To the Editor:
I thought Lynnette Luna’s recent story on Powertel’s distribution center was very thorough. However, I feel compelled to respond to the comments from Mr. Laikin and Mr. Egan.
First, and most importantly, Mr. Laikin contends that Powertel’s move to an internal distribution capability might cause concern among our shareholders, who are more “interested in subscribers and airtime.”
Frankly, investors demand the creation of “overall” shareholder value. Powertel’s investment in its distribution center is diminimous, and doesn’t require raising additional capital, as Mr. Laikin implies. We are extremely comfortable justifying our internal distribution efforts to our shareholders. In the few short months the center has been operational, we already have realized substantial savings in our distribution expenses.
Second, Mr. Egan implies that Powertel might face difficulties in making the transition to outsourcing and doesn’t understand the dynamics of managing outsourcing relationships. While this might be true for some companies, this clearly is not the case for Powertel. Davey Solomon and his team at the Powertel Distribution Center previously managed distribution for Russell Athletic, one of the largest suppliers of athletic wear in the United States, where they managed the daily distribution of millions of items. Distribution is not rocket science-it was a much greater challenge building the largest contiguous personal communications services network in the southeastern United States, which Powertel successfully accomplished in less than two years.
Lastly, while outsourcing is the trend today, that might not be the case in the future. New carriers-like Powertel-focused all of their initial efforts on building their networks, launching service and adding subscribers. As new entrants mature, they will examine alternative methods of reducing operational costs and creating efficiencies. Since distribution is a substantial cost of conducting business in the wireless industry, more carriers will take a closer look at internal distribution.
For some-like Powertel with contiguous regional footprints-it will make economic and operational sense. For others, it won’t. In fact, several carriers already have toured Powertel’s facility to determine the feasibility of internal distribution as well as the possibility of using Powertel as a distribution mechanism.
I encourage RCR to follow this story … the trends in outsourcing are changing.
vice president, investor relations