How Tele2’s CFO became CEO

When Allison Kirkby was asked to step up to be the CEO of Tele2 she describes the moment as a “bit of a shock.”

Although she had been the finance director of the Swedish media group for just over a year, the call to take the top job came abruptly.

On a Friday in August 2015, her predecessor Mats Granryd resigned to become Director General of telecoms industry body GSMA, Kirkby was announced by the board as the new CEO on the Monday and started the role on the following Friday.

“I’d always been a very commercial CFO, so I felt it was a natural transition, but it wasn’t a transition that I had prepared for, and it certainly wasn’t a transition the organisation had prepared for,” says Kirkby.

Another thing going for Kirkby was her previous experience in general management. Starting as an accountant at drinks group Distillers that was acquired by Guinness, she spent two decades at consumer goods giant Procter & Gamble (P&G).

There Kirkby undertook increasingly senior roles including Associate Finance Director Balkan Markets, CFO UK & Ireland, Director of Investor Relations & Corporate M&A EMEA, before leading the integration of hair products company Wella UK & Ireland into P&G. She has also been a board member of listed bakery group Greggs for several years.

Her foray into TMT began when she became Executive Director of Finance Operations and Transformation at Virgin Media before being approached to be CFO of Shine Group, Elisabeth Murdoch’s global TV content company, soon after it was acquired by her father’s News Corporation.

At Tele2 Kirkby says she found it easy to transition into the CEO role, “once I was given that authority” partly because she had been an integral part of the management. “I was driving that strategy as a partner to the CEO and I was able to adapt it to what I felt was going to create the most value for our shareholders over the coming years,” she says.

Building a mandate

In the months ahead, Kirkby would be involved in a dramatic push to reset the group’s direction, in terms of undertaking major acquisitions and rebuilding the management team.

“When the chairman called me and said we’d like you to be the next CEO I had two immediate reactions. One was, how will the shareholders react and the other one was how will the employees react and particularly my leadership peers,” referring to Tele2’s governance structure featuring a major shareholder Kinnevik- which holds a substantial chunk of the group- and Kirkby’s position on a secondary management board, common practice in Sweden.

“I knew I had the support of the largest shareholder Kinnevik and gained comfort from having backing from the majority of investors as they knew what impact I’d already had on the business and on the strategy. I guess the trickier bit was with my peers in the leadership team, featuring CEOs and CFOs of the various businesses,” she says.

The backing of this group, featuring executives running the group’s core markets such as Sweden and the Netherlands, would be vital if the business- which grew as a disrupter in the Swedish mobile market, before expanding into west and east Europe, could stay on an upward growth trajectory.

Kirkby says she recognised she needed to win hearts and minds of the leadership team quickly to execute a plan for fixed mobile convergence through acquisitions, and the clock was ticking because the merger partners had other plans. “The first thing was to get the right people on the bus for the journey ahead.”

A three year plan of instilling operational and financial discipline, concentrating capital allocation on geographies where Tele2 had ‘a right to win’ such as Sweden and fixing a strategy on those markets for the long run. “Then it was, how do I get the right people in my executive team, to help me see that strategy through?” Kirkby reveals.

Personnel changes were especially required to drive through two big acquisitions that would pit Tele2 firmly in the fixed mobile convergence (FMC) sweet spot- buying Danish rival TDC’s Swedish business in the Summer of 2016 and then Swedish TV firm Com Hem last January.

“I had a point of view on what changes I would have to make in the organisation to achieve my strategic agenda but then you have to make sure that both shareholders and the executive team are with you on the journey. I had to make the right calls on the executive team to enable the changes that I wanted to make,” she adds.

Upping the ante

But delivering these deals required sorting out the sprawling portfolio, by undertaking actions such as getting out of some of the smaller markets such as Austria. But months into Kirkby’s leadership things started to go south as a couple of board departures and slowing performance saw a significant fall in the share price.

Compared with being CFO, being CEO meant being more personally responsible for what was happening. “As a CEO you’re definitely more on the hook,” says Kirkby who was holding down both roles until a new finance chief arrived, while other key positions such as the heads of Sweden and Netherlands were yet to be filled.

“Suddenly the board made it very clear this trend could not continue,” Kirkby says, reflecting on the days when the share price was going south. But by August of that year a new team was in place to drive the strategic plan, defined by a new sense of purpose.

The many departures from her senior team made running the group a lonely place, admits Kirkby, although she was able to draw on the support of the group’s chairman. “He had been instrumental in hiring me as a CFO, he had been a CFO and then a CEO and he was the one who really believed in me,” she says.

Another critical aspect of being a CEO is the media spotlight, but plenty of experience of working on Investor Relations (IR) whilst she was finance director prepared Kirkby for the media onslaught that came with the job. Building a good relationship with the group’s communications and strategy head helped get an understanding of manging this side of her job, she says.

Being “fearlessly liberating and more connected” became the new rallying cry for the organisation, tapping into the disrupter identity that Kirkby believed had fallen away from the group in recent years. As well as McKinsey, she brought in agency Eat Big Fish to invigorate the group with a challenger spirit by redefining Tele2’s sense of purpose.

But bringing along the significant elements of Tele2’s wider workforce, reflecting a Swedish sense of inclusivity required developing a team of around 30 Tele2 staff representing a broad section of the group to work on the new strategy. “They felt a sense of ownership for that new strategy, rather than it just be me and a couple of my leadership team working with the advisers,” says Kirkby.

“I was able to listen to and learn from colleagues. I’d only been in the business 15 months myself so I really wanted to hear from individuals that had been in Tele2 for 2,5, 10 or 15 years, in order to get a real perspective as to what made them join and stay at Tele2 and what made the recent ones join us. I pulled together a functional team from network, marketing, comms, IT, and the different markets, to achieve a broad understanding of what the organisation wanted and what we felt had been missing in recent years,” she adds.

Going all out

Having established plenty of goodwill across the group, Kirkby swooped for Com Hem, recognising the need to rush to fixed mobile convergence. She said that the critical factor was a decision by private equity firm BC Partners to sell its final 18% stake in Com Hem, that had IPOed in 2014.

“Suddenly there came an opportunity for Tele2’s major shareholder Kinnevik to take BC Partners’ final 18 per cent, at the same time as Com Hem were looking at the next stage of their growth journey which was taking them into mobile,” she says, explaining the rationale.

The challenge for Kirkby was getting shareholder buy-in for the acquisition of Com Hem a month after Tele2 and Deutsche Telekom agreed to combine their Dutch operations. “It was probably a bit earlier than we would have. But we couldn’t sit around and wait, because Com Hem were clearly looking for their next leg of growth, and because FMC was becoming a major industry theme, others would have shown interest,” she insists.

The result was an 8 per cent share fall on the day- driven by shareholders who thought they were going to get a special dividend from the Dutch deal and another in Kazakhstan, only to see Tele2 plough resources into another deal.

“They were concerned about the future of television, and because they never invested in it, they hadn’t bought into the story. Given the company’s previous view that mobile was all and everything, Kirkby says she has been listening intently to what shareholders of both companies.

“Between January and April we spent quite some time listening to our shareholders who were upset that extraordinary dividends weren’t going to be coming to them. But we also listened to their shareholders who were concerned that the Tele2 leverage policy was going to be overly prudent and therefore not of the same shareholder return that they’d got previously from Com Hem.” The result is a new shareholder remuneration policy that was launched in April.

Once the deal is completed Kirkby will step down, making way for Anders Nilsson, the CEO of Com Hem who will lead a much more Sweden-focused business. Although now committed to being a CEO in whatever role she takes up next, Kirkby acknowledges the importance of being a finance chief first. “Being CFO gives you a great grounding to go into any industry because you get to understand how value is created and how value is sustained, despite digitalisation and transformation or risk,” she adds.

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