MetroPCS Launches Phone Service Through Retailers, Company Stores

By Joseph Palenchar -- TWICE, 2/25/2002

Dallas — Wireless carrier MetroPCS launched its all-you-can-talk prepaid local-calling service in nine of its 14 licensed territories and intends to complete the rollout by the end of the year.

The privately held company is offering phones and service through its own stores and indirect channels, including local and regional wireless and electronics dealers.

Founded by PageMart founder Roger Linquist, MetroPCS is using 1.9GHz CDMA 1X technology to launch the service, which costs a flat $35 per month for all the local calls you can make, plus incoming calls from anywhere in the world. Prepaid long-distance is billed at an additional 5-cents/minute.

For an additional $3/month, subscribers get voice mail, caller ID, and call waiting. Unlimited messaging between subscribers costs $5/month.

Leap Wireless, which operates a similar service with 1.12 million subscribers in 41 markets, is targeting the landline-replacement market, but MetroPCS is targeting different customer segments. "I think this [landline replacement] might very well happen as customers adopt our service," said VP/CFO Dennis Spickler. "But we want people to understand this is a mobile service that offers freedom of mobility."

MetroPCS is targeting three types of consumers, he said. One consists of people who haven't gone wireless because they believe they can't afford it or because they are confused by the plethora of rate plans. The second segments consist of people who have disconnected their wireless phones after using them more than they expected and getting hit with higher than expected bills. Another group consists of current wireless users who understand their usage patterns and "see us as a better proposition," Spickler added.

"We found a plan that we think is affordable for the bulk of customers, eliminates the uncertainty over monthly bills, and gives a value proposition that gets people to use a mobile phone," said Spickler.

All target segments would share one thing in common: Like 80-85 percent of all wireless users, they rarely roam or leave a 50-mile radius of a major metropolitan area, Spickler said. "Our principal focus is serving customers who live, work and play in major metropolitan areas with a simple, easy-to-understand plan."

MetroPCS's licensed basic trading areas (BTAs) are clustered in three major metro areas with a population of almost 22 million. One area consists of Miami-Dade, Broward and Palm Beach counties in Florida. The other two metro areas are Atlanta and Sacramento-San Francisco. For now, the company has no plans to acquire licenses in other areas, Spickler said.

The carrier's licenses don't overlap with current or announced Leap markets, which operates mainly in small and midsize markets but has recently expanded to larger markets such as Denver, Pittsburgh and Phoenix, Spickler noted.

MetroPCS's commercial launch began in late January in Athens, Ga., and the Miami area and has expanded to all licensed BTAs but three in the Sacramento, Calif., area and two in San Francisco area. The San Francisco BTAs could be up by late in the second quarter, Spickler said.

In these markets, the carrier is able to deliver a high-value proposition by "minimizing capital deployed to build the network and the operational expenses to maintain it," he explained. Largely, the carrier accomplishes that by building cell sites only in the "densest population areas."

MetroPCS also dispenses with the cost of paper bills, he added. Consumers prepay for each month's service by an automatic credit-card debit, by a call to the customer-care center, by check, or in person at an authorized retailer or other outlet. For long-distance and international calls, subscribers prepay in increments of $10, $20 or $30.

For now, MetroPCS offers only one phone, a $129 Kyocera 2235 trimode packaged with one month of local service and 10 minutes of long distance. The carrier expects to expand its selection by midyear but will "probably never offer more than three at a time to concentrate our buying power," Spickler said.

The phone is packaged as an over-the-counter sale. Spickler declined to comment on dealer compensation programs other than to say that "we have simplified the process dramatically."

He also declined to outline the company's subscriber goals or cost of acquisition.

When its distribution program is fully in place, the company expects to do the majority of sales through indirect channels. For now, those channels include local and regional wireless stores and electronics stores as well as a south Florida pharmacy chain. The company is in discussions with national retailers.