NEW YORK-SBC Wireless hopes to take a bite out of the Big Apple as one part of a territorial and services expansion plan accompanying combining its wireless operations with those of BellSouth Corp.
With the closing of the joint venture agreement, which is expected in the fall, the combined operations will have more than 19 million wireless customers, of which about 10 million are now SBC subscribers.
“We have always looked for expansion in non-dilutive ways, and this joint venture has taken us most of the way,” said Stephen M. Carter, president of SBC Wireless, at the recent Donaldson, Lufkin and Jenrette Securities Corp. “Wireless and Satellite” conference.
Carter said the SBC/BellSouth joint venture has holes that it needs to fill in, such as New York. He pointed to the 700 MHz and NextWave auctions as two opportunities to fill in spots in the Pacific Northwest and the New York metropolitan area.
“We also see properties that are to be sold off, and if they come in at the right price, we will buy them,” he said.
Carter said the carrier has teams of people reviewing various model scenarios for both federal spectrum auctions, but he expressed some reservations.
“No doubt, the 700 MHz takes a lot of studying. There are some major encumbrances, to understate the fact,” he added.
Also under fast track review are possible names for the new joint venture, which Carter said would move quickly to execute its plans once the deal closes.
“As to the outlook for an [initial public offering], it is too early to comment on the capital structure for the new company. But this is certainly something our board will be discussing in the next several months,” Carter said.
The network of the new combination will cover 70 percent of the U.S. population and 40 of the top 50 domestic markets.
“Look for a national brand, which the joint venture will develop and launch quickly as a high and early priority. When the new company launches, we will be very aggressive in the rollout of attractive national plans with seamless coverage and simple prices,” he said.
In June, SBC Wireless inaugurated its Digital Edge USA one-rate, coast-to-coast calling plans, which start at $25 per month. In markets where it has not yet promoted Digital Edge USA, 5 percent of its subscribers have signed up for it; in markets where advertising is under way, 25 percent have signed up.
The combination company also will provide wireless and wireline services in eight of the top 10 Hispanic markets in this country, as well as the largest overall overlap of mobile and landline services of any American carrier, including Verizon Wireless, Carter said.
“There are 31 million Hispanic Americans, and that number is growing. Hispanic customers spend on average 28 percent more than non-Hispanics on wireless,” he added.
In Carter’s view, mobile telecommunications has always been a good business, but it has been constrained in the past by issues around geography, technology and limited applications.
“We are at a rare moment in time where forces reshaping the wireless industry have poised it to blow past (prior) boundaries. That’s why we took the decisive step to joint-venture with BellSouth,” he said.
“The big winners in this new environment will be companies that can organize and execute economies of scale. Despite the hype, competing technologies are on an equal road to wireless broadband. Networks are a big deal, but applications are the key.”
SBC Wireless is at work with several partners to develop customized applications. Within the next few months, it intends to introduce personalized directories. Later this year, it will offer “instant access to the PC, and in the future, shopping and location-based services,” he said.
As an important adjunct to rapid deployment of diverse applications, marketing necessarily is becoming more sophisticated. Until recently, most carrier marketing departments have focused on sales rather than price plans, Carter said. Over the past year, he added, “SBC has devoted significant resources to customer research and market segmentation,” including Generation Y and the Baby Boomers, each comprising a cohort of more than 60 million people, and Generation X, which numbers around 20 million.
Calling delivery of wireless data “the second powerful lever,” Carter said SBC Wireless will begin offering Wireless Application Protocol services in California in July. Beginning in the fourth quarter of this year, the carrier will roll out WAP services in other regions.
This year, the company initiated a major sales effort targeted at businesses for the bundling of wireless and wireline services. It already is “in the midst” of bundling digital subscriber line and wireless data services in some markets.
“Our first priority for short message service will be to offer it within our companies, possibly by early in the fourth quarter. But we also are certainly looking to our competition about the facility to send SMS among carriers,” Carter said.
Trials of General Packet Radio Service are to begin this summer, with commercial launch also expected late this year. The debut of Enhanced Data Rates for Global Evolution technology is planned for the end of next year.
“The end game is 2 Megabit throughput. Wireless broadband at that speed will be transformational,” Carter said.
“Despite some myths, [Time Division Multiple Access] and [Global System for Mobile communications] are coming together on a wireless migration plan to 3G. [Code Division Multiple Access] is proceeding on a parallel track. Each has its challenges, but the technology (for both) will be ready well ahead of consumer demand,” Carter said.
SBC Wireless is on course to change over by year-end all of its Ameritech Corp. properties to TDMA from CDMA. The 375 million GSM and TDMA customers worldwide propelled that decision with their promise of economies of scale and global roaming opportunities, he said.
However, he emphasized that the new SBC-BellSouth wireless joint venture solely involves the domestic properties of the two parent companies, which will continue to retain separately their international wireless holdings.
“You can expect more coordination between the two groups, in [research and development], for example,” Carter said.
