The Markets in 99
Since its beginnings at the end of 1995, the PCS industry has come a long way. Buoyed by a strong economy and the benefits of increased competition, PCS has taken wireless telephony far beyond the limits of the old cellular business. For 1999, expect the industry's strong growth to continue, but expect a different kind of year as the industry continues to mature. There are signs that the long-expected wave of carrier consolidations is beginning to form in the deep waters offshore, and could bring great changes this year. In addition, rapid subscriber growth and the expansion of PCS service to smaller markets will take wireless penetration into unexplored territory.
Then the world will come to an end and we'll all count up our scores.
Well, probably not, but the growing mania over the year 2000 computer bug has touched every other aspect of our lives. The wireless industry shouldn't think it can get off completely untouched.
...Where Scandinavia Leads, We'll Gladly Follow
In addition to the stunning successes of Scandinavian wireless vendors such as Nokia Corp. [NOK/A], penetration rates in Scandinavia have been the envy of carriers around the world, as well as-hopefully-an indication of where other markets are heading. If this trend continues, carriers have a great deal to look forward to. Last August, Finland became the first country with a mobile penetration rate above 50 percent. By mid-December, the figure stood at 56 percent, with 2.9 million handsets in a population of 5.5 million people. The dream of wireline displacement is beginning to happen in Finland. In fact, the number of mobile subscriptions now exceeds the number of wireline subscriptions, with new wireline growth leveling off completely according to the Finnish government. The same report predicts that mobile penetration will reach 60 percent this spring.
While it will take some time for penetration rates in the United States to reach such lofty heights, and wireline will remain a powerful force for a long time to come, the strong subscriber growth of previous years is expected to continue. The stratification between national and regional players is beginning to become more evident, particularly as national players finally took advantage of their scope last year with single-rate plans. AT&T Wireless Services Inc. [T] managed to make Nokia Corp. the predominant handset vendor in the United States and single-handedly revitalized TDMA technology with its Digital One Rate plan. Sprint PCS [PCS] followed with its own plan, and continues to expand its reach. From a standing start-without benefit of the large cellular customer base enjoyed by AT&T-Sprint has managed to rack up more than 1.75 million subscribers to date.
...The Wireless Big Three? Four? Five?
A third national player may be coming on the scene, though. (Actually it's four if you count specialized mobile radio provider Nextel Communications Inc. [NXTL], and with 2.4 million subs expected when the final figures for 1998 come out, perhaps you should.) As the new year began, Bell Atlantic Corp. [BEL] and AirTouch Communications Inc. [ATI] confirmed that they are holding discussions on a potential "business combination," reportedly to take the form of a stock-swap merger valued at about $45 billion.
Such a deal, if completed, would create another mega-carrier combining Bell Atlantic Mobile's (BAM) cellular network with the cellular and PCS interests of GTE Corp. [GTE]-also on Bell Atlantic's menu. It would also reduce the original four partners in PrimeCo Personal Communications LP to a convenient one. The idea behind PrimeCo was always to combine and connect the cellular interests of its parent companies. Actually forging the group of holdings into a single branded system would have considerable benefits, however. Bell Atlantic would be in a position to offer more competitive rates to attract the all-important business traveler segment-cellular and PCS subscribers who generate lots of airtime, both within their calling areas and elsewhere in the United States. According to AirTouch, 70 percent of its subscribers' roaming is done within its own coverage areas and those of BAM and PrimeCo.
Another effect of such a merger might be to increase pressure on the GSM Alliance to find some way to consolidate itself. The group of regional GSM providers wants to be thought of as a national carrier, but has not succeeded in creating the kind of strong brand identification necessary to compete on those terms. A number of these carriers' parent companies have expressed interest in spinning off their GSM subsidiaries, including Western Wireless Corp.'s [WWCA] VoiceStream operation, and Aerial Inc. [AERL]. Omnipoint Communications Inc. [OMPT] is rumored to be or sale or at least looking for a major investor. Wireline consolidation and intramural competition has also left a number of GSM players in interesting situations. PacBell Wireless was absorbed into SBC Corp. [SBC], which has used TDMA for its own wireless networks. BellSouth Corp.
[BLS] also seems more interested in its TDMA-based cellular operation than in expanding its BellSouth Mobility DCS GSM service. And, of course, the nation's first PCS network, GSM-based Sprint Spectrum, is now a second Sprint network in Washington and Baltimore.
This year could prove a very interesting one for GSM in the United States. It remains to be seen whether GSM can survive as a regional-only technology, or if some combination of spin-offs and
mergers will help create another nationwide powerhouse in time to avoid losing the technology's early lead.
...Affiliates Ready To Pick Up The Torch
While overall penetration continues to climb, the industry continues its buildout efforts-applying those rates to a larger base of covered pops. A few major market rollouts remain, mostly in basic trading
areas acquired by major players in the D- and E-blocks to fill out their footprints. A notable example is Sprint's Chicago launch, expected to take place soon. For the most part, however, the major
markets are already covered. The next stage of PCS deployment is in smaller markets.
In many cases, these launches will be by affiliates of the A/B-block giants. Sprint has some affiliates in the field already, among them US Unwired and Enterprise Communications Inc., offering service in Dothan, Ala., and Albany, Ga.
Sprint gained momentum in the affiliation movement when it picked up a number of existing C-block licensees during last year's restructuring. However, it was AT&T that started the affiliation drive in earnest, and AT&T's affiliates are preparing to enter the market as well. Triton PCS Inc. and Telecorp Inc. are racing to be the first to offer service, and other affiliates are also online. A number of AT&T's affiliates will apparently join together in a sort of affiliate's association, and according to Triton, will use the brand name SunCom in the Southeastern United States.
Regional carriers are also getting into the act, using joint ventures to cover specialized niche markets. Western Wireless and AmeriCall International LLC formed ST PCS Joint Venture LLC to cover portions of Southern Texas. Unlike most small joint ventures, however, ST PCS will not be the first PCS carrier into most of its markets. Sprint included ST PCS markets like Brownsville and McAllen, Texas, in its early rollouts. ST PCS has only recently succeeding in lining up financing, and has few firm plans for a rollout schedule, but Executive Vice President Ron Belin said his company expects to have a firmer grasp on its deployment timeline by March. Expect small market launches, by independent small carriers, joint ventures, and affiliates, to take over the limelight in terms of new launches this year.
...Two Thousand Zero Zero, Party Over, Oops, Out Of Time
Of course the biggest trend of 1999 will be the rapid approach of 2000. The Y2K computer bug has leapt into the public consciousness as a millennial disaster that even jaded, secular '90s professionals can believe in. Computer programmers are buying land in the Rockies and filling underground bunkers with seed corn, hunting rifles, and Diet Coke.
In case you were concerned, the wireless industry will survive. Still, it would be good to make sure that your billing system doesn't go berserk next Jan. 1, just to make sure you don't get sued after
everyone sobers up and calms down. The bug shouldn't be ignored. Nokia, for instance, is correcting a software problem with the Nokia 9000 Communicator that would have caused the system to misinterpret the dates on text messages. A software patch is available.
U S West Inc. [USW] went so far as to put out a release reassuring customers that its wireline system will work. In the process, the company hit on a possible silver lining for wireless operators
whose systems are still working. U S West expects a huge number of people to place calls early on Jan. 1, it said, simply to find out whether or not they can.
Temp' |
