O2’s evolution from BT-owned start-up in the 1990s to what is now one of the most successful mobile operators in Europe has been, for a company which makes its money from selling talk-time, a relatively quiet process.
The telecoms giant’s legal team, however, is anything but. Forthright general counsel Justine Campbell took the reins at O2’s legal team from the highly-rated Philip Bramwell when he moved to take on a role in the spotlight as general counsel at embattled defence company, BAE Systems, in 2006.
Steering the mobile giant through its takeover by one of the largest telecoms companies in the world, Campbell says that O2 post-Telefonica offers more opportunities to its lawyers. “The merger has opened up a lot of opportunities for us as a group,” she says. “We compete with the big boys now.”
The BT demerger, prompted by attempts by the parent company to make a dent in its heavy corporate debt, has since seen O2 go on to assert itself not only in the mobile field but also in markets traditionally dominated by its erstwhile parent. Bramwell was credited with having laid the foundations for what has become one of the UK’s more high profile in-house teams.
After Spanish-based telecoms firm Telefonica clinched a £17.6bn deal to buy the UK company in 2006, Bramwell’s move left Campbell handling the considerable task of integrating two very different teams. “The takeover has been very positive for us as we have retained flexibility but gained scale,” says Campbell. “Telefonica is more traditional but it is changing.”
Key benefits from the merger highlighted by Campbell include working with Telefonica’s ‘fantastic’ internal M&A function, which her team worked closely with on the £2bn sale of O2’s Airwave business to Macquarie in 2007.
“On our side we bring a lot of cutting-edge experience in intellectual property and competition law, as well as in negotiating commercial deals like the O2 sponsorship deal,” says Campbell. “We are sharing learning across the group and sponsoring a similar arena in Berlin.”
Change is never far away in a market as fast-moving as mobile communications. The hey-day of the mobile telecoms market, when the high cost of line rental and calls ensured mobile companies shareholders stayed happy has long gone. The murmurings of an increase in competition from non-traditional rivals in the market such as Google and Yahoo! has seen O2 branch out into a wider communications market with a £50m acquisition of niche broadband player, Be. More recently, the mobile giant secured a coveted role as Apple’s exclusive network partner for the iPhone in the UK, stealing a march over rivals Vodafone and Orange.
In-house lawyers Tom Maasland and Ed Smith led the team that negotiated O2’s tie-up with Apple, a deal that has seen a significant number of customers with contracts at rival networks switch over to O2 on what the mobile giant has called its fastest-ever selling device.
But the iPhone, which launched on 9 November in London to much fanfare and an appearance from Apple chief Steve Jobs, has caused ripples of controversy within the UK mobile market.
Vodafone and Orange competed fiercely to win the right to become the iPhone’s exclusive partner in the UK by way of a revenue-sharing agreement, later accusing O2 of giving Apple more than 25% of the revenue customers pay to the operator for using the device to clinch its deal. Campbell says that the Apple tie-up was a natural move for O2, saying that the two companies share the same brand values.
As a major player in what is still a relatively young industry, O2 has also had its fair share of intellectual property disputes and competition issues. Beverley Robertson heads O2’s dedicated competition law team and has been leading the mobile operator’s fight with the European Commission over roaming call charges, as well as appealing an Ofcom decision about call termination charges.
Campbell explains that the fast-changing world of telecoms provides particular challenges to the legal team, as rivals can quickly become business partners. In an attempt to claw back some ground from big names in the internet world, O2 last October announced tie-ups with social networking sites Facebook and MySpace and is currently negotiating with a major search engine to offer its functions on O2’s networks and handsets.
However, Campbell’s main focus since the takeover has been to ensure that both Latin and Anglo-Saxon legal teams work well together, despite any cultural differences, and she says O2’s legal function is changing shape to fit with the new feel of the company.
“Our priorities are to see through the integration period and to maintain the level of our practice while taking advantage of the opportunities - both internal and external,” says Campbell.
“We have had two Telefonica lawyers over here on a structured secondment programme and are expecting another one in April. It has opened up a wealth of opportunities, particularly in career management for talented and ambitious lawyers”
There have been challenges to fusing the two teams, as each have a distinct character. Cultural differences in the working methods of the two teams are being ironed out, however, by a frequent interchange of personnel between Spain and the UK.
Group head of commercial law, Matthew Mullan, has just returned from an 18 month-secondment to Telefonica’s Madrid campus and the Slough-based UK team has recently been playing host to Alberto Alonso, a lawyer from Telefonica’s litigation department.
Mullan says the legal team’s UK base and international make-up have given it a competitive advantage when it comes to negotiating large deals: “When doing large-scale commercial deals across the entire Telefonica group we are finding that some companies - in particular US - do not want to do business under Spanish law.”
He adds: “The legal team has a particular style - lawyers who are assertive, confident and very commercial. In the UK we tend to have a lot of Aussies (including myself) and Kiwis; they fit the culture.”
With the bulk of the integration underway, Campbell is about to kick off a review of the telecoms giant’s legal advisers, the first since she took on the role of general counsel in 2006.
“The management of outside counsel is at the top of my agenda for 2008,” says Campbell. “We spend well over £10m on legal fees and, yes, we do demand a lot. We want to extract greater synergies across the group as well as exploring creative ways of adding value to the service we receive.
“You have to strike a balance between the value you get from relationships and the value you get from pushing hard on fees,” she adds. “It is good to keep instructing new lawyers, it keeps
things fresh.”
While Campbell has thus far kept her options open when it comes to choosing outside counsel, longstanding relationships with both SJ Berwin and Campbell’s old firm, Freshfields Bruckhaus Deringer, have endured.
Whether Campbell will stick with O2’s traditional, relationship-based management of its external firms or take advantage of the competitive edge a formal panel can deliver, is yet to be seen.
Mullan comments: “Lots of lawyers shy away from fee management because it is just too much bother and can be seen as a bit distasteful. However, this is an essential part of running the business and legal is not an exception. We are upfront about fees, it prevents any nasty shocks when the bill does arrive.”
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