In an industry where size is often viewed as a result of success, especially when it comes to the bottom line and customers, U.S. Cellular Corp. has managed to operate successfully in a position between the country’s big-six nationwide operators that dominate the large markets as well as most of the industry and the dozens of rural operators that are often left to fight for the scraps the large carriers pass over. With nearly 4.7 million subscribers spread across more than 150 markets in 26 states, U.S. Cellular, the nation’s eighth-largest carrier, has often been referred to by industry analysts as the prototypical super-regional carrier.
Overseeing U.S. Cellular’s operations during the past four-plus years has been John Rooney, president and chief executive officer of the company. Rooney has spearheaded the carrier’s transition from a regional carrier that operated in a handful of mid-sized markets and relied heavily on roaming revenues to a substantial player in a number of the nation’s top markets that cut its reliance on roaming to less than 10 percent of total revenues.
At the forefront of that transition has been U.S. Cellular’s focus on what are currently four market clusters in the Midwest, Northwest, Northeast and Southeast that are anchored by large urban markets in most cases. The biggest push has been in its Midwest cluster, where U.S. Cellular launched operations in its hometown of Chicago in 2002 and recently launched operations in Oklahoma City and Lincoln, Neb.
Rooney noted that this focus has allowed the carrier not only to serve the densely populated urban markets, but also the highly trafficked paths in between that typically drive up roaming expenses for carriers that solely focus on the big cities.”If you look at the map associated with U.S. Cellular, you can see these are like puzzle pieces that fit right in, and Chicago obviously is the anchor,” Rooney said of the carrier’s Midwest operations. “That’s the driving influence for the whole Midwest area.”
At the same time, U.S. Cellular has shed markets through a number of sales and spectrum swaps that Rooney said did not fit into that cluster focus. Last year, U.S. Cellular signed a deal with AT&T Wireless Services Inc. that exchanged 13 AWS properties in the Midwest and Northeast adjacent to U.S. Cellular’s clusters in exchange for its operations in 10 markets in Florida and Georgia.
“We’re continuing to grow the company in a deliberate manner and strengthen our geographic footprint and rationalize it,” Rooney explained. “We want to get rid of pieces of property that don’t have any strategic value to us at all.”
As further proof of its market rationalization, U.S. Cellular sold its south Texas properties to AWS earlier this year for $95 million in cash, which U.S. Cellular said it would use to help launch services in St. Louis next year using spectrum it acquired from AWS in a previous deal. In addition, U.S. Cellular announced a deal earlier this month with Alltel Corp. to sell assets in Florida and Ohio, as well as investment assets in Ohio, North Carolina, Mississippi and Wisconsin for approximately $80 million.
Rooney described all of the recently sold assets as non-strategic to the carrier’s long-term plans.
As a result of its recent market swaps and sales, U.S. Cellular has entered into a number of the nation’s larger markets, which have become fierce battlegrounds for market share between the nation’s six largest carriers. Rooney brushed aside questions regarding U.S. Cellular’s ability to compete against its larger competitors in the big cities, noting the current wireless landscape provides strong competition in nearly every market.
“We are head-to-head with all the major carriers in all the markets we serve,” Rooney explained. “There is no place to hide anymore, whether you’re in Des Moines, Iowa, or Cedar Rapids. No matter where you go there are three, four, five players. I don’t think there is any market where we have less than three competitors, and they are all the big guys.”
Rooney added that while he sees U.S. Cellular’s competition as coming from its larger competitors instead of the smaller regional operators like Dobson Communications Corp., the carrier has no plans to spread its operations nationwide.
“There’s no way in my tenure here that we will subscribe to be a national carrier, and I doubt that anybody in the organization harbors those ambitions,” Rooney said. “We are a regional carrier. We operate in our markets, and in those markets where we have been established for awhile, we are the big dog.”
While U.S. Cellular’s market approach is similar to its larger competitors, the carrier’s focus on customer service is much more locally focused. Rooney, who in his previous positions at Ameritech in the early ’90s oversaw both customer service and call-center operations, said this has allowed the carrier to continue to post strong subscriber results backed by customer churn well below the industry average.
“The whole business philosophy of the company is to get our share of the gross adds and delight the customer to death and keep them,” Rooney said, highlighting U.S. Cellular’s 1.6-percent postpaid churn rate during the second quarter of this year. “I wasn’t born and raised in this industry. When I came in here and found this industry feels it’s OK to have 30 or 35 percent of your customers fire you every year-I’d never heard of that before. I take that as a major challenge. Wherever I have been, we’ve operated on the basis of high value and low churn. It’s critical to our success. We don’t have to plug that big hole in the bottom of the barrel.” (Before wireless, Rooney was employed at Firestone Tire and Rubber Corp.)
Specifically, U.S. Cellular has focused its customer-service resources where customers come in direct contact with carrier representatives. U.S. Cellular boasts five call centers across the country and said it does not plan to follow moves by its larger competitors to move some of those operations offshore.
“If our competition wants to deal with overseas applications, that’s their prerogative, and they see the business differently than I see the business,” Rooney said. “I see the business here as a customer-service business. We’re in the business of providing service to our customers. We don’t have hard products. It isn’t like buying a lawn mower in the store where you take the lawn mower home, and you don’t see the store again unless you’ve had some serious problem. We touch our customers and our customers touch us multiple times during the course of each day, let alone months and years. We have ample opportunity to delight customers, but if you don’t do it right, you also have ample opportunity to screw them up.”
U.S. Cellular’s customer service focus appears to be working as the carrier continues to meet or exceed analysts’ expectations, and it further bolsters the carrier’s still somewhat ambiguous place in the wireless industry, which remains irrelevant to Rooney.
“I don’t know if I am a regional, super-regional or local carrier; all I know is that I am the customers’ guy.”
