Andrew Sukawaty: Sprint's High-Yield Manager

In a city where Sprint Corporation buildings seemingly outnumber all other Kansas City businesses, the main Sprint PCS corporate office by contrast is a little trickier to find. It is tucked away from view just off of the Country Club Plaza in a United Missouri Bank building.

Once inside the corporate offices, however, you can tell there is nothing quiet or reserved about these operations. The hallways and conference room walls already are crowded with framed press stories recounting the company's achievements during the last 24 months. Sprint's initial multicity launch; the construction of an all-digital CDMA network; the replacement of cellular campaign; agreements with vendors such as Motorola, Nortel, Qualcomm and Sony; Radio- Shack distribution agreements and aggressive new branding efforts are just a few of the trophy stories.

Andrew Sukawaty, the com-pany's CEO, reflects a similar controlled modesty. But again, the initial impression of a quiet reserve yields to Sukawaty's more genuine drive and intensity.

That drive and intensity has been fueling Sprint PCS' explosive entry into wireless since he took over the reins in September 1996 from Ron LeMay, who had moved on to become president & CEO of the parent corporation. Sukawaty came armed with his own brand of CEO experience garnered both from Mercury One-2-One, which launched the world's first personal communications service, and NTL, a diversified broadcast transmission and communications company. It was the experience from the former that has served him best. There he choreographed the mission of the new U.K. PCS company, building the network infrastructure, establishing the sales and marketing strategy, and guiding the initial launch.

Since joining Sprint PCS, Sukawaty has charted a similarly calculated march on the competitive wireless market. In the process, the company is defining itself as well as its vision of what a nationwide carrier should be.

>From 0 to 65 In January 1997, Sprint Corporation, with its partners, Tele-Communications, Incorporated (TCI), Cox Communications and Comcast, bid $545 million and won the PCS licenses for 139 markets serving a population of more than 260 million people.

At the time, Bill Esrey, Sprint chairman & CEO, predicted that Sprint's PCS company eventually would have a consistent service offering in every market, a distinct advantage over its competitors. Sukawaty, his PCS commander-in-chief, was charged with bringing the plan to fruition.

Sprint PCS initially launched service in eight cities and promised that its service would be available in 65 cities, including 35 of the top 50 U.S. cities, by the end of 1996. At the end of 1997, the company already was serving more than 70 metropolitan markets, which include more than 500 major cities. Although the majority of that growth occurred in the last 12 months, Sukawaty isn't letting himself or his company rest on their laurels. He has bigger and better goals in store.

"We will be in 100 of the top 100 cities by the end of next year," he predicted once again.

So what makes this carrier's plan different from all of the other aspiring wireless licensees?

Sukawaty suggested that the key has been to view its PCS network as a national system from the beginning.

"The way we built it was as a national network," he said. "We shared resources between cities on the network, for example. We made it totally seamless. A customer using voice mail could be using any one of a dozen voice-mail platforms, but it looks like one big voice-mail platform nationally. When I amin San Francisco, it works the same as when I am in Kansas City. I access features just the same."

Sukawaty also predicted that over time, this national ubiquity would prove to be a very attractive proposition to the customer.

"Everyone is making claims they are national -- you can roam here and roam there," he said. "But to truly make it something that is user friendly is (in) the way you price it and the way you access it. We think that is powerful."

In a market that is migrating more toward a consumer-oriented service, using the national brand and network from one service provider makes sense. As for brand, consumers are familiar with the Sprint long-distance name and the pin-drop icon. Sukawaty said he plans to take advantage of that, but he emphasized that there is more to a national network than a big name.

"That positioning is there for addressing the consumer markets aggressively," he said. "If you have the national footprint and the license, if you deliver on that and make that national system work, it just seems a compelling proposition for customers. Over time, we (Sprint PCS) have to prove that to people, demonstrate that to people and deliver that to people. Then we think we will be a very strong competitor in this market."

Beyond the National Network Sukawaty evaluated the landscape of the competitive arena, the resolve and result of the Telecom Act, and areas where the wireless industry has fallen short of its aspirations. He spoke passionately of the challenge for wireless carriers to bring pricing and ultimately yields into line. Once these are in line, Sukawaty said the wireless industry will explode beyond expectations.

"If you look at the competitive scene out there -- cellular and wireless -- there is a 60% difference between highest yield per minute in wireless to the lowest yield in this country. That kind of pricing discrepancy illustrates what a different competitive scene we see in different localities in the United States," Sukawaty said. "You've got to deal with that as a national carrier. You can't ignore that."

Sukawaty echoed the concern of members of Congress that the Telecommunications Act is falling short of its competitive aim. In fact, he went so far as to call it a "failure."

"It was a very wireline-focused approach in terms of the way the legislation was structured and somewhat ignored the potential of wireless to actually compete in the local loop," Sukawaty said.

He complained that from the political point of view, wireless and mobile phones unfortunately still are perceived as devices merely for business and for the privileged. Sukawaty suggested that a wireless call needs to be considered as just a plain phone call, no different from a wireline call made from someone's desk or home.

"Why should we force wireless carriers into a situation where they are taxed differently, where their interconnection arrangements are different, where they can't even have standard calling party pays to a mobile phone?" he asked. "The user of a mobile phone pays both ways. Well, why does it have to be that way? It is both historic in the way our regulatory structure has been established, and it is also attitudinal and policy-oriented because the mobile phone is treated quite differently."

Sukawaty cited the recent CALEA legislation as an example of how wireless devices and their service providers are treated.

"Let's force mobile operators to give a location of a party calling in on 911. ... Let's force that cost onto the mobile network," he said, "and they have to recapture it however they can recapture it."

He pondered at what would happen if the wireline networks were saddled with the same sort of unique taxation.

"There would be an outcry," Sukawaty said. "There's no outcry in this case. It is just that people accept it as a matter of course. 'Well, yeah, those are mobile-phone networks. Those are parties that can afford it. The people that are paying for that can afford to pay a little bit more. Who cares?' If this were an everyday phone, people wouldn't be saying that. That is the breakthrough we need to make in people's thinking and the political thought that goes on in this country. That is a crusade that we are on ... trying to drive growth."

Parity With Wireline On this crusade, what is it that the wireless industry needs to be doing, but is not?

"Driving harder with our federal, state and local politicians toward getting parity with the wireline networks is something that has been totally underplayed by the wireless industry," Sukawaty said. "A big reason for that is many of the players have been captive, owned by wireline operators, so there has not been the mandate to make it happen. I also believe the political clout of the telephone companies is enormous, and so it has been a difficult row to hoe."

As wireless sheds these current shackles, the competition it presents to wireline services will grow substantially, Sukawaty suggested.

"There's been so much growth in pure mobile traffic that to push it further has not been the highest priority," he said. "And I think that is changing.

"As our yields come closer to what a yield is on a wireline call, there is going to be more switch-over to calls on wireless and more growth in calls for wireless," he said. "In our industry today -- and I am talking about wireless and wireline -- the growth in traffic is phenomenal."

The growth on the wireline side has been inspired by access-line demand created by applications such as the Internet and fax machines. In the mobile environment, Sukawaty pointed to "plain-old voice" drivers such as improvements in voice quality, battery life and phone size. Because of these, the wireless industry has witnessed a subtle surge in minutes of use, some of which have come at the expense of the wireline networks.

In the future, Sukawaty said that wireless will make improvements and develop new drivers to better address a broader range of data services and higher-speed data services over time.

"As we do that, Internet access on the move becomes a real possibility," he said. "We'll start to pick up part of that growth in minutes of use as well. It won't just be the wireline network picking it up, so everything that is driving wireline minute growth today, wireless networks will be able to address in the future. We will be able to share in that growth. Now the utility of having a mobile device is so high that as these yields start to come together, you naturally are going to see a switch to more and more minutes on wireless."

Does Sukawaty see a total displacement of wireline to wireless?

"No. You have certain applications that are untouchable on wireline," he said. "The growing bandwidth requirements out there, the speed in which they are being addressed in a wireline network -- we just are not going to be able to keep up the pace. There will always be broadband developments that are wireline applications, and that we won't touch."

However, he is quick to counter that there is a growing range of data applications and Internet applications that don't require high bandwidth.

Proving the Point Returning to his favorite subject of yields, Sukawaty pinpointed the time when those segments will take off by using a real-world analogy.

"A good example is going back to plain old voice in Israel," Sukawaty said. "The price per minute on the (wireless) network there was originally set at 3 cents a minute. The elasticity, the shift of traffic to the wireless network and the number of minutes per user that came out of that was something we hadn't seen in the wireless world before. So it proves that this elasticity exists in the wireless and wireline network.

"As those yields come together, you are going to see a switch. You saw it happen in Israel. And in Europe, you see it with ratios between a wireless yield and a wireline yield. Where those come together, you see a bigger and bigger shift. What you see is more minutes of use on a wireless phone."

Another analogy could be drawn from Sprint PCS' parent in long distance as well.

"In the long-distance business, as yields went down, minutes went up for long-distance calls," he said. "Certainly, there are some learnings for the wireless business from that. Sprint has operated in a very sophisticated tactical marketing world for a long time. The long-distance business has been a very competitive business. And they have done very well starting as an underdog and working their way up the ratings. I think that has served us well. We are applying some of those learnings to the wireless world."

Although there are some lessons to be gained from wireline and long distance, it is far from an exercise by rote. One of the most groundbreaking areas and most significant differences is in the phone device.

"In the long-distance business, you are not selling a device," Sukawaty said. "Your service in wireless is embodied in the device. You have to sell it and learn to be good at selling it, not just the service. That brings in a different dynamic into the market."

Sukawaty said this competitive give-and-take doesn't necessarily result in one industry failing while the other succeeds.

"Competition means more growth. Price is decreasing, but price is decreasing within a realm of reason," he said. "I think another big lesson is as your regulatory structures change and your thinking changes about how a mobile phone fits into the overall competitive landscape for telecommunications that it becomes a viable alternative to wireline much sooner than people think. What drives that is not only competition, but better quality, longer battery life and a regulatory regime that allows some level playing field between wireless operator and wireline operator."

It probably will be some time before Sukawaty sees his vision of a level playing field or of a wireless call being treated the same as a wireline call. In the meantime, however, he can console himself by managing his nationwide network and promoting an escalation in competition Sprint PCS style. That style will no doubt yield high growth, managed pricing and a national seamlessness that matches the wireline network.

Owning licenses for 139 markets and sharing the name and financing from strong corporate parents may help clear the trail, but it doesn't guarantee a yellow brick road to wireless acceptance and success.

Andrew Sukawaty said fulfilling the company's mission of a nationwide network is no small feat.

"Rome wasn't built in a day, and these networks are enormous," he said. "You can't get ahead of yourself here and think of this as one national system or market.

"While we have these global ambitions, at the same time we have to be very micro-level focused on just getting the job done. We have to be operationally focused on execution. Each city is a separate launch for us. Each city's district manager makes the call on pricing and when the market is ready to launch. They do it based on what we know of that local market."

Los Angeles is one of Sprint PCS' largest market launches, illustrating the company's attention to technical detail and individual market requirements.

First Sprint had to establish the CDMA-service footprint. Its next step was to develop its distribution channels in the area. This required the company to open 23 Sprint PCS Retail Express locations and offer product availability with Los Angeles and Orange County retail outlets such as:

* Best Buy * Circuit City * The Good Guys * Office Depot * Robinsons-May department stores.

Also, prior to service launch, Sprint PCS provided limited-time price plans and agreements for consumers who shopped early.

"Our experience in Southern California has proven that the demand is here for digital PCS wireless service," said Rod Egdorf, Los Angeles area vice president. "In Los Angeles alone, we know that 15% of the market is mobile, and that number is growing rapidly."

For early prelaunch signups, the company offered three price plans ranging from a $75- to a $20-a-month service charge, guaranteed through the year 2000.

Diamond Plan for Heavy Users $75 monthly service charge includes 1,000 minutes per month with a 15 cents -per-minute charge thereafter.

Crystal Plan for Medium to Heavy Users $50 monthly service charge includes 500 minutes per month with a 20 cents -per-minute charge thereafter.

Prism Plan for Light to Medium Users $20 monthly service charge includes 20 minutes per month with a 40 cents -per-minute charge thereafter.

After 16 months on the job as Sprint PCS CEO, Andrew Sukawaty pondered a few moments when asked if there were things he would do differently if he had them to do again. Finally, he chuckled and said, "There are probably 50 if I sat and thought about it."

However, the two he settled on illustrated his goal-setting regimen and negotiation of direction.

"The number one thing would probably be setting objectives for ourselves internally that recognized some of the logistical challenges that are out there," he said. "Last year at the end of the year we got somewhat criticized, in the trade press particularly, because some of the objectives were not hit for number of cities launched."

Sukawaty explained the stringent criteria Sprint PCS set to identify when cities were ready for launch and when the company would allow them to be launched.

The first phase of the company's launch targeted 35 of the top 50 U.S. metropolitan areas. Sukawaty said this goal put their backs to the wall when a vendor's software problem created a 60-day delay for eight cities. Although the company could have launched, the software glitch put it out of reach. Nevertheless, he expressed pride in the overlooked news story.

"The normal template for building a city is 18 to 24 months from the time you start," he said. "We launched our first markets after eight months. We had almost every city launched within 18. We really had a phenomenal accomplishment, but it almost appeared like, 'Boy, they have had a slip.'

"I think we got a raw deal by our own creation last year because we set some very aggressive targets that weren't totally achieved. This year, by the way, that has not happened."

Sprint PCS' digital air interface technology is CDMA. It is that technology choice that brought to mind Sukawaty's second rethinking. He said he had questioned CDMA, mostly because of his GSM background and experience in Europe.

"I really thought quietly that CDMA was a risky proposition for a business that was going in at a $10-billion investment and needed to make revenues happen quickly," he said. "I have been absolutely amazed by CDMA and its strength and robustness in the early stages of its deployment. I felt that it would take longer than it has. I would say I held back on some things that I wouldn't have held back on in retrospect."

To enhance its distribution efforts, Sprint PCS opened Sprint Stores at more than 6,000 RadioShack locations across the United States. Before the grand opening, all RadioShack managers and sales representatives were required to learn about Sprint's products, services and tools to ensure customer satisfaction. Sprint PCS also launched a multimillion-dollar ad campaign featuring Cartoon Network's The Jetsons. Along with the national TV campaign, the company distributed 40 million copies of an 8-page local and regional newspaper advertising insert featuring the Jetsons.

Ninety-four percent of all Americans live or work within five minutes of a RadioShack store. Sprint PCS' build-out of its stores within the 6,000 stores took five and a half months. Here's a glimpse of what went into building the store-within-a-store distribution network.

* It took more than 48,630 staff hours to build all 6,000 stores. *Total floor space totals 597,060 square feet. * 86,560 new signs hang in all of the stores. * More than 25,000 employees will work in the stores nationwide. * More than 3,600 tons of finished materials were required to build the stores.

Andrew Sukawaty graduated from the University of Wisconsin with a BA in marketing and international business, and he holds an MBA from the University of Minnesota. He began his career with marketing positions with AT&T and Northwestern Bell Telephone Company before moving up the ranks through organizations such as US WEST Cellular and Coastel.

When asked if he always had a grand design to become a telecommunications heavyweight, Sukawaty tells a different visionary story, one marked more by coincidence.

"My father had a small business, and I went to the University of Wisconsin as a journalism major," he said. "Like anybody else, I was just searching for what I was going to do in life. I moved from journalism into business and decided not to go into our family business."

Sukawaty finally settled on the idea of an advertising career.

"I was sitting in the lobby of a well-known ad agency waiting to meet the president, who was a friend of a friend, and I met someone from AT&T. I struck up a conversation, and they offered me a job a week later. It was twice as much as the ad agency offered me, so my great vision drove me to take the higher pay."

After stints in the driver's seat of such telecommunications giants as US WEST, Mercury One-2-One, NTL and now Sprint PCS, what would Sukawaty's perfect job be?

"If you look at what I have done, it's been both operational and entrepreneurial, with an emphasis on startup entrepreneurial," he said. "This is a great challenge, and I enjoy it greatly. To the extent that we can make it entrepreneurial, drive this company to be a lean, mean startup, then this is a perfect fit for me."