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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: 100cfm who wrote (2693)	10/26/1999 7:08:00 AM
From: Ron M	Read Replies (3) \| Respond to of 13582

Local wireless operator with Hughes Network System and ATT wireless roaming agreement to tear down system and start over. From the Milwaukee Journal Sentinel 10/26. Industar shutting down for overhaul New wireless phone system to cost tens of millions By Lee Bergquist of the Journal Sentinel staff Last Updated: Oct. 25, 1999 After struggling unsuccessfully to fix technical glitches, Industar Digital PCS founder Kailas Rao said Monday he will turn off his wireless phone system until the middle of next year and replace it with an entirely new network. The decision means jettisoning a $45 million investment, spending tens of millions of dollars on new equipment and taking on new partners in the hope that Industar can overcome chronic service problems. The big hang-up: dropped calls and uneven coverage in metropolitan Milwaukee. Customers also griped about poor sound quality. "It's not working well," Rao said. "When I started, I said that we were going to have a 'star' product. Today, it's not a star product." Rao said that even his wife had been unable to call him from her car outside the couple's Whitefish Bay home. Friends and customers, including Briggs & Stratton Corp. Chairman Frederick P. Stratton Jr., have called Rao - sometimes at home at night - complaining their phones don't work. Until the system is fixed, Rao said, he is retrenching. Industar will eliminate 26 jobs by the end of the week, paring the work force from 54. The company will turn off its network in November or December and will help its 1,400 customers migrate to another provider, he said. The announcement marked a major setback for Rao, who built a fortune in computer retailing and used his riches from the sale of Computer Bay stores to spend $60 million in a 1996 auction for the rights to a slice of the wireless spectrum in Milwaukee, Waukesha, Ozaukee, Washington, Racine, Dodge and Jefferson counties. He threw a lavish luncheon for 1,000 people in spring at the Midwest Express Center to promote the new company, and gave away hundreds of wireless phones. A host of business leaders sank money into Industar, including Major League Baseball Commissioner Bud Selig and George Dalton, the former chief executive at Fiserv Inc. But Rao said the business never really got off the ground. Technical problems kept his company from actively marketing wireless services and expanding the business to sell complete wireless systems so that employees could roam anywhere with their phones in hand, he said. Now, Industar will undergo a major reorganization. Two investors from the telecommunications industry, whom Rao declined to name, are expected to take major stakes in the company in coming weeks. Rao may not be majority shareholder in Industar after that, he said. Smaller wireless ventures like Industar have struggled across the country. "It's not easy for smaller carriers to make it in this competitive marketplace," said Rikki Lee, executive editor of Wireless Week. "It is the larger carriers that have the upper hand because they have the economies of scale." Industar has a national roaming agreement with AT&T Wireless. Switching a wireless company's network is comparable to a new manufacturer replacing its assembly line. Industar will tear down a network built by Hughes Network Systems and replace it with one by Lucent Technologies. The company will use the back-office operations of one of its new partners, eliminating the need to rebuild its own billing system. That means pulling down Hughes Network equipment at 63 cell sites in southeastern Wisconsin and building 100 new cell sites. Lucent will provide switching equipment that processes wireless traffic. "This is big news," Lee said. "This is the first time that I have ever heard of a wireless company say they had technical problems that were big enough that they said, 'Let's start over again.' " The decision to throw out its Hughes Network was complicated by Hughes' $5 million equity stake in Industar. Terry O'Reilly, executive vice president, chief operating officer and general counsel, said Industar had not decided whether to take legal action against Hughes. A Hughes representative declined to comment. Another change is that Industar will market its service equally to businesses and consumers. The company had marketed strictly to businesses before. "The business has changed," O'Reilly said. The under-35 age group is adopting the wireless phone in droves, and data and Internet traffic is beginning to be sent over wireless networks. "What we are really selling is time on our network," he said. Appeared in the Milwaukee Journal Sentinel on Oct. 26, 1999.