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RIVALRY BETWEEN PCS AND CELLULAR IS GOOD FOR ALL WIRELESS SERVICES

Rivalry from personal communications services providers has increased net cellular subscriber gains by 60 percent, says Herschel Shosteck Associates Ltd.

The consulting firm summarized the finding in its latest quarterly survey of the cellular industry. Without PCS, the firm said, cellular growth would have topped out at 9 million in 1995 and declined to 4 million to 6 million in 1996. But with competition from PCS carriers, cellular growth lingered at 10 million in 1996 and will remain at 8 million to 10 million in 1997, said Herschel Shosteck.

Cellular carriers are responding to competition from PCS providers by lowering tariffs, increasing advertising and grabbing more retail points of presence, said the firm. From year-end 1994 to year-end 1995, the average tariff charge in the 10 largest markets declined by $7 or 6.7 percent. The average charge for access only dropped from $22 to $19, a decline of 14 percent. Herschel Shosteck predicted cellular tariffs will continue to decrease through 1997.

Carriers and handset manufacturers alike are building brand recognition through major advertising campaigns, and “cellular carriers now are recognizing that in a competitive environment, sales require retail distribution,” noted the firm.

“In Washington, when APC (American Personal Communications) launched, cellular (carriers) didn’t know what to expect,” said Jane Zweig, senior vice president of Herschel Shosteck. “Now other PCS operators are not doing anything terribly different. Everyone has a handle on what PCS is.”

Sprint Spectrum L.P. affiliate APC has gained more than 20 percent of new wireless customers, said the firm, and the company attributes this in part to more retail points of presence than its cellular competitors in the Washington/Baltimore area.

The firm recommends dealers convince carriers to allow them to sell both PCS and cellular handsets as the presence of both can increase sales of all wireless phones. RadioShack in the Washington/Baltimore area carries both APC and Cellular One handsets, and sales in general have risen, Sprint has indicated.

“Position PCS for lower tariffs and possibly sexiness,” said the firm. “Position cellular for lower-priced handsets, consistent wide-area coverage and nationwide roaming. The outcome [will] be much higher total sales and for [the] carrier a modestly higher net increase in cellular adds.”

The percentage of cellular sales to business subscribers is on a slow upswing, increasing from 30 percent in June 1995 to 33.8 percent in June 1996. Mass market sales are still increasing steadily, said Zweig. Replacement sales have risen from an average 14.3 percent in the first half of 1995 to 14.6 percent in the first half of 1996, said the firm.

“Replacement sales will be even more important as new subscribers slow down,” said Zweig. “People will need to replace their phones.”

The firm predicts replacement sales will offset the drop in cellular gains it expects in 1998.

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