Telecom's Auckland fling

Telecom's centre of gravity steadily shifts northwards, but is that a mistake?

Telecom's relationship with Wellington had been showing signs of strain.

First, its attention started to drift away from home as it focused more and more on work commitments such as building up its mobile market share in Auckland. Then the suits started disappearing from the wardrobe, as the trickle of executives heading north turned into a flood.

Next it started throwing parties to which Wellington was not invited: the laser show it held at the Auckland Town Hall in May to launch its XT mobile network and the one at the Auckland ferry terminal last month to celebrate its new brand.

In July, Telecom quietly began redirecting its mail, officially shifting its head office from Wellington to Auckland.

Hurtful things were said. "We have recruited a number of new executives from large international cities overseas and the reality is that most of them elected to be based in New Zealand's largest city," says spokesman Mark Watts, who describes Auckland, unequivocally, as New Zealand's "commercial and economic capital".

It's time to face the facts, say some: Telecom just doesn't love Wellington any more.

Telecom chairman Wayne Boyd said he "hoped and expected" Telecom's new chief executive would be based in Auckland in February 2007, four months before Paul Reynolds was appointed to the role.

Other overseas hires followed suit; chief transformation officer Frank Mount, chief financial officer Russ Houlden, mobile head Paul Hamburger and retail boss Alan Gourdie.

It didn't used to be this way, says one former senior executive. Rod Deane, chairman till the former Government's May 2006 industry reforms, and then chief executive Theresa Gattung, were "dyed-in-the-wool Wellingtonians" who, as a commentator observed, ran the company from the capital like a royal court.

Gattung juggled gamely for priority with the cars and bikes on Oriental Parade on her way to work, ordered in chocolate puddings for Chatham House rules-meetings with favoured journalists at Jervois Quay, and meticulously oversaw Telecom's sponsorship of headline acts at the capital's biannual arts festival.

But even under her stewardship, staffers say there were signs of what was to come when Telecom began shifting its marketing team in 2004.

A tipping point was when former chief operating officer Simon Moutter relocated to Auckland in 2005. "That really started to accelerate and more or less every new appointment went up to Auckland," one former executive says.

By 2006, he says, "if you wanted to go anywhere in Telecom you really needed to be in Auckland". It is good that network arm Chorus is based in Wellington, he says, but with little over 100 staff in the capital — sharing a single floor with little elbow room — it is a "pretty small operation".

Another former executive agrees that Moutter's move was a turning point and that the Auckland migration has accelerated under Boyd and Reynolds. "Now, Wellington is definitely a regional office, I'm sorry to say, for everything."

Watts insists Telecom and the capital remain the best of friends. Telecom employs 1871 full and part-time staff in Wellington — or 1806 fulltime equivalents (FTEs) — compared with 3683 FTEs in Auckland. It has actually added 300 staff in the capital over the past four years, with only 50 net new hires in Auckland, he says. Nationwide, Telecom's fulltime staff numbers have dropped by 700 over the same period.

Construction has started on a 12-storey building between Boulcott St and Willis St with a seating capacity of 1700 that will provide a base for 1900 staff. Chorus will keep its separate office and Watts says Telecom will need other offices to handle project work.

"We don't see the project volume ever going away. Wellington tends to be technical and project-centric and this skill base will remain of huge importance to Telecom," he says.

"Currently, almost the entire group finance leadership team and their staff are based in Wellington and our chief financial officer is happy for them to remain Wellington-based. Likewise, a significant number of our group legal and regulatory leadership team remained based in Wellington and will continue to be based there.

"Our Gen-i and transformation, technology and shared services business units also have large numbers of senior managers based in Wellington with significant numbers of career opportunities in Wellington for those people."

One staffer is unconvinced. Within Telecom's retail arm, "the reality is that, overall, numbers have dropped and are set to continue to drop", he says.

"While a small number of non-sales and network people such as group finance and legal will remain Wellington-based, the head office shift to Auckland is continuing to empty out Wellington.

"More worrying, the calibre of people Telecom is hiring in Auckland to replace Wellington people is frequently questionable," he says. "A labour shortage and Telecom's inability to pay Auckland market rates means they often attract sub-par talent."

That is an argument flatly rejected by Watts, who cites Telecom's recent hiring of former Vodafone Australia marketing maestro Craig Herbison.

Whether Telecom's shifting centre of gravity has delivered results for the company is a moot point for many.

"I am pretty sure Wayne Boyd believed you really did need to be based in Auckland to be in touch with customers, particularly in the mobile market where Telecom was so dominant," says one former senior executive, adding that he thinks that was a wrong decision.

Another insider says Telecom's charm offensive has failed to woo Aucklanders, where Vodafone is deeply entrenched. Telecom has secured a meagre 2 percent share of the youth prepay mobile market in the city, he says. Meanwhile, its large market share is under threat in many business segments in Wellington and elsewhere, where account managers are increasingly thin on the ground and the very public focus on Auckland has rankled.

"We are in a slack labour market pool currently, where it is easy to pick up resources," says another of the former executives. "But you need to be able to present good opportunities for talented people in both labour markets to get further ahead."

He believes the pendulum has swung too far and another consequence is that Telecom has fallen out of touch with decision-makers in the capital.

"Wellington is the centre of the universe in terms of Crown Fibre Holdings, the work the Economic Development Ministry is doing and the views that Treasury have, and that is such a big part of Telecom's future, I think it is a myth to think you can do it all from Auckland.

"They have gone backwards. And why is that? Because you have got more qualified regulatory people in Wellington than you have in Auckland."

Is there any chance of Telecom and Wellington making up? Never say never.

Reynolds has wanted to centralise the company, but is not going to be around for a long time, one of the executives says. "He is here to do a job, get in and get out. It is not so much about 'relatedness'.

"The next chief executive after Paul will probably be around for a five or six-year term. In that mode, it is more about the communities you are in."

Reynolds moved from Scotland to England to pursue his career with British Telecom, after finding it too hard to run the company's wholesale division from Glasgow and commute to weekly board meetings in London.

But New Zealand is not Britain and Auckland, while it may be New Zealand's "consumption capital", is certainly not London, the staffer says.

Moreover, Telecom is a communications company and should not be sending out the message that big businesses need to herd their top management under one roof.

He concurs that the shift to Auckland began with the forced relocation of marketing staff several years ago, noting the irony that at the time Telecom was running a marketing campaign with the tagline "Work Anywhere".

Watts insists there is no glass ceiling descending on the capital. "Telecom's position is that senior executives can work out of Auckland or Wellington, but in either case there is an expectation that they will spend significant time in both centres if they have large numbers of customers or staff in one of those centres," he says.

"Being based in Wellington is not an impediment to moving into bigger roles in the company but, as with all companies, because of the location of certain customers or staff, there will be some instances where we do prefer that some roles are either Wellington or Auckland based."

To prove the point, Telecom Wholesale has just recruited a new general manger of customer services, he says.

"The candidate from Britain wanted to be based in Wellington even though it's an Auckland-based role. We have allowed him to be based in Wellington, but to spend part of each week in Auckland."