RADIOCOMM ’84
CELLULAR RADIO – COMING ON STREAM

A VIEW FROM THE SYSTEM OPERATOR
SHERATON CENTRE. TORONTO. MAY 31, 1984

What is a CANTEL? This is a question one of our corporate communications consultants asked. Clearly he was trying to justify the $9,000 charge he was about to stick us with for re-examining our corporate image and suggesting a new name.

After due consideration they came back with the name CANTEL – obviously assuming that if we came up with the name in the first place we must like it. This led us to observe that the corporate communications business is probably a lot easier a way to make money than the cellular communications business.

All that aside, CANTLE is or will be a system operator who will be coming on stream July 1st, 1985. That is what I have been asked to talk about today.

But first let me ask you what you think a CANTEL is. I am sure you already have your own perceptions, e.g.

• some big guys with a lot of big money;

• some pretty sharp operators;

• some people who know their way around government.

In a way all of the above are correct:

• CANTEL is made up of three very large Canadian corpora tions with assets of over $3 billion. You can be assured that we are in this business to stay.

• The entrepreneurs who lead the companies have a reputation for innovative creativity in cable, broadcasting, publish ing and finance and are going to ensure that these talents are applied to this exciting new field.

• And because all three companies are used to working in a regulated environment we are used to dealing with governments at all levels, and are going to do our best to ensure that the new cellular mobile radio business operates in an environment where all of us can provide this leading edge new service in a financially attractive way for our customers and our companies.

But CANTEL is more than that. You are going to find that the CANTEL team Is a very human and approachable bunch of people. We understand that in many ways we are the new boy on the block, (new person?). While we are very confident In our own ability to do everything we promised, that very confidence makes us particularly open to learning from others. In fact we are very conscious of the fact that we do not want to be over confident because of our Initial successes in winning the licenses and in positioning the industry -we do not want to be the type of company that “you CAN TELL nothing to.”

We have already benefitted greatly from working with members of your Association such Both Von Hempeln, Paul Lloyd, Dave Simmonds and other pioneers.

We may be number two at the moment but you can believe that we will be trying harder.

Our track record in our founding companies as well as in CANTEL itself shows that we are winners. When we ‘come on stream’ we will do our best to make that stream look like Niagara.

While I am sure you would not expect me to discuss the competitive details of our approach to the market place,

I can certainly describe the type of system operator CANTEL will be.

CANTEL AS A MARKETING ORGANIZATION

CANTEL is a marketing organization. As such we recognise that we have a formidable job to do for we have to develop a need for our network and then we have to sell like hell.

Based on what the RCC’s have already demonstrated in the paging market alone, we have no doubt that people need to be in touch wherever they are. We therefore have great con fidence that the market for a workable mobile or portable phone is there. The success of Alberta Government Telephones in moving over 25,000 units clearly indicates that given the right price and the right selling job the market can be opened up reasonably quickly.

However, we are not unrealistic in our own projections. The public is just not that aware a breakthrough in communications is on the horizon. A mobile phone is still viewed as a luxury item. To be realistic, at a $2,000 purchase price plus installation charge plus monthly charges, even cellular mobile radio is a long way from being a consumer product.

Fortunately, the technology is working for us. Now that the frequencies are available to make mass marketing realistic we can be sure that the costs of the units themselves will come down rapidly. It is encouraging that in this industry the changing technology is working for us, at least on the systems operator side. But it will be some time before the total price of the service gets to the place where the house holder will be a significant user. In the meantime we are going to have to condition the market to understand that portability in telecommunications is a good investment -a real improvement in productivity.

I was encouraged the other day when a major Honda dealer got in touch with us. This may already indicate some break through in the old concept that it is only the Cadillac and Lincoln drivers who would ever have a mobile phone.

CANTEL then will be doing all it can to develop the market place. In this we welcome the approach taken by the DOC. In splitting the spectrum and encouraging competition we can also be assured that the telephone companies will be just as aggressive in increasing public awareness of this new technology. We believe that with two organizations in each market place, acceptance of the product will grow much more rapidly. It could be something akin to IBM entering the PC market.

CANTEL AS AN ASSOCIATE

As I mentioned earlier, CANTEL will utilize a broad variety of selling channels. No matter which outlet is used to close a sale, however, our emphasis will be on client retention not just a quick close. In the cable business we understand the cost of churn. We know it is far less expensive to retain customers than to sell them in the first place.

We also know that from everyone’s standpoint a growth business can best be built on a growing monthly revenue base. We there fore plan to keep adding new features and services to our initial offering to assist you in retention selling.

CANTEL expects to market through the following channels.

1. Radio Common Carriers

With the base of business you already have and the likely upward mobility from the paging market, we expect that the RCC’s will be an important frontline in our sales activities. During this conference we have been holding discussions with as many of you as we can to assess your capabilities and to give you a proprietary look at some of the approaches we hope to use with you.

2. Manufacturers

CANTEL is not in the manufacturing business and does not intend to be in that business. We will therefore be working with a number of manufacturers to encourage their sale of clients on our network. Again, the details of our approach are of course proprietary at this point.

3. Direct Selling

CANTEL expects to market directly to national organi zations wherever appropriate. However, where installation or ongoing service is provided locally, CANTEL will ensure that the local installer or servicer is compensated for the value they add to the process even if the sales origi nated on a national basis.

CANTEL AS A PARTNER

As you know, CANTEL is committed to providing 20 percent of its equity to RCC’s. Of this amount 8.1% has already been made available to Time Cellular, Celtel Communications, Check point Communications and Telecom Canada. The remaining 11.9% will be made available to RCC’s as we develop our national network across Canada. The shares will be available on a regional basis so that even if we are not in all locations at once, some shares will be held for those in the regions not initially covered.

We are not planning to give the shares away. Those RCC’s chosen to be agents for us will have to earn the right to take up the equity. Frankly, I doubt if you would want to be a partner in a company that did not use every opportunity to create incentives for outstanding performance.

Again, we have been discussing the details with some RCC’s in the areas we will serve initially. It is our intention to hold meetings in other regions of Canada at the appropriate time. In the meantime, I would certainly encourage you to fill in the information forms so that we will know who is interested in becoming a partner in the CANTEL network. If by any chance you did not get one of the forms please pick one up at our CANTEL booth.

CANTEL AS A NETWORK OPERATOR

CANTEL intends to operate as fine a system as can be obtained. We have been fortunate in having a number of excellent responses to our recent tender for network equipment. We pre-qualified the bidders by requiring all of them to commit to a high level of Canadian content.

For the network equipment we decided that it is premature to announce a supplier for all 23 metropolitan areas for which we will initially have licenses. The field is developing so quickly that it does not make sense to commit nationally to one system at this time. We are in contract negotiations with the finalists at this time for the first major markets.

We are impressed with the capability of the newer cellular-specific switches and will continue to work with the manufacturers of these with a view to the other markets in our network.

This approach will continue to give all major suppliers a opportunity to remain in contention for future CANTEL business – as potential shareholders in CANTEL I am sure you are glad to see us keep the manufacturers ‘interested’ in this manner!

CANTEL AS AN RCC ASSOCIATE

Finally, as we look forward to coming on stream by July 1st, 1985 I can assure you of our continued support of the RCC Association. CANTEL does view itself as being a broadly based communications company rather than just a mobile telephone company. The recent decisions of the Department of Communi cations and the CRTC through Decision 84-10 indicate that the federal government wants to establish a competitive alternative in the telephone field. Therefore we hope to do some pioneering ourselves in opening up new opportunities for new services for you and for us. The telephone companies across Canada provide a very fine service now. A little competition will ensure that the telephone companies and CANTEL work just that much harder for the public we serve.

SUMMARY

The CANTEL team has enjoyed being at its first CRCCA

Convention. The organisers can be very proud of the excellent conference they have run over the past several days. We look forward to participating in many more such gatherings in the years to come.