Everyone thinks he's an expert on wireless and qualified to tell Bernie what to do. This from a journalist.
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BUSINESSWEEK ONLINE : JULY 19, 1999 ISSUE
NEWS: ANALYSIS & COMMENTARY
Commentary: This Is How to Go Wireless, Bernie
To Bernard J. Ebbers, Chairman, MCI WorldCom Inc.
Re: Your Wireless Strategy
Bernie: We all know there's a hole in your plan to build MCI WorldCom into one of the top phone companies in the world. When it comes to wireless, you're falling behind. You sat out the bidding for AirTouch Communications Inc (VOD). You passed on Nextel Communications (NXTL). Meanwhile, AT&T (T) and Sprint (FON) are building nationwide mobile networks.
So here's some unsolicited advice: think GSM. That stands for Global System for Mobile communications--the digital cell-phone standard that more than 5 million people around the world are signing up for each month. It's just gathering steam in the U.S., and you can still get in early. Even better, part of the work of assembling a national network has already been done. In June, VoiceStream Wireless Corp. said it will merge with Omnipoint Corp. (OMPT), creating the nucleus for a nationwide GSM network in the U.S. The combined companies stretch from Seattle to Miami, including the New York metro area.
GOING FAST. But if you don't act quickly, you could be left on hold permanently. European GSM operators are looking for a toehold in North America. Your colleague Edward E. Whitacre Jr., CEO of SBC Communications Inc. (SBC), might also be interested (he already runs the GSM network in California). And don't count out VoiceStream. Its CEO, John Stanton, helped Craig McCaw assemble his cellular empire, now owned by AT&T.
Sure, I'm biased. During nearly a decade of living in Europe, I got used to a phone number that worked from Madrid to Moscow, not to mention Singapore and Capetown. So imagine how disappointed I was when the mobile phone I bought in Atlanta didn't work in a resort a few hours away.
Admittedly, consolidation won't be easy. The GSM players are still in building mode. They're struggling with debt, haven't turned a profit, and have relatively few subscribers --just 3.3 million, compared with 7.6 million for AT&T and AirTouch's 8.1 million. If you complete the networks, a roll-up could dilute your earnings, and I know you hate that.
Another downside: The U.S. GSM network, while extensive, isn't really coast-to-coast. Chicago, Dallas, and New Orleans have no operating system, although VoiceStream has licenses for the first two markets. Furthermore, Baby Bells SBC and BellSouth Corp. (BLS) provide GSM service in California and the Carolinas, respectively. Neither will be eager to sell out.
SELLING POINT. But consider the positives. First, the GSM network is roughly as extensive as Sprint's and offers nearly the same coverage that AT&T does, if you discount the older analog portion of its system. And if you're looking for mobile data capabilities--a nice selling point for your business customers--GSM is for you. Stan Sigman, president of SBC Wireless, who is working with GSM and two other digital standards, says GSM is a year and a half ahead of the others.
Of course, now that VoiceStream has gotten the ball rolling, you'll have to dig a little deeper. Stock prices of the next two likely GSM targets are already on the way up. Powertel Inc. (PTEL), a Georgia-based carrier serving 12 Southeastern states, has seen its shares surge from 22 to near 30 since the VoiceStream/Omnipoint deal was announced on June 23. Stock in Chicago-based Aerial Communications Inc., with operations in Florida and the Midwest, is up more than 30% for the same period, to 13.
Even so, for the same $12 billion you considered paying for Nextel, you could get the independent GSM carriers, pay their debts, and put together near-nationwide coverage. Sure, you'll spend more time and money adding customers and equipment and you'll have to cut deals with the Baby Bells. But in the end you'd have a nationwide wireless network. And everyone would stop offering you tips on a wireless strategy.
By David Rocks
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