Top 10

Dec 1, 2000 12:00 PM, By John Rockhold, News Editor

Have the mighty fallen? Or have they just followed the old saying: "If you can't beat them, join them"? Consolidation and growth have radically redesigned the face of the wireless industry. Compare Wireless Review's 1999 Top 25 listing to this year's Top 10, and you'll see new names but familiar faces.

Wireless-service providers were ranked based on their subscriber numbers at the end of the third quarter. Revenue figures are through nine months, ending Sept. 30. All information was gathered from the providers' Web sites, third-quarter releases and from the providers themselves. Analysts from the Yankee Group outlined each provider's main strength and most pressing challenge, while also offering additional commentary.

With 26 million customers and counting, Dennis Strigl wants to keep Verizon Wireless simply huge.

To heck with learning to walk. Verizon Wireless, just eight months old, launched itself straight to the top of the wireless industry and left the market radically changed in its wake. If consolidation wasn't the name of the game before Bell Atlantic Mobile, GTE Wireless, PrimeCo and Vodafone AirTouch merged into Verizon Wireless, then it became the mantra afterwards. The provider already has seen its growth-by-merger strategy employed by its competition; BellSouth and SBC teamed up to create Cingular Wireless, which, in terms of subscriber numbers, launches second only to Verizon.

What does the future hold for the No. 1 wireless company? Mum's the word on that, as Verizon remains in a quiet period until it resolves its deferred IPO. Don't expect Verizon to develop an ego, though, as Dennis Strigl, president & CEO, wants the provider's focus to begin and end with the individual subscriber, no matter how many million there are. He doesn't plan to stop and admire the view from the top.

"I don't even like to think about big," Strigl said. "I think the challenge is to think and act small, and to stay customer focused, so I'm trying not to let it sink in."

In the FCC Waiting Room
Playing the waiting game is rarely any fun; just remember the last time you had to sit in a doctor's waiting room. Imagine, though, that you're waiting for approval to create the nation's largest wireless-service provider.

"Thank goodness, we're finally ready to launch," a much-relieved Strigl thought when the go-ahead for Verizon Wireless came through. Indeed, quickening the merger process would be the one thing that Strigl would change if he could.

"I would do things faster and smarter," Strigl said. "That comes with experience, and while we've had a lot of it, it would be naive of me to say that you can't do things better."

Many thought putting together so many companies would pose a daunting task, but Strigl never found that to be true. The companies' cultures came together and "focused on growing customers, growing the business and growing themselves with the business," he said.

For Strigl, the initial launch is Verizon's high point thus far. Although he originally was concerned about implementing a new name, Strigl's trepidation was quelled by the full-throttle promotional efforts of Verizon employees.

Millions of Shoes
The pitfall to being the nation's largest provider is that you could begin to think and act like you are the biggest, according to Strigl.

"It is a classic mistake to think that either because of your size or your wisdom, that you can put something in the marketplace, and customers are going to buy it," he said.

"When you are attempting to (make a decision), whether it is a new broad policy, a new price or a new competitive product offering, you have to approach it like you are the customer," Strigl said. "The only way that you can focus on the individual consumer is to put yourself in the individual's shoes."

Standing in 26 million subscribers' shoes is no small feat. One effort to make that campaign easier is Strigl's mission to eliminate corporate bureaucracy and subsequently reduce prices for consumers.

"Bureaucracy in my mind is the equivalent of unneeded cost," he said, adding that everyone at Verizon Wireless knows to eliminate unneeded costs, no matter what they are. Another way of reducing bureaucracy is to bring the company as close as possible to every Joe Smith.

"We have a policy of making decisions as close to the customer as we can; to decentralize and give people in our business accountability, and get out of their way," Strigl said.

He listed unifying Verizon's numerous billing systems and efforts to reduce handset costs as primary examples of making wireless more affordable for consumers.

If the commitment to see things from the subscriber's perspective slips with even one decision, providers will find themselves without the customers they worked so hard to obtain.

"I think that the successful companies are the ones that remind themselves constantly that if they relax or stumble, the competition is going to eat their lunch," Strigl said.

Such cutthroat competition forces providers to be relentless. As easy as it would be for a provider to stop and smell the roses, the race toward more subscribers never stops. Strigl believes procrastination is not an option. In fact, making a mistake is better than not acting at all.

"Making a mistake isn't the bad thing; it's not changing and correcting the mistake, that's the bad thing."

Verizon's pace, according to Strigl, must remain greater or equal to that of its competition. The statistics that he finds most useful to gauge the company's progress are customer growth, market share and cash flow. In the third quarter, Verizon added 806,000 subscribers, second only to Sprint PCS, which added 1.6 million. Verizon finished first in Strigl's two other categories, though, hoarding nearly 25% of the market and pulling in $4 billion in revenue.

"That's all there is," he said. "Anything else you might want to look at relates to those three."

In this every-provider-for-itself market, the industry leader sets the bar for the others to chase. Strigl acknowledged that Verizon has a target on its back, but added that every provider is potential prey for its competition.

"I think everyone has a target, whether it's on their back or on their head," he said. "So, everybody in this business ought to know that they are a target for somebody else."

Verizon won't look back, though, Strigl added. That would distract from their honed customer focus.

"You want to make sure that you are creating interest for your customers and providing a product that they need and want," he said. "You want to try to do that as best you can profitably."

Keeping it simple seems to be what drives Verizon Wireless. The challenge will be to maintain that attitude as its subscriber numbers push upward, and its competition consolidates to keep within striking distance.

Strigl pointed to Vodafone as an important model for Verizon. Despite the sheer size of Vodafone's subscriber base (31.5 million), it remains an entrepreneurial force in the industry, he said.

It may be cliche to look at where you came from to see where you are going, but if the past is a model for the future, next year's top-service-providers list probably will surprise everybody.

"I was lucky to be in the industry at its very beginning," Strigl said. "I think it's amazing to see how the industry has grown and, no, I never would have anticipated the industry shaking out the way that it has. The way that companies have grown and merged, now with six, seven competitors in every market, I don't think anyone in 1984 would have foreseen that."

The simple approach might be the one thing that can keep Verizon's focus at the ground level. When asked to complete the phrase, Verizon is ..., Strigl succinctly replied, "A good company."

For Verizon Wireless that mentality starts from the top down, and that means from the subscriber up.

"(These) are things that are good for everybody, like our strong stand against domestic violence," Strigl said. "That is not only a huge social issue, it's one that impacts our workforce.

"On driver safety, there's always been a lot of debate on what's the right thing to do. The last thing you want is to come up with something that would cut customers (from) using the phones. Well that's not the issue; the issue is what's the right thing to do, and I have to tell you that the right thing to do is not to sit in a car, driving along at 60 miles an hour with a phone at your ear."

Subscribers: 26.3 million
Revenue: $10.2 billion
Service: National
POPs: 240 million
Technology: CDMA 800MHz & 1.9GHz, Analog 800MHz
Ticker Symbol: none
CTO: Dick Lynch
Employees: 32,000
ARPU: $52
Churn: 2.5%
Slogan: Simple, National, Affordable. Join In
Web Site: www.verizonwireless.com

Analyst Perspective
Strength: Best combination of subscriber base size, coverage area and digital penetration
Challenge: To become a leader not only in market share, but product and service innovation
Comment: Have been slow to roll out data services

Subscribers: 19 million (estimated)
Revenue: $8.87 billion (BellSouth Wireless & SBC Wireless combined)
Service: National
POPs: 190 million
Technology: GSM 1.9GHz, TDMA 800MHz & 1.9GHz
Ticker Symbol: none
CTO: Bill Clift
Employees: 28,000
ARPU: $49.5 (BellSouth & SBC average)
Churn: non-disclosed
Web Site: www.cingular.com

Analyst Perspective
Strength: Strong penetration, presence and brand awareness in existing markets
Challenge: Need to consolidate multiple brands, service offerings and organizations into a national focus
Comment: Have holes in footprint, which will require them to acquire spectrum in key markets, including additional spectrum in New York City

Subscribers: 15 million (with partnership markets)
Revenue: $7.5 billion
Service: National
POPs: 270 million
Technology: TDMA 850MHz & 1.9GHz
Ticker Symbol: AWE (NYSE)
CTO: Rod Nelson
Employees: 21,000
ARPU: $68.5
Churn: 2.9%
Slogan: Your World Close at Hand
Web Site: www.attws.com

Analyst Perspective
Strength: Has some of the highest-value customers, with ARPUs near top of industry
Challenge: Can it continue to be market innovator as it has been with programs such as Digital One Rate and PocketNet?
Comment: Spectrum rich: 30+MHz on average in 80% of country; 90% of network is digital

Subscribers: 9.2 million (with affiliates)
Revenue: $4.3 billion
Service: National
POPs: 270 million
Technology: CDMA 1.9GHz
Ticker Symbol: PCS (NYSE)
CTO: Oliver Valente
Employees: 26,000
ARPU: $59
Churn: 3%
Slogan: The Clear Alternative to Cellular
Web Site: www.sprintpcs.com

Analyst Perspective
Strength: Strong distribution channels - can leverage retail relationships to reach mass-market customers
Challenge: Can it continue to maintain aggressive subscriber growth? Third-quarter subscriber additions lower than expected
Comment: Although it has good coverage footprint, needs to improve network quality to compete with the big three

Subscribers: 6.2 million
Revenue: $3.75 billion
Service: National
POPs: 200 million
Technology: iDEN, SMR
Ticker Symbol: NXTL (NASDAQ)
CTO: Barry West
Employees: 14,000
ARPU: $75
Churn: 2%
Slogan: How Business Gets Done
Web Site: www.nextel.com

Analyst Perspective
Strength: Highest-value customers in industry - strong presence within business markets
Challenge: Will need additional spectrum in upcoming auctions to broaden market strategies, particularly for 2.5G and 3G deployment
Comment: Product offering of Direct Connect provides unique value to customers

Subscribers: 6 million
Revenue: $2.45 billion
Service: Midwest, Southeast & Southwest
POPs: 72 million
Technology: CDMA 800MHz
Ticker Symbol: AT (NYSE)
CTO: John Haley
Employees: 26,000
ARPU: $49
Churn: 2.45%
Slogan: The Power to Simplify
Web Site: www.alltel.com

Analyst Perspective
Strength: High penetration in existing markets and long-term roaming agreement with Verizon provides ability to translate regional presence into national success
Challenge: "National" providers threaten to take market share in traditional strongholds
Comment: Bundling strategy offers efficiency in services and distribution

Subscribers: 3.1 million
Revenue: $1.27 billion
Service: Midwest, Northeast & West
POPs: 220 million
Technology: GSM 1.9GHz
Ticker Symbol: VSTR (NASDAQ)
Executive Vice President of Engineering: Tim Wong
Employees: 9,300
ARPU: $52
Churn: 3%
Slogan: Get More From Life
Web Site: www.voicestream.com
Pending: Acquisition of Powertel, merger with Deutsche Telekom (DT)

Analyst Perspective
Strength: Merger with DT provides infusion of capital - combination of DT's overseas expertise with VoiceStream's strong management team
Challenge: Will be difficult to gain substantial market share quickly in an already crowded and competitive market
Comment: Only GSM operator in United States needs to acquire key spectrum assets to complete national footprint

Subscribers: 2.9 million
Revenue: $1.13 billion
Service: East, Midwest & West
POPs: 24.9 million
Technology: CDMA 800MHz, TDMA 800MHz
Ticker Symbol: USM (AMEX)
CTO: James D. West
Employees: 5,000
ARPU: $46.5
Churn: 1.8%
Slogan: The Way People Talk Around Here
Web Site: www.uscellular.com

Analyst Perspective
Strength: Properties fill footprint gaps for several providers and allows for significant roaming traffic
Challenge: Can it continue to run dual technologies (TDMA and CDMA) to accommodate roaming partners?
Comment: Will its data strategy follow that of its strategic partners?

Subscribers: 976,500
Revenue: $541 million
Service: Midwest & West
POPs: 9.6 million
Technology: Analog 800MHz
Ticker Symbol: WWCA (NASDAQ)
VP of Engineering: Terry Benz
Employees: 2,400
ARPU: $65
Churn: non-disclosed
Web Site: www.wwireless.com

Analyst Perspective
Strength: Footprint is attractive to national providers for roaming traffic
Challenge: Needs to establish key roaming relationships as revenue gets boost from roaming traffic
Comment: Focusing on TDMA as digital technology of choice to provide compatibility with key roaming partners (AT&T, Cingular)

Subscribers: 854,000
Revenue: $377.8 million
Service: Midwest, Northeast & Southwest
POPs: 6.8 million
Technology: TDMA 850MHz, CDMA 1.9GHz
Ticker Symbol: DCEL (NASDAQ)
Senior Vice President: Tim Duffy
Employees: 2,200
ARPU: $42
Churn: 2.15%
Slogan: Plans That Fit the Way You Talk
Web Site: www.dobson.net

Analyst Perspective
Strength: Cellular presence in several large Midwestern rural markets
Challenge: Very low industry ARPU ($42)
Comment: Niche market player