NEW YORK-All eyes are on Omnipoint Corp., which one investment banker has likened to a poster child for personal communications services.
What will be the final chapter in Omnipoint’s search for a strategic partner, and how soon will it be written? How might this conclusion affect a national Global System for Mobile communications strategy, the stated goal of the North American GSM Alliance, to which Omnipoint and at least 14 other carriers belong?
Like the Sphinx, whose predictions could be taken many ways, company executives offered enticing but inconclusive comments during a May 10 quarterly earnings teleconference.
“Based on discussions with many people, it’s safe to say that an awful lot of people recognize the value of creating a national [GSM] network,” Douglas G. Smith, president, chief executive and chairman, said.
“I have to be very careful how I say this, but unquestionably there are multiple parties that recognize obvious ways in which a consolidation could take place … I don’t want to cross the (confidentiality) boundaries of discussions with any particular company, but I am extremely confident that the national GSM story will evolve in a very good way for Omnipoint and others.”
The recent re-auction of C-block PCS licenses marked the starting point for a national GSM play, Smith said. Omnipoint picked up licenses for Detroit, and Cook Inlet/Voice Stream PCS gained licenses for Chicago and Dallas. The latter is backed by Western Wireless Corp., another GSM Alliance member.
“The effect of the auctions on our strategic partnering decisions is that Omnipoint got the best of three worlds from our perspective. We enhanced our value by picking up 19 million pops, (and) did so without creating any conflicts in terms of the strategic partnering discussions we’ve been in. The national GSM story is about to become reality,” Smith said.
Omnipoint’s latest results also enhanced its attractiveness to potential strategic partners, company executives said. The PCS provider added 100,000 net subscribers during the first quarter, bringing its total to 478,000. Revenues totaled $69.7 million, compared with $34.1 million for the year-ago quarter.
Higher-than-expected subscriber growth and the addition of about 750 new distribution outlets contributed to a cash flow loss of $74 million for the latest complete quarter, the company said.
Omnipoint reported a net loss of $181.5 million, or $3.42 per share, down from its net loss of $201.6 million, or $3.82 per share, during the first quarter of 1998.
“From this point on, our intention is not to address questions of strategic partnering until we announce the specific terms of a transaction,” Smith said.
During the conference call, company executives also parried questions about the effect on its wireless data strategy of Microsoft Corp.’s agreement to buy a minority stake in enhanced specialized mobile radio operator Nextel Communications Inc.
“Regarding Microsoft and Nextel teaming up and where Omnipoint is afterwards, we won’t comment on any negotiations we might be having with any particular company until they are ready to be announced,” said George Schmitt, president of Omnipoint Communications Services L.L.C., the PCS operating subsidiary of Omnipoint Corp.
“We do have data applications that far exceed those of any of our competitors. We run the Windows CE operating system directly on our Nokia 9000 phones,” he said.
By early next year at the latest, Omnipoint expects to begin offering its customers packet radio data services and terminals, Schmitt said.
“At this point, we have chosen not to try to force our customers to use one company’s operating system. Our customers should be able to choose what they want to do and whatever browser they want.”
The network technology involved in offering packet data is available at a cost “more reasonable than we had thought,” Schmitt said.
The more difficult issues the carrier is wrestling with now include making sure the billing system for packet data works properly and finding the best way to market the service. At this point, Omnipoint is considering “some sort of flat rate,” he added.
When it debuts, Omnipoint’s packet data will be transmitted at speeds comparable to those offered by a typical wireline into a home telephone, Schmitt said.
“A year from now, we’ll offer speeds … that would allow us to compete against digital subscriber lines, against almost anyone on the data side,” he said.
