Triton PCS: The Next 100 Years

Triton PCS Chairman & CEO Mike Kalogris and President & COO Steve Skinner have a long history in the buy it, build it, sell it business. Formerly key members of the Horizon Cellular Group management team, they acquired licenses for Horizon, built them out and sold them for $575 million. In November, they did the same with Triton Cellular's assets, which Rural Cellular plans to acquire for $1.24 billion. Will the same thing happen to Triton PCS?

"Even our original business documents presented Triton PCS as a long-term company," Kalogris said. "It was initiated and started as a joint venture (with AT&T Wireless). The very fact that we started it as a corporation instead of a limited partnership is a strong signal that we envision ourselves as a long-time affiliate of AT&T and a successful regional company for the next 100 years."

The year 1999 was a busy one for Triton PCS. In June, it completed Phase 1 of its digital network build-out, launching commercial service in 15 markets. Last month, it was on target to bring service to 15 more markets. On top of an aggressive build-out, Triton PCS, which markets service under the brand name SunCom, a member of the AT&T Wireless Network, became the first AT&T affiliate to go public.

SERVING THE SOUTHEAST Triton PCS' network covers 13 million POPs in the southeast, including northern Georgia, North Carolina, South Carolina, northeastern Tennessee and Virginia. When Kalogris and Skinner were targeting PCS licenses, they chose the Southeast for its own unique advantages. Besides being directly contiguous to the already complete AT&T Wireless markets of Atlanta, Baltimore, and Washington, it offered numerous other benefits. Kalogris and Skinner tested various parts of the country and found that large cities that spread out in concentric rings tended to result in low population density. That was not so in the Southeast. When Triton PCS finishes Phase III of its build-out, its lowest POPs-per-square mile will be 80.

"These 13 million POPs are totally contiguous to each other," Kalogris said. "We like that the Southeast is not dominated by a large city like a New York City or a Chicago. Even Atlanta is far enough away. Our communities of interest are smaller, such as Athens, GA, and Charlottesville, VA. We like those cities in terms of population density."

Kalogris and Skinner also looked at the number of highways in various regions. Once build-out is complete, Triton PCS will have built 18,000 miles of interstate and secondary highways.

In addition to high population density, the southeastern state governments have a long track record of attracting new businesses, offering tax advantages and other corporate incentives to companies that set up headquarters in their states. The populations are growing, and average incomes are rising, which equals an outstanding demographic target. Add to that the fact that Triton PCS' markets including Charleston, Hilton Head and Myrtle Beach, SC; Savannah, GA; and North Carolina's outer banks are all vacation destinations, and the company saw an incredible opportunity.

"Full time residency of Myrtle Beach is 250,000 people, and 11 million more visit it every year. Of that 11 million, 9.8 million drive (to their destinations)," Kalogris explained. "When you are in the mobile telephony business, that is great to have those kinds of numbers. Myrtle Beach is very consistent with the outer banks of North Carolina, as well as Charleston, Hilton Head and Savannah."

Kalogris knew that picking destination markets would make the company successful in roaming. AT&T Wireless' Digital One Rate plan in large markets such as Charlotte combined with Triton's mid-size markets give both companies strong recurring roaming traffic because customers are not inhibited from using their phones.

CAN DATA MAKE IT? You can't talk to anyone in wireless without hearing about 3G wireless data applications. But does a carrier that targets only mid-size markets stand a chance in wireless data? Kalogris says yes. Demand in mid-size markets is high because their residents are dependent on their wireless phones as they are more mobile than people in urban areas.

"If you are an urban dweller, often you don't use your product for a whole week outside of a 3-block area," he said. "I was in New York City recently for three days and never left a 10-block area."

Triton PCS already is piloting high-speed data with business customers. When it launches the service, it will take a 3-pronged attack. First, it will offer a consumer product, then a business product. The difference will be advertising and point-of-sale techniques, but the technology will be identical. The third prong, which it is piloting at Virginia Tech right now and will launch next year, is wireless office. For instance, it might put in a campus network at a college, and students and faculty could use the campus picocell for service at one price. As they go mobile on the macrocell, prices would change.

"That way you are combining voice and data in a wireless campus setting, and that works as well in a 20-employee company as it does in a university," he said.

In fact, Kalogris foresees Triton PCS rolling out wireless office services more quickly than AT&T Wireless.

"It is a lot harder to turn an aircraft carrier around in the harbor than a speedboat," he said. "AT&T Wireless is leading the way with research on wireless office, and we will deploy some of their work faster than they do because they are an incumbent carrier with incumbent infrastructure. We are fast followers. We will let them do the heavy lifting and work with vendors. We are there learning, and when it is ready to go, it takes a large national carrier more time to launch than a small, fast-growing company."

DATA'S DOWNFALL Kalogris admitted that customers are dissatisfied with some mobile Internet offerings because advertising gives them the impression that they can seamlessly surf the Web with their wireless phones, and that's not the truth.

"I think (Sprint PCS') limited product through Yahoo! is oversold from an advertising point of view," he said. "I think it is a great product, and bully for them for getting it out the door, but I think you have to be careful, and I think candidly some national carriers have been selling more to Wall Street than consumers."

Kalogris said some wireless-data advertising is ahead of the products, so Triton PCS will not launch data until it has access to client servers. That way, if a customer is part of Outlook, he has the ability to access through Outlook everything that he normally accesses.

Triton PCS will approach the data market differently than Sprint PCS does, he said. Each phone sold in 1Q00 will have the "I" designation, meaning it is Internet-compatible. It will price data service so that there will be a small incremental charge for data, but a customer's bucket of minutes will include both voice and data.

"Customers love the concept of data but feel that one more time they are getting ripped off," he said. "So we are not sure exactly where we will settle, but say you have a $30 rate plan, you add $10 total to make it data-capable, and whatever your bucket was, 300 minutes or whatever, you can use your minutes for voice or data."

Triton PCS will count on EDGE for its 3G data offering.

"On the first level, it is the most painless infrastructure migration in terms of not having to rip out switches or radio channels," Kalogris said. "We can migrate to EDGE to full wideband capacity in the most elegant way. Second, it solves the whole standards issue. Third, one fear I would have unless we move in the EDGE direction is one problem you have with DSL -- as you use capacity, the capacity speed per person goes down. But with EDGE, it is indifferent if you use voice or data circuit."

Triton PCS will launch Athens, Hilton Head and Savannah at the end of this quarter. Before it turns on service in any market, it gives out service to "ambassadors," who test the service and report back to Kalogris.

"If the boss doesn't stay in touch with what is going on, we can't be supportive," he said. "We are committed to living up to a vision: we are going to do things the way the customer wants them done."

January 1999: Triton PCS becomes first AT&T Wireless affiliate; selects SunCom brand name for its digital network.

June 1999: Triton PCS launches first phase of digital wireless network.

November 1999: Triton PCS becomes first AT&T Wireless affiliate to go public.