Cell C’s lacklustre performance at Icasa’s door.
Cell C made its own mistakes.
It tried to be everything that Vodacom and MTN were, with a fraction of the resources and market.
“We’re going to die if we try to do everything they do.”
Its new strategy is to focus on the lower end of the market, bringing services to customers which are “not in the brave new world” category of 3G HSDPA but offer “basic voice, affordable voice and SMS”.
“Affordability and accessibility” will be the name of Cell C’s new game, which it kicked off recently with the announcement that it would be offering free weekend calls to people using its network.
But even so, in the current regulatory environment — where the regulator is “under-funded and its best people are constantly being poached by MTN, Vodacom and Telkom” — he admits it will be an uphill battle.
In Europe and the US regulators are given “a lot more teeth, a lot more muscle and the ability to take decisions and enforce decisions”, he says.
This allows them to attract people who are bright and highly qualified and choose to do public policy work for the love of it rather than the money, as long as they know they’re not on a hiding to nothing.
Hedberg, 45, was raised in Boston, one of eight children.
He studied business administration at Northeastern University in Boston and completed an MBA in international management.
He has worked in Munich, London and Bern, among other cities, spending rather too much of his time for his own liking on management boards.
He came to South Africa because he wanted to get his hands dirty.
“I wanted to go and turn something around.”
When Hedberg says his philosophy is “live and let live” I suggest that Vodacom and MTN will be happy to hear this.
“Okay, then. You get what you give.”
We’ll see.
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