The Sunday Times - UK (2021-12-19)

The Sunday Times December 19, 2021 9

BUSINESS

ing but I was in Portugal at a windsurfing

competition,” he says.

He flunked his grades terribly, limiting

his job options. After an apprenticeship

at a small bank, he eventually started a

degree. Economics was the subject — but

he was to end up learning a lot more, par-

ticularly about himself.

He explains: “When I started my stud-

ies, I didn’t know if at high school I was

lazy or stupid. That sounds funny, but for

me it was not funny at all. I needed to

prove myself.”

He worked obsessively. On the plus

side, he emerged four years later with top

grades and both a bachelors and a mas-

ters degree. But his mental health suf-

fered terribly.

“I had a burnout because I was too

focused on work. I couldn’t sleep. My

body just stopped sleeping. I’d have one

beer to sleep, then two, but I would wake

up during the night. It took me years to

really recover.”

The banker Antonio Horta-Osorio had

a similar experience early on in his ten-

ure running Lloyds Banking Group, I say.

“Yes,” Schüler responds. “Usually it hap-

pens to people who are a bit older in jobs

but I learned early that you need a bal-

ance in life.” For him, that balance means

kitesurfing and time with his wife and

three adult children back in Bavaria.

A

chieving such an equilibrium while

coping with the stress of integrat-

ing two massive companies cannot

be easy. “We are all working hard

and with Covid, the mental health

challenges are increasing, but I’m big on

team play. So when we see in our team

that somebody is struggling a bit ... then

we step in for each other.”

How, I wonder, does that fit with com-

ments from some in the press that he had

brought a “machismo” culture to O2 that

wasn’t there before? He looks genuinely

baffled at the accusation. “Yes, I am chal-

lenging. So we play to win. I am demand-

ing in that sense but I’m also supportive.

Pushing hard, but not in a masculine or

male way.”

So, what exactly is he pushing at? Pri-

marily, the big beast in the UK telecoms

jungle: BT.

In bashing Virgin Media together with

O2, a business has been born that should

be a far better competitor to BT, offering

both mobile (like BT’s EE) and broadband

(like BT Openreach).

In an industry that has famously

burned money on irrational duplication

and crazed competition, Schüler plans to

wrest £6.2 billion of savings — and invest

at least £10 billion expanding fibre, 5G

and digital services by 2026.

Some fret that those ambitions could

distract him from dealing with one of

Virgin Media’s biggest problems: its repu-

tation for poor customer service. Last

month, regulator Ofcom said it was the

most complained about pay-TV provider.

“Let’s not talk around it, right?” he

says. “We absolutely always have had

issues with customer service.”

The problem grew particularly bad

during Covid because a majority of the

customer service staff had been off-

shored to India and the Philippines,

which effectively shut down when the

pandemic swept through. “As a result of a

Virgin Media 02 boss Lutz Schüler

on how he has the fibre for the

fight for eyeballs that lies ahead

Telecoms

titan set

to take on

big tech

L

utz Schüler is not panicking

about another Covid crisis hit-

ting his business. The chief

executive of Virgin Media O2

has seen it all before — and

worse. After all, it was while

Europe was in the grip of total

lockdowns earlier this year that

he and his team negotiated a

£32 billion deal to merge Lib-

erty Media’s Virgin broadband empire

with Telefónica’s mobile giant O2.

In fact, Schüler — then chief executive

of Virgin Media — ran his end of the deal

from his daughter’s bedroom in Munich.

“We were carrying out the biggest tele-

coms merger in UK history ever while I

was in this rose [pink] bedroom,” he

recalls, with a hearty German laugh.

“So let’s not be complacent, let’s not

underestimate what’s going to happen,

but I think we have now learnt how to

deal with it.”

Schüler’s first encounter with the pan-

demic came earlier than most. He was in

a meeting with the government and BT

chief Philip Jansen, who soon fell ill as

one of the first high-profile Britons to

catch Covid. Schüler, who lives between

London and Munich, was visiting family

in Germany when the news broke and

had to isolate before being locked down.

“I didn’t return to the UK for four

months,” he recalls.

The 53-year-old is not your run-of-the-

mill UK chief executive.

For a start, he arrives for our interview

at the company’s Hammersmith base on

an old boneshaker of a bicycle. “I don’t

want an expensive one to get stolen or I

get stranded,” he says in heavily accented

English.

Then there’s the look of him: 6ft 5in

and slim in black skinny jeans, a dark

polo-neck and a black suit jacket, he

sports long, glossy black hair swept back

behind his ears. With catwalk cheek-

bones, dazzling teeth and a perma-tan,

he gives off a fashion designer vibe.

Schüler’s route up the corporate lad-

der was equally unconventional.

Born the son of a lawyer father in Düs-

seldorf, his mother died when he was a

toddler and his father remarried, creat-

ing what he describes as “a new patch-

work family” with a stepbrother and

stepmother. It worked well — the two

boys were best friends as well as broth-

ers, doing everything together until, in

his teens, Schüler got the windsurfing

bug. In a huge way.

When he should have been studying at

high school, he was spending all his time

driving to the Dutch coast two and a half

hours away to surf, surf, surf. He was

good, too, with race sponsorship and

prospects on the pro circuit.

He feared that would be a bit of a “one-

dimensional” life, however, and sought

something else.

“The trouble was, when it came to our

final school exams, everyone was study-

JIM

ARMITAGE

savings — had criticised the

regulator’s actions. Only last

week, another independent

report found that the FCA

had wrongly excluded 10,000

businesses from a redress

scheme for the misselling of

interest rate swaps.

Those who know Rathi

describe a can-do attitude —

or perhaps arrogance. “It’s

Rathi’s way or no way,” one

source said. Earlier this

month, however, Rathi

appeared to show he was

listening, telling staff that

after the early response to the

consultation the majority

would get a 5 per cent rise.

As the firms the FCA

regulates prepare to pay

bumper bonuses, staff can

this weekend make their final

representations over pay.

They could at least claim a

victory on one investigation

last week: NatWest was the

first bank to admit criminal

charges for breaching money-

laundering regulations and

was fined £265 million.

to five. According to the

consultation document,

those rated above two are

being offered a 2 per cent rise

from April 2022 and a 2 per

cent rise a year later.

Performance-related pay

rises will still be available.

Rathi would not comment

before the end of that

consultation but told MPs this

month: “We were not

motivating the right collective

behaviours across the

organisation. We do not

believe that for objectives like

ours, which get demonstrated

over multiple years, large,

one-off cash payments every

year are necessarily going to

incentivise the delivery of

those objectives.”

In the consultation with

staff he went further, saying

bonuses “risk undermining

confidence in the FCA”,

especially after independent

reviews — including one into

the oversight of London

Capital & Finance, where

customers lost £237 million of

crying in meetings to discuss

the changes, while the

Financial Times suggested

that vacancy levels were

running at 500, compared

with more usual levels of 300.

Unite the Union, which is

seeking recognition at the

FCA, said there was

considerable disquiet among

workers. Dominic Hook,

national officer for finance at

Unite, said: “It looks to staff

as if the chief executive has

come in with an approach to

be the big boss and make big

changes. The FCA is under a

lot of pressure and he’s trying

to show that he’s sorting

things out.”

Staff are said to feel their

voices are not being heard as

Rathi proposes changes that

would raise the salaries of

about 800 of the lowest-paid

staff, currently on about

£23,000, by £3,800. But

many others can expect a cut

as the bonuses they relied on

end and they are graded in a

new scheme, rated from one

Watchdog’s

new broom

is sweeping

away morale

FCA staff are said to be in tears over the

pay review instigated by Nikhil Rathi —

just one of a raft of changes shaking the

financial regulator. Jill Treanor reports

M

ergers and takeovers are still very

much in the air. Over at BT, Pat-

rick Drahi, the Israeli-French tele-

coms billionaire, has just raised

his stake to 18 per cent. “When I

put myself in Phil [ Jansen]’s shoes,” says

Schüler, “thank God that I’m not getting

distracted at the moment with a possible

hostile takeover that takes management

time and attention.”

Schüler talks ruefully of how the big

telecoms companies complacently

allowed themselves to be sidelined by

Silicon Valley’s tech giants to become

mere “pipes”, rather than platforms

controlling the global internet market.

Apple’s iOS and Google’s Android soft-

ware successfully became the aggrega-

tors for millions of mobile apps while

companies such as his stood by, even

mocking the first iPhones for being infe-

rior to “our smart Nokias”. Now, Schüler

says, telecoms companies have a second

chance to be the platforms for TV, video

and other home services, offering con-

tent providers access to millions of cus-

tomers directly, through mobile or

broadband TV.

Television delivered over the internet

— known as Internet Protocol TV (IPTV) —

makes that possible, as Sky is hoping to

prove with its Sky Glass TV, an attempt to

create the iPhone of the video industry

with seamless access to online TV apps,

from iPlayer and ITV Hub to Disney+.

Schüler says the potential is huge to

add other services, from e-sports to

home security and smart home applica-

tions, all the time using customer data

more intelligently to help content provid-

ers reach more viewers.

He has opted not to ape Sky with a

“Virgin TV” set. Rather, his product, to

be called Virgin TV Stream, will launch in

the coming months as a dongle that turns

your existing television into an IPTV.

“I’m telling you, if the market in the UK

turns into Sky Glass, we have our answer

all ready. Don’t underestimate us.”

We won’t , Lutz. We won’t.

cost-driven sourcing strategy, we lost

60 per cent of our resources. So we made

the decision to bring back onshore all

those resources into the UK.”

He says improvements are starting to

show, and the regulator’s report does

acknowledge that.

There are other big challenges. Where

Virgin has a big cable network, available

to 15.6 million homes, the future is fibre.

BT is spending £15 billion to lay fibre

reaching 25 million homes and busi-

nesses by 2026. How will Schüler com-

pete with that kind of firepower?

Schüler — who BT’s Jansen describes as

“a fantastically good chap” — says that

Virgin Media has upgraded its cable net-

work to gigabite speeds (for £62 a month

if you’re interested), making its network

far faster than the average. But he knows

he has to build fibre for the future.

As one veteran says: “BT’s fibre will be

in the ground for 100 years. You can’t say

that for Virgin’s cable.”

Schüler agrees that fibre is the future

and is now laying it through Virgin’s exist-

ing cable ducts. He gives himself until

2028 to have the entire network on fibre.

Now he is pondering whether to start

wholesaling his lines to other operators

wanting to offer broadband — Vodafone

perhaps. While that could bring him

some new revenues, it could also trigger

an instant and damaging price war with

BT which the telecoms leviathan would

probably win.

Others suggest that Schüler will part-

ner with other players to roll out fibre —

something hat Virgin Media O2’s share-

holder Liberty Global has mooted.

Expect to hear more about that from next

year onwards.

Schüler joined Virgin Media in 2018

when Unitymedia, a German cable busi-

ness also owned by Liberty, was sold to

Vodafone. His long career in mobile

phone companies has spanned stints at

O2, T-Mobile and Deutsche Telekom.

Let’s not talk

around it, right?

Virgin Media

always has had

issues with

customer service

Lutz Schüler learnt early in his career the importance of mental health issues, but that does not blunt his will to win

THE LIFE OF

LUTZ SCHULER

VITAL STATISTICS

Born: 1968

Status: Married with

three children

School: Leibnitz

Gymnasium Düsseldorf;

Universität Augsburg

First job: in a surf shop

Home: Hammersmith,

London, and Munich

Car: Knaus Sun Traveller and

a Mini Cooper in Germany;

mostly cycles in London

Bike: Trek Madone 5.6

(in Germany)

Favourite book: A Voyage

for Madmen by Peter Nichols

Drink: cappuccino or

Italian wine

Film: Moneyball

Music: Red Hot

Chilli Peppers

Gadget: cycling computer

Charities: Carers UK, Surfers

Against Sewage,Street Child

Last holiday: sailing in

Croatia

WORKING DAY

On a normal day, Schüler is

up at around 7am and

cycles to the office, where

he starts with a cappuccino.

He spends much of the day

in meetings, and always

ensures time is spent each

week at offices across the

country or on virtual calls to

keep employees updated.

Schüler regularly spends

time with partners,

customers, the

government and Ofcom,

and often cycles to those

meetings. He aims to

finish work by 6.30pm and is

a strong believer in a work-

life balance.

DOWNTIME

With a lifelong passion for

watersports, when in

London Schüler often hires

a car for the weekend and

travels to various locations

around the south coast to

go kitesurfing and try

out new restaurants.

When back in Munich,

Schuler packs the

camper van and

spends time

with his family —

cycling, sailing

and surfing in the

summer, and

skiing in the

winter.

Dubrovnik in Croatia, a

Mini Cooper, Red Hot Chilli

Peppers, and Brad Pitt and

Jonah Hill in Moneyball

TOM STOCKILL FOR THE SUNDAY TIMES

Number of pay ranges

for its 4,200 staff, sorted

into 13 ‘job families’

500

RUCTIONS AT THE

REGULATOR

77

Rathi — a surprise

appointment in September

2020 — arrived with a mission

to turn the FCA into an

“operational machine”.

A former senior executive

at the London Stock

Exchange who earned his

spurs at the Treasury during

the banking crisis, Rathi has

installed new faces on the

executive committee he

inherited and streamlined the

regulator.

With the speed of change

likely to have rattled long-

serving staff, Rathi is said to

have won little support for his

plans for another radical

overhaul: the way employees

are paid. He wants to end the

culture of cash bonuses and

change the grading system

too, which includes 13 “job

families” and 77 pay ranges.

Consultation on that pay

review ends on Monday. It

has provoked an emotional

response from workers, with

Financial News, the specialist

trade paper, reporting staff

An unusual message had

been posted on the intranet

of the Financial Conduct

Authority. The 4,200 staff of

the financial regulator were

warned about their “bad

behaviour”, which included

“defecating on the floor in

toilet cubicles”.

The year was 2019 — and

the warning was a reflection

of the low morale at the body,

which is responsible for

protecting the public from

wrongdoing by the 50,000

firms it regulates.

Two years on, the FCA’s

staff are more likely to be

working from home because

of Covid than at its HQ in the

old Olympic park at Stratford,

east London. But they are still

said to be suffering from low

morale as new chief executive

Nikhil Rathi tries to push

through sweeping changes at

the regulator, which was

created in the wake of the

2008 banking crisis to put an

end to the swashbuckling

attitude of many City firms.

Open vacancies at the FCA:

more than 10 per cent of

the total workforce