NEW YORK-After receiving “Big Daddy” T-shirts from BT Alex. Brown Inc. telecommunications analyst Jeffrey L. Hines June 10, top executives of four of the world’s largest wireless carriers offered an expansive vision of their companies and their industry.
“There are accelerating growth rates in all of our markets, and we will be massively bigger than we are today,” said Chris Gent, chief executive of Vodafone Group, the largest wireless company in the United Kingdom.
“We are active in 13 countries and hope for more. This is a hunt-or-be-hunted world, and we are hunters.”
Gent joined George Cope, president and chief executive officer of Canada’s Clearnet Inc.; Tim Donahue, president and chief operating officer of Nextel Communications Inc.; and Dennis Strigl, president and chief executive officer of Bell Atlantic Mobile, for a BT Alex. Brown forum on “The Future of Wireless.”
“In the [United States] over the next decade, there must be restructuring, and you will see fewer players,” Strigl said. “The survivors will have wide area coverage, a good customer base and service at a fair price.”
Donahue predicted that Nextel will “be one of three major world players” within several years, and it will have “the largest footprint in the United States within two years.”
In this country, he said, he believes there will be ultimately a handful of regional players along with three national players, one of which could involve a joining of “the GSM (Global System for Mobile communications technology) folks.”
Meanwhile, Nextel and Motorola Inc. plan within a few years “to roll out a data product with Internet Protocol that we think will be the premier in the world … that will allow you to access anything you can get on your (personal computer) … We are working with Oracle and IBM to develop applications.”
Nextel also is developing a dual-mode version of the world phone that would incorporate GSM and integrated Digital Enhanced Network (iDEN) technology, he said.
Donahue added that Nextel expects to become cash-flow positive by the end of the second quarter of this fiscal year. Cope said Clearnet hopes to reach cash-flow break-even status within two years, “a major milestone for the company.”
Clearnet, which operates a start-up, nationwide personal communications services network, reached 1-percent market penetration in its first seven months of operation. Taken together, wireless services in Canada “just finished (their) best six months ever,” Cope said.
Overall wireless penetration in Canada had trailed that of the United States and Europe until the advent of competition among four players under a system of mandatory roaming via dual-mode phones. Those same four carriers likely will remain standing as independent companies, Cope added.
Clearnet sells its consumer-oriented PCS services “like microwave ovens,” in a growing variety of retail outlets. As of June 15, the carrier also will offer PCS sales via the Internet, Cope said.
However, Clearnet doesn’t delegate to third-party dealers the sale to business subscribers of its other wireless service, iDEN, which Cope termed “addictive” to high-margin corporate customers.
“Eventually, we will enter the consumer market (with iDEN) but not just with a me-too product.”
Strigl said Bell Atlantic is experiencing continued rapid growth, especially in its international markets, where the customer base is smaller than in the United States. Domestically, he said he expects “15 (percent) to 20 percent growth in the immediate future.”
Notwithstanding the United States’ larger overall subscriber base, the growth in the U.S. market is stymied by the absence of calling party pays, Vodafone’s Gent said.
“It’s a shame that, after 13 to 14 years, we are still arguing this in notices of inquiry … I hope the [Federal Communications Commission] pulls this together within the a few years,” Strigl said.
Meanwhile, with some success, domestic carriers have substituted large bundles of airtime minutes for calling party pays, he said. In Canada, where calling party pays is anticipated next year, and in the United Kingdom, where it already is in effect, price declines for services have been followed by rises in usage that actually increased revenues per subscriber, Cope and Gent said.
“In cellular, the key is can you withstand price declines and revenue dilution given your cost structure,” Strigl said.
“Stabilization of [average revenue per unit] may be true for Nextel and will be true for Bell Atlantic.”
Besides the calling party pays issue, Strigl also predicted it “will take years, but not that many” to unravel arcane rules no longer applicable in a highly competitive market, like universal service requirements and excise taxes.
Nextel’s Donahue, however, said he believes U.S. regulators ought to be graded on a curve compared with their counterparts in some other countries.
“From our perspective, we don’t have regulatory issues and problems here, (but) see them more overseas, for example in Brazil.”
By 2000, Donahue said the number of wireless phone numbers in this country will have grown to 40 percent of the total, up from 29 percent today. Wireless minutes of use will grow in 10 years to 10 percent of the total, compared with 4 percent today.
For investors in Canadian wireless services, “the good news is that 40 percent penetration is still in the future,” Cope said.
In developed nations generally, Gent said, “we are heading eventually toward half the population for voice and data.”
An important factor in promoting broader market penetration and usage are prepaid services, he added.
“Some new initiatives are coming up in international prepaid, which heretofore has been country specific,” Gent said.
