Good Article On GSM>
From the September 13, 1999, issue of Wireless Week
Nagging Question Remains For GSM Carriers
By Monica Alleven
Even after the June merger announcement between VoiceStream Wireless Corp. and Omnipoint Communications, one question
persistently plagues the domestic global system for mobile communications community: When will all the regional GSM players
become one?
The question has been slung at GSM carriers for years, twisting around their necks like a phone cord ready to choke off their very
existence until they retort, "Don't you know? We've got a national network already!" However, industry insiders joke that GSM
carriers, considered collectively, can boast great coverage--just don't try to use your GSM phone in Dallas or Chicago, where no
GSM network exists. There, you'll have to pick up one of those old wired models.
The technology simply has no single prominent carrier to represent it--thus the perception persists that GSM is comprised of a
crazy-quilt patchwork of regional carriers. Despite attempts at alliances and related public relations work, this digital technology is
still struggling to achieve brand identity like that enjoyed in the United States by the other major cellular technologies, time division
multiple access and code division multiple access. Thus speculation continues over how GSM carriers will evolve to thrive in a
national market led by giant brands such as AT&T Wireless Services Inc. and Sprint PCS.
Past attempts to brand
Why such continued interest in GSM's nationwide status, and is that question even fair?
GSM proponents point out that no carrier has a truly nationwide service; TDMA carrier AT&T Wireless relies on roaming
partners, as does CDMA carrier Sprint PCS. Even Nextel Communications Inc. could use more spectrum and better coverage.
Plus, VoiceStream Wireless expects to introduce Chicago and Dallas service next year, plugging two prominent holes in GSM
coverage.
Yet the call for a more cohesive strategy remains, and a seemingly botched nationwide marketing attempt on the part of some
GSM carriers a couple years ago hasn't helped shape perceptions in their favor.
Remember August 1997, when then-North American GSM Alliance Chairman Don Warkentin and other GSM proponents
boarded a yacht in New York to unveil a bold new plan that would make GSM the next FTD Florist of wireless, a service as easy
to find as automatic teller machines and readily identifiable to end users? The idea was that GSM Alliance members would bond
over a single branding effort and work to get better volume deals on handsets. It wasn't going to be another Cellular One brand,
mind you, but the image of one powerful, nationwide brand certainly was the focus.
Some said that plan was doomed from the get-go. How in the world would participants get egos from the seven largest North
American GSM operators to agree on a common strategy, much less implement it? Two alliance members--BellSouth Mobility
DCS and Pacific Bell Wireless--already possessed relatively strong brand recognition thanks to their wireline siblings, and they
weren't about to give that up.
Recalibrating goals, retooling perceptions
Today, GSM carriers indeed use common logos to identify their allegiance, but to say the GSM Alliance created an FTD-like
brand awareness would be a bit of a stretch. GSM Alliance Chairman Bob Stapleton, while conceding that the industry perceived
the alliance's efforts as focused on common branding, argues that that never was the goal. Stapleton, the president of
VoiceStream, assumed leadership of the alliance this summer, after Warkentin's two-year stint.
Stapleton now asserts that GSM doesn't really need a national brand. Individual members have forged attractive roaming
agreements among themselves, essentially allowing them to offer national rate plans competitive with AT&T Wireless' Digital One
Rate and a host of other one-rate plans. In their regions, GSM carriers have undertaken exhaustive branding efforts under their
own names, including VoiceStream, with its wildly successful marketing program that features celebrity spokeswoman Jamie Lee
Curtis.
The real goals of the alliance, according to Stapleton, were related to technology and standards.
In technology, GSM carriers made great strides with better quality vocoders, for example, forcing proponents of CDMA to react
with their own product improvements. Another achievement was getting the GSM and TDMA camps to pursue a common
next-generation technology, a historic bonding expected to show results in 2001.
Doing fine, but looking ahead ...
Numbers from the GSM Alliance indicate that, collectively, the carriers are doing just fine. In the second quarter, GSM companies
added 660,000 new customers, more than Sprint PCS, the fastest growing 1900 MHz CDMA carrier. During the first six months
of this year, GSM carriers added customers at a rate of five per minute. In the past year, more than 2 million customers signed up
for GSM service.
Under the pervasive "bigger is better" philosophy raging throughout telecommunications, however, a unified, national footprint
brings more clout, more economies of scale and better brand awareness. Even European carriers such as Vodafone AirTouch plc,
which bought AirTouch primarily for its international properties, recognize the value of creating a nationwide U.S. footprint.
Under the widespread expectation that further consolidation must come, all eyes are on VoiceStream, where management has the
gusto and expertise to get the job done. Upon VoiceStream's announcement that it would buy Omnipoint, speculation mounted
over how, or when, VoiceStream would make additional acquisitions. Before the ink was dry, analysts pegged struggling Aerial
Communications Inc. and fast-growing Powertel Inc. as the next most likely acquisition candidates, although officials at those
companies predictably wouldn't comment.
For his part, Stapleton said his company is not ready to pay the kind of steep prices some GSM companies might garner today.
Ever since the VoiceStream/Omnipoint merger was announced, stock in most GSM carriers went up dramatically. "We're always
looking, but we aren't going to overpay to make any transaction happen," he added.
Some analysts agree that VoiceStream doesn't need to acquire more companies to remain competitive. Once the merger with
Omnipoint is finalized, most likely this winter, VoiceStream will cover 175 million POPs, or about two-thirds of the population. It
essentially will be the fourth-largest carrier nationwide, and roaming agreements will fill in any areas that are lacking.
But if VoiceStream were to pursue more acquisitions, Aerial's patchwork network would fill in some key Midwestern markets and
Powertel's contiguous footprint would fill in the Southeastern states. That would still leave the California market, where
VoiceStream has a license in San Francisco it hasn't yet built out because it already has a roaming deal with SBC
Communications.
Which begs the question, would SBC and VoiceStream join forces? SBC, which owns the California and Nevada GSM markets
via its Pacific Bell Wireless subsidiary, has strong brand awareness in the Golden State, and no one suggests wrestling the
California market from SBC's acquisitive clutches would be easy, or even likely. Yet "you can't have a nationwide footprint
without those (California and Nevada) markets," noted Cindy Motz, analyst at Credit Suisse First Boston in New York.
SBC is still wrapping up its hefty Ameritech acquisition, so its plate, for now, is relatively full. But Stapleton said it's important for
the two companies to keep a good working relationship; VoiceStream, with coverage in many Western states, relies on PacBell
for roaming into California markets, and VoiceStream is PacBell's largest roaming partner.
Some say SBC could simply wait for VoiceStream to do all the hard work, then snatch up the then-consolidated GSM carriers in
one fell swoop. For that matter, MCI WorldCom could take the same tactic toward rolled-up GSM carriers, although Motz and
many other analysts insist the best wireless play for MCI is still Nextel, even though the two broke off talks earlier this year.
Perceptions aside, GSM carriers clearly have their own vision of their future needs. VoiceStream's acquisition of Omnipoint will
create a massive network covering most of the country, establishing it as the nation's fourth-largest carrier. But until GSM carriers
roll themselves into one cohesive unit, speculation about GSM's U.S. consolidation will remain.
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