An unlikely conversation with a customs officer at Sydney International Airport gave Iñaki Berroeta a first taste of his new Australian life in early 2014.
With his wife and two daughters still in Romania, Berroeta had flown solo with his luggage and a mountain bike to start his new role as chief executive of Vodafone Hutchison Australia.
To say Vodafone’s local operations were a mess before his arrival would be an understatement. The telco provider’s mobile phone signals cut out so frequently that the #vodafail tag was regularly trending. Customers were leaving in droves.
“When you arrive with a mountain bike they usually want to check that you don’t have any mud on tyres,” Berroeta recalls. “This customs officer was looking to see if the bicycle was clean and then he asked me what I was going to be doing in Australia and I told him that I was going to be running Vodafone.
“The guy said ‘good luck with that’.”
Berroeta knew he had a tough job back then. But next week things arguably get harder when TPG Telecom’s $15 billion merger with Vodafone becomes official in the midst of a once-in-a-lifetime pandemic. For the first time there will be a third telco player with the scale to actually compete with Optus and Telstra. The stakes couldn’t be higher.
“I’m ‘first day of school’ nervous,” he says from the company’s North Sydney office where he sits in front of a red ‘please sit here’ social distancing sign. “When you do something for the first time you get that kind of rush of excitement and nervousness.”
Berroeta did not expect that his attempt to combine Vodafone with TPG would lead him to the witness stand in Federal Court. He also did not expect that the merger would end up taking place during the coronavirus. But Berroeta’s predecessor at Vodafone, Bill Morrow, says he couldn’t think of anyone better to lead a new-look TPG Telecom.
“He stands on his own principles, he’s got a nice balance of business acumen with people orientation, he’s customer-focused and he’s a fierce competitor,” Morrow says. “But the thing I enjoy the most is his no nonsense, non-emotional view on things in life.”
Born in Bilbao, Spain in 1967, Berroeta has always enjoyed living away from home. Since spending his senior year of high school in Idaho, he has lived in Malta where he ran Vodafone until 2010, Romania and other parts of the US.
It’s not about Inaki, it’s about what is the right thing to do to succeed. He has his ego in check.
Bill Morrow, former CEO of Vodafone Hutchison Australia
“The reason why I’ve worked in many countries over the years is not just professional. The thing that is also very attractive to me is the idea of living in a different place and understanding a different culture and visiting places,” he says.
“One thing that is very important when you go to new places is how much you observe before you make your conclusions. Every country that you go has different unwritten protocols and ways of things, and companies are a bit the same.”
Berroeta was always fascinated with computers and technology. After finishing high school he attended the Bilbao Superior School of Telecommunications Engineering and received a master of science in telecommunications before receiving a master of business administration from Henley Management College. In his university years, the telco industry was in its infancy but as devices such as mobile phones became popular, Berroeta became fascinated by how technology could shape the way people live.
His first personal phone, a Siemens S55, was a sign of the rapidly changing industry that he wanted to be a part of.
A mechanic at heart
As a child, Berroeta spent hours in the garage with his grandfather, who worked for Pirelli, fixing broken, old cars.
“I still tinker around in my garage,” he says. “It is relaxing and at the end of the day it is something that you do with your hands. I also like to learn so I don’t have any formal training on mechanics. I did take a few courses but it’s something that I also like to learn by myself.”
His long-held love of restoration of cars like a 1967 Alfa Giulia Super is reflected in his professional life. “He likes fixing things,” Morrow says. “He doesn’t want the [cars or motorbikes] that have a high resale value. He wants the ones that are written off that no one else cares about. “That’s a little bit of his outlook on life – everything is worth saving and if you put the time and effort into it, anything can be restored.”
In the same way that he set out to transform Vodafone Romania, Berroeta arrived at Vodafone in the middle of a three -year plan to win back customers.
More than 2 million had left the network between 2010 and 2013 in the period dubbed ‘Vodafail’ due to a series of network meltdowns. Morrow had been parachuted in to fix the troubled local mobile operation, but after being appointed the new chief executive of the NBN Co, Morrow needed a successor.
“[Berroeta] impressed me right from the beginning because what you see is what you get,” he says.
Several people who were with Berroeta on the first day he stood in front of staff at a town hall meeting in early 2014 said his approach was candid.
Vodafone’s human resources director Vanessa Hicks, who has been working with Berroeta since his first day, remembers when he took to the stage. “He asked a lot of questions,” she says. “He’s a very good listener. He didn’t come in and say ‘this is how things are going to be’. He wanted to understand the business, the people, the culture and the history.
“You could see the relaxing of the employees in the room – that this guy was not going to come in and impose some London learned Spanish-based way of life,” Morrow adds. “He was going to fit into the Australian life.
“It’s not about Inaki, it’s about what is the right thing to do to succeed. He has his ego in check, he went through the program that we had started. He did it better than I could’ve done it. He did it with limited resources in a challenger-type position.”
A merger that had to happen
Berroeta saw the benefits of merging Vodafone with another telco operator before he had taken his new job in Australia.
“The moment I thought that Vodafone had to merge with a fixed operator was the moment I was given a lot of market information before I took the job,” he says. “TPG came when I met David [Teoh] at the end of 2014. We had lunch. That’s when I thought this is probably the best way to go.”
The history of Australia’s third telco has been tortured. After the 2009 merger of Vodafone and 3, which saw Vodafone Australia and Hutchison Telecommunications Australia each own 50 per cent, the combined business suffered disastrous network failures that prompted millions of customers to walk away. Vodafone, which had 7.5 million customers in 2010, had 4.96 million subscribers in March 2014 when Berroeta arrived. By comparison, Telstra had risen to 15.8 million users while Optus was at 9.43 million.
Berroeta’s arrival was part of the plan to bring back the mobile operator from the brink of financial ruin. “I think we were successful in recovering the customers, we were successful in bringing a good financial position and that led to being in a position to complete the merger.”
After signing a deal where TPG would supply fixed-line fibre connections to Vodafone’s mobile towers and TPG would move its mobile virtual network operator business to Vodafone in 2015, Berroeta knew the two businesses needed to combine. But he did not anticipate the regulatory hurdles he would have to endure over two years.
“I never anticipated the whole regulatory environment looking at this merger,” he says.
“Everybody has their view and the ACCC and the ACMA and the different regulatory bodies they do their jobs so at the end of the day I’m very respectful, and I’m very respectful of their ideas. I always think that they do things with good intentions. They probably saw something that maybe we didn’t see.”
Berroeta will address staff at his newly merged business as he did in 2014 on Monday, but this time remotely. He will have his first board meeting and a day later the combined business will trade on the ASX on a non-deferred basis for the first time.
Berroeta’s first priority, flagged earlier this month, will be improving the performance of the mobile network. With Vodafone Australia operating as a mobile business prior to the merger, and TPG Telecom offering fixed-line broadband services, Berroeta will need to combine the two distinct systems and brands including Vodafone, TPG, iiNet, Internode and Lebara.
The plan is to create a third telco provider which will ultimately become a challenger to Optus and Telstra.
He combines great charm with straight-talking. I have always enjoyed our many interactions. And he is passionate about his business.
Rod Sims, ACCC chairman
“The only reason we did this merger between both companies is because we were building a company that was going to be more capable to compete in the market,” he says. “We are now in a position that can offer much more competition to the other players in market. Competition is not just a matter of how many are competing, it’s also about the quality of each [player].”
While the pandemic has made the stock market unpredictable, Berroeta is taking comfort in what value investors have previously seen in the merger: the opportunity to share infrastructure, to cross-sell to customers and the ability to compete in the enterprise market.
“It is a properly financed business with a strong management team in a good sector with good opportunities – usually analysts like that,” Berroeta says. “What is the stock market going to do? I have no idea.”
Big shoes to fill
But whether investors buy into the idea of a better, stronger TPG will be a key consideration for Berroeta, who is unlikely to ditch the challenger mindset in a hurry. Having fought hard to make the merger happen, Berroeta will now have to prove that TPG can inject the competition that it promised to deliver.
With overall revenues in the telco industry flattening out and all of the operators gearing up to spend billions of dollars on 5G spectrum, TPG is unlikely to flood the market with ultra-low broadband offers.
TPG, under the auspices of its billionaire founder David Teoh, had built a reputation of squeezing maximum value out of the assets at its disposal, whether Berroeta can keep the ball rolling on that front will also be keenly watched by the market.
Filling the shoes of Teoh, who built TPG from a seller of keyboards and cables to a multibillion-dollar telco, is not for the faint-hearted.
But the industry is almost unanimous in saying that Berroeta has what it takes to do the job, with his determined demeanour earning him plaudits even from adversaries.
Even Australian Competition and Consumer Commission chairman Rod Sims, who has crossed swords with Berroeta on a number of occasions, holds him in high regard.
“Iñaki is an impressive individual,” Sims says. “He combines great charm with straight-talking. I have always enjoyed our many interactions. And he is passionate about his business.”
With an ability to absorb pressure and a management style focused on outcomes, Berroeta is about to embark on quite possibly the biggest challenge of his career.
Luckily it’s a race that he says, he won’t be running alone.
“I think the challenge as an executive is to believe that because you’ve been there before you know all the answers and sometimes that takes away the opportunity to continue learning.
“I think the day that I don’t learn anymore I will probably retire.”
But Berroeta isn’t the sort to retire in a hurry. Trent Czinner, Vodafone’s general counsel, laughs as he remembers a time when the Spaniard showed his competitive streak.
“I ran up to the boardroom one time…it was four flights of stairs. When I arrived there and he asked me a question, my breath started catching up with me,” Czinner says.
“He said ‘you are really unfit, you’ve got to join me. I’m doing a run. I’m doing a half marathon. We ran the Point to Pinnacle, all uphill. He beat me badly.”
Berroeta is known for a good work life balance. Outside of marathons, he enjoys bushwalks with his wife and spends hours cycling. He also enjoys time with his daughters, now 21 and 15. It’s this lifestyle that several who The Sydney Morning Herald and The Age have spoken to which they believe is key to his success.
Chief executives like Berroeta are rarely universally loved, but in more than eight interviews the consensus is a kind, hard-working but tough executive.
“He’s got very strong values, he’s a really loyal person,” News Corp’s managing director of commercial content and former WPP boss Mike Connaghan says. “He’s determined, he’s razor-sharp smart. He’s got one of those engineering, mathematical, analytical brains.”
Czinner and Hicks also say he is light-hearted with a dry sense of humour and all those who spoke about Berroeta agree that he rarely reveals how much pressure he is under.
“A while ago I walked into my area and there was this old 1990s mobile phone on my desk. [Inaki] had bought it on eBay and had put it on my desk and wanted to watch me look at it and go ‘what the hell is it’,” Czinner says. “We had just won a patent case against a company in respect of a 1990s patent that had to do with these phones.”
But Morrow says doesn’t like to be pushed around. “He’s no wilting flower,” he says. “Make no mistake he’s got some emotions that fly in there as a good Spaniard would, but he keeps things in check and he’s not one to fly off the handle.”