Monstermob: Martin Higginson
Fired by the board that he’d assembled. Monstermob’s Martin Higginson talks exclusivelyabout his very public ousting in his first interview since returning to the AIM-listed mobile player
June 13 2006. A very very bad day for Martin Higginson. Sacked by the company he created; his name emlazoned across all the nationals' business pages.
It was an ignominious, devastating end to his association with Monstermob, which he set up in 2000 and turned into a stellar business with a market capitalisation of more than £290m. “I fell a long way. It really was a huge kick in the nuts,” he recalls. “It was the worst thing that had happened to me in my entire life. I can still get very emotional about that moment because there was no debate, no argument.”
Despite the words, which might conjure the image of a recovering tear-soaked shell of a man, he's incredibly upbeat. Why? Because at the tail-end of February 2007 he made a triumphant return to the business. Private Spanish company LaNetro Zed SA (ZED) completed the purchase of 52.6% of the business for £34m and hired Higginson, still the largest individual shareholder, as a non-executive director at the subsequent Extraordinary General Meeting (EGM).
It's been a turbulent year and no mistake. And the emotion now appears fully channelled into regaining control. “On a personal level, there are a few ghosts and you want to prove a few people wrong. The fact is, I'd never been fired in my entire life.”
The rise of Higginson
Higginson's career to that point had been relentlessly impressive, although he appears to have forgotten one early upset. His first job as a motorcross photo journalist led to him identifying the growing popularity of BMX bikes. He persuaded his employer, United Newspapers, to let him start a weekly newspaper to cater for the interest. It was axed 13 weeks later and he received his first P45.
This provides a degree of insight into the nature of the man. Not accepting the decision, the 18-year-old Higginson relaunched the title alone as a fortnightly. Two years later he sold it to publishing house IPC Magazines. A premium rate phone line business, Megafone, followed, growing from a £300,000 to £10m turnover by 1998, when it was bought by Scottish Power. Installed as director of internet and interactive businessses at its subsidiary Scottish Telecom, he integrated a series of acquisitions and restructured the company, also taking over the running of Demon Internet, while Scottish Telecom was rebranded as Thus Plc prior to its successful market flotation. Then came Monstermob.
The rise of Monstermob
It generated a flabbergasting £19.5m in its first year of trading. And in 2003, with the demand for ringtones going stratospheric, it floated on AIM with a market capitalisation of £32.1m. His personal wealth was soon estimated at close to £70m.
The company branched out into richer forms of mobile content, offering video on demand, games and interactive communities. To capitalise on the rapid rise, Monstermob bought content providers 9Squared in the US, British- based Phunky Phones, text promotions business Mediaprom and Unrealmind Interactive in Malaysia. Higginson hired in a merger and acquisition team, namely former investment banker Niccolo de Masi and finance director David Marks, then pursued opportunities in China, with Orange founder and former Carphone Warehouse non-executive chairman Hans Snook joining as chairman in May 2005. It secured three multimillion pound purchases by the summer of 2006.
Meanwhile, the UK was suffering in the wake of the Crazy Frog scandal. You may recall, Jamba, the American business behind the annoying animated amphibian phenomenon, was heavily fined for signing up mobile phone users to premium rate subscriptions without their knowledge.
Consumer confidence in the sector plummeted. Higginson, for his part, made the strategic decision to pull Monstermob's UK marketing completely. “It was the right decision,” he stresses. “Anyone who continued marketing lost a fortune – and we didn't lose a fortune. We managed that number because there's no point in trying to swim against a tide that strong.”
Unfortunately, the business was tainted by association, and concerns about performance began to circulate the City with underlying profi ts down £1.5m on projections at the time. It's since been reported that there were three profi t warnings issued that year. There weren't, counters Higginson. “All this gets a bit out of kilter,” he says. “What was actually said, and people misconstrue this, is that the UK is tough and we don't know whether we were going to issue profit warnings, but we're still in line with our expectations.”
The UK end was only expected to make £1m of the projected £20m profit for the company. So even if the UK figure had dropped to nought, it would not have amounted to a 10% fall on analysts' profit forecasts, the point at which a warning is issued.
“There needs to be some clarity,” says Higginson. “You'd had a mass period of all these acquisitions, so there were various numbers out in the marketplace as to what our final figure would be anyway.” It understandably irks him, because it was used in defence of his dismissal.
The fall of Higginson
Behind the scenes, in the lead up to the announcement on June 13, Higginson was totally in the dark. “I got the phone call on the Sunday while I was out of the country – a rather bizarre call from the chairman, Hans Snook, saying they'd like me to resign,” he explains. “It was a great shock.”
Higginson asked for time to consider the impact on the business and shareholders. “I then responded saying I wasn't prepared to resign because I think immediate resignations are exactly what they are, and said: ‘If you want to get rid of me you'll have to fire me'. They then went round and got the necessary signatures from the board.”
One of the things that hurt most was the manner in which he received his marching orders. “I'm a great believer that if you're exiting someone from a business, you should do it face-to-face and give people the right of rebuttal,” says Higginson. “The way it had happened just wasn't right. To be sacked by your own company by fax. I got the call and said: ‘We really need to speak about this. There are ways this could be handled better, more timely, that will not affect the share price'.”
His plea to delay the announcement to the City fell on deaf ears, despite him drafting and redrafting a proposed press release with the company's former chairman and ex-Conservative minister Lord Kenneth Baker. “I was taking his advice as to how we could best handle the situation in terms of damage limitation for the shareholders,” he explains. “But I got the fax saying ‘we don't want to talk about this anymore, you're fi red', which I thought was sheer stupidity.”
The company's own release went out, carefully pointing the fi nger at Higginson's supposed focus on UK operations, while elevating 26-year-old de Masi, who had led global acquisitions, to chief executive. The City responded. The share price fell £1 almost immediately. It subsequently continued to drop from a high of around £3.50, before finally coming to rest like a dying leaf in the autumn around the 50p mark. This represented a massive vote of confidence for Higginson, but that did little to take away the pain.
“If you ask anyone who's set up a business they'll tell you that the business is more important than the cash and they'll do anything in their power to try to make sure that it survives,” he says.
The fall of Monstermob
Did the board have a point though? It seems unfair to blame Higginson for performance in the UK against the backdrop of the Crazy Frog controversy, particularly as the company was moving ever-further from straight ringtones to a fully-fledged mobile internet business. Only a week before, he'd secured agreement from the board to invest up to £2m in a UK-based research and development centre. “We needed to invest in the future and embrace what was around the corner, such as WAP 2.0,” Higginson says. “Unless we invested time, money and effort in those, it was certain we'd wither and die.”
The pick-up and put-down pace of change had taken consumers from a simple ‘ring, ring' to monophonic, polyphonic, then music and MP3s, to full interaction with the internet in less than a decade. Having spent time in San Francisco observing the “inordinate” amount of time Apple spends looking at how people open boxes for the ultimate ‘unwrapping' experience, his idea was to create a melting pot where some of the brightest mobile innovators from around the world could literally eat, sleep and breathe mobile minutiae. If Web 2.0 is becoming a known phrase now, WAP 2.0 still requires traction. He cites peer-to-peer music fi le sharing as an example of an area that the music industry and players in the mobile space are still failing to get it right.
It's interesting to note that Monstermob's new owner ZED is investing 63m into WAP 2.0 – a staggering increase from Higginson's proposal. Whether Snook's board subsequently dismissed his plan as harebrained, the fact is that the focus switched to financially re-engineering the business, including the terms of earn-outs with Monstermob's Chinese acquisitions. Serious regulatory changes in China have hampered growth in the region as under instruction of the Ministry of Information Industry, China Mobile imposed mandatory rulings designed to protect consumers from commiting to subscription services, leaving providers unable to rely on the usual inertia.
“The problem is that when a business is run by financiers, it's all about looking through the rear-view mirror,” says Higginson. He argues that the company lacked entrepreneurial creativity, pointing out that numbers of mobile phone users continue to swell in China, so “you've got to be doing something pretty wrong if you can't sell something to them”.
He also questions why the share price continued to fall following his departure. “You've got an audience that still wants the product,” he says. “It's over-regulated, so find a way round it and come up with a product that the customer can have. But instead, the whole focus was not ‘we're in the shit, how can we get out of it?' it was ‘who can we blame and how can we re-engineer the business?'.” This, claims Higginson, led to a fatal drop in morale and momentum, with the customer largely ignored.
“I do not believe that Niccolo was or is the right person to manage and run a business,” he states. “He's too impatient and doesn't have the communication skills and savoir faire you need with institutions. At the first sign of trouble he retreated to the slide rule, never communicated with the institutions on expectations. The press didn't know what was going on, so the great unwashed shareholders didn't know what was happening, and everyone panics.”
Perhaps Higginson would say that, though, given the circumstances. After all, he admits de Masi had made it clear he had designs on his job, and that despite the founder wanting to take on a more strategic role for the business, the young pretender was not his chosen successor. “That was always the plan,” he says. “To get the AGM out of the way, look for a suitable replacement; a professional robust manager who could manage the business. I see myself as a starter of businesses, not someone who runs them on a day-to-day basis. You need someone who's very strong operationally. But you've got to transition so that there are no shocks. The last thing any institution wants in the public environment is shocks.”
Higginson's second coming
Following his sacking, Higginson tried to take some time off to collect his thoughts. The planned fortnight away turned into just a long weekend. “If this happened again, I think I'd take a lot longer off, because you need that time to clear your head,” he says. “I looked at a number of things and wasted some money on ideas.” He got involved with Stream Group, rebranded as NetPlay TV (see box) and continued with his other directorships.
Higginson also spent time thinking of ways to aid Monstermob “because the business was bigger than the squabble”, not to mention the value of his shares (he'd bought close to £500,000-worth at top price a month before). “The problem is, not one member of the board had any significant shareholding,” he says. “All the decisions didn't really affect them.”
He claims that the company lost focus while desperately trying to find a suitor. Then along came ZED. Despite interest from elsewhere, it prevailed. As the single largest shareholder, Higginson was consulted and was supportive of the bid. As the EGM closed following the purchase, a broker from the company's new nominated adviser, Teather & Greenwood, who also happened to represent NetPlay's interests, approached. The remarkable comeback was complete.
What has the experience taught him? “To have conviction and be more forceful in my views,” he replies. “I also trust fewer people in business now. It's also taught me to realise that this is only business. It's better being truthful with people to their faces, even if you upset them.”
It remains to be seen how Monstermob will fare under new ownership, but Higginson likes what he's seen so far. “Once the EGM finished, people were on planes the following morning to the four corners of the Earth,” he recalls. “I think Monstermob is tremendously undervalued. There's a real opportunity to see it grow. It's not going to happen overnight, but as we start building confidence, getting certainty and numbers out to the institutions, the share price will return to where it should be. It would be nice to prove a few people wrong.”
Name: Martin Higginson
Companies: CityBlock, non-executive chairman; First Base Homes, founder and chairman; Monstermob, non-executive director; NetPlay TV, chairman and chief executive; Springdoo, non-executive chairman and CEO