TORONTO – As his wireless company nears its launch in the new year, Public Mobile CEO Alek Kristajic was talking tough this week, addressing how the company plans to attack the Canadian marketplace while applauding the CRTC for standing firm on Globalive’s ownership shortcomings.
Speaking at the Scotia Capital 2010 Telecom and Tech Conference on Tuesday, Kristajic (a former Rogers Cable and Bell Canada executive) emphasized how he believes his company is going after a market that no one else has tended to yet: “the low end of the market that doesn’t have a cell phone,” he said.
When western markets are analyzed, he added, about 24% of people are limited by their circumstances so that they’re completely cost-conscious and need certainty with their bills. That means Public Mobile’s $40-a-month, unlimited talk and text, price point will be a hit with those consumers, a target market which the incumbent wireless players “can’t and won’t go after,” he added.
“They need predictability,” said the CEO, so that “when you say it’s $40, it’s $40.
“The incumbents love to talk about ‘out-of-bucket’ minutes – and they make a lot of money on that – and that’s why these customers don’t have a cell phone.”
In fact, Kristajic won’t even be trying to poach customers from the big wireless carriers anyway, figuring he might take about 1.5% of his customers from the likes of Rogers, Bell and Telus and their flanker brands (Fido, Virgin, Koodo).
In contrast to those companies and some of the newcomers, big handset subsidies and even roaming are not part of Public Mobile’s business plan, which is focused on $40 (this is why it bought G-band spectrum during the AWS auction for a fraction of what all of the other players paid for what they consider more robust spectrum.)
While Public’s handsets will be technically able to roam on the other networks, “here’s the issue: Do you offer roaming? We have to remember who the target is… I grew up in a working class family in Toronto. I took one vacation in the first 18 years of my life. Our vacations were staycations,” he said.
Kristajic doesn’t want to alienate any customers who roamed onto Bell by accident “and then got a $23 charge on top of my $40,” a surprise his target market isn’t signing up for. So Public, which only has spectrum in the Windsor to Quebec City corridor, won’t offer roaming, at least at the start.
The CEO also noted the incumbents and other newcomers have been hard on Public Mobile for buying up G-band spectrum, saying it’s not as robust and won’t have much of a handset choice when it comes to market, but Kristajic was undaunted, perhaps even a little smug, in his explanation.
“We got very lucky,” he said. “We did our homework and no one else did… We got spectrum for pennies on the dollar compared to everyone else.”
He added that the handsets Public Mobile will have in its Q1 2010 consumer launch (from makers like Samsung, ZTE and Kyocera) include a Qualcomm chipset that with “a 12-cent filter” can be enabled for G-band.
“How many handsets am I going to sell in the next bunch of years? A couple million? Times 12 cents,” he said.
“I paid $52 million for spectrum. DAVE paid $250 million. Globalive paid $450. I think I’m okay… The G-band thing is all crap,” he continued. “Spectrum is spectrum.
“It’s in the interests of everybody else to say ‘we didn’t miss anything, the spectrum is not as good.’ But guys, they missed it,” insisted Kristajic.
When asked about the Globalive ownership battle with the incumbents, the denial by the CRTC (as we reported here), and his own regulatory filings, Kristajic said he’s not worried about his own in-progress review and said he’s approached Globalive to ask about an acquisition.
“The difference between us and Globalive is we actually have Canadian money,” he explained. “This Globalive thing is a bit of a mess on a number of fronts.”
Calling the CRTC’s decision “entirely correct” and fretting that Industry Minister Tony Clement is now looking at it, Kristajic praised the Commission. “I actually applaud the CRTC for having the balls to stand up and say, notwithstanding what other government departments did, we are going to apply the rules.”
While the CRTC turned Globalive down, Industry Canada, even though it is supposed to apply the very same rules, had approved Globalive’s ownership structure a year earlier.
“Industry Canada decided that ‘you know what, we just want competition. We got their money, you pass’,” surmised Kristajic. “We’re going to draft a letter to (Minister Clement) that says two wrongs don’t make a right… your department made a mistake in approving these guys. The CRTC has done the right thing.”
So now, Public Mobile wants to buy Globalive. This “has created an interesting opportunity for folks like us to potentially help consolidate this market,” said Kristajic.
“We have reached out to the folks at Globalive and we’ll see where this thing all goes but there’s a great consolidation opportunity here.”
(Ed note: While the AWS spectrum auction rules say the new wireless companies can not sell to an incumbent operator for a period of five years, the newcomers can get together on their own.)
“I want to buy one of them. The issue is who, how, when – and I’m not saying I’m going to because the odds are very low,” he added.
But, “somebody has to buy somebody else,” Kristajic continued. “There’s no merger (because) there’s no way I’m going to contaminate my pure model that’s built on this low-end cost structure by saying I’m now going to sell a BlackBerry or I’m now going to have a hardware subsidy,” he said.
“Or the best one is ‘no contract and I’m going to give you a hardware subsidy.’”
“Now that’s a going out of business plan.”
