MetroPCS honcho: We're no 'Podunk' business

MetroPCS President Thomas Keys tells CNET about raising the company's profile, unlimited plans, competition, and why it doesn't make sense to merge with Leap Wireless.

MetroPCS President Thomas Keys looks on as the company unveils its product lineup for the second half. Roger Cheng/CNET

MetroPCS Wireless President Thomas Keys has spent a considerable amount of time and energy building up the reputation of the prepaid carrier as a legitimate player in the wireless industry.

So he could only shrug and make light of the fact that one of his key executives described the company as "Podunk" and "the hair on the tail that wags the dog" in a recent meeting with analysts and reporters.

But it's that exact image that MetroPCS wants to shed as it moves from a "fast-follower" to a company leading the wireless pack -- even if it's only by a few hours. The transformation is vital to the company's attempt to improve its visibility and remain relevant in the increasingly competitive prepaid arena.

Over the past few years, MetroPCS has recorded a few significant firsts. It was the first U.S. carrier to deploy LTE, two years back, narrowly beating Verizon Wireless. Earlier this month, it was the first to launch voice-over LTE in its home market of Dallas, though shortly after, SK Telecom lit up its entire network with VoLTE services. The attention it gets from these milestones is just one way MetroPCS hopes to raise its profile.

Still, MetroPCS is a regional prepaid carrier that spends a fraction of a fraction of the marketing budget that's at the disposal of a national carrier such as AT&T or Verizon Wireless. As of the second quarter, it had just a little less than 10 million customers, about a tenth of the customer base of either of the big two.

So for MetroPCS, it's not just about being heard; it's about even being recognized.

Keys sat down with CNET to talk about all things MetroPCS, from why he doesn't yet sell the iPhone -- which we reported yesterday -- to why a deal with fellow prepaid carrier Leap Wireless isn't the slam dunk everyone thinks it is.

On Leap Wireless:
For years, industry pundits and analysts have called for MetroPCS and Leap Wireless (known to consumers as Cricket) to merge. Both companies offer similar prepaid services, and they have just two overlapping markets. Put them together, and you have a nationwide prepaid network using the same technology.

So it's a perfect fit, right? Not so, Keys said. He noted that both companies face constraints on spectrum, and a combination wouldn't solve that problem. Instead, it would be a single larger company distracted by the integration and lacking in the resources to compete on a national scale.

"You would be putting two companies together before answering the spectrum crunch," he said.

Keys didn't outright reject the idea of a merger. He described it as a matter of "sequencing," in which the companies have to obtain additional airwaves before considering a combination.

On spectrum sources:
Keys unfortunately offered little in terms of concrete answers, saying only that the company was entertaining all kinds of conversations when it comes to spectrum. But he called the lack of spectrum the biggest hurdle facing the company, a sentiment echoed by many in the wireless industry.

He pointed to potential partnerships with Dish Network and Clearwire as possible ways to bring some relief.

Dish has been quietly acquiring spectrum from bankrupt companies and auctions and has a healthy swath that remains unused. The company has said it needs a wireless partner to help with the build-out.

Clearwire has opted to convert its network to 4G LTE, moving away from its original WiMax technology. The company has talked about wholesaling its spectrum and infrastructure to customers who want to get into the wireless business. It's unclear how a partnership with MetroPCS would work, since Keys said he wasn't keen on the idea of a wholesale business agreement, because the economics of his business under such a deal look less attractive.

Leap had its own wholesale deal with Sprint Nextel to expand nationally, but the company has struggled to turn it into a success.

On raising MetroPCS' profile:
One of the biggest problems with MetroPCS is its low profile. It serves several major markets, including New York, but few recognize the name because it's often the fifth or even sixth option behind the national carriers and other prepaid players.

MetroPCS spends about $200 million in marketing for the year, a drop in the bucket for a national carrier. As a result, the company has to pick its spots. In New York, MetroPCS has signed a deal to have a presence with the Brooklyn Nets, and plans to use Nets star point guard Deron Williams in a campaign.

Elsewhere, MetroPCS has taken money away from Dallas and moved it into the surrounding communities in a bid to go after new demographics.

"We need to do something different," Keys said.

One of the ways the company is hoping to make a splash is with its newly unveiled "promotional" $55 unlimited data plan.

On unlimited plans:
Yesterday, MetroPCS introduced a $55 plan that offers unlimited data with no strings attached , which means no throttling of the connection when a certain point is reached.

The $149 LG Motion makes for an attractive deal with the $55 unlimited plan. Sarah Tew/CNET

The plan is designed to move customers into its 4G LTE network, which is essentially empty, he said.

Keys was careful to say he wasn't looking to start a price war, and noted that the promotional line gives it an out whenever the company needs to cease offering the option.

Several hours after speaking to Keys, T-Mobile introduced its own fully unlimited data plan option .

While the speeds from MetroPCS' 4G LTE network have gotten better, they remain notoriously slow relative to the LTE speeds seen on the bigger carriers. Customers are also limited to the markets that MetroPCS serves.

On competition:
With the contract business at saturation, the bigger wireless carriers have moved into the prepaid business. Sprint, in particular, has been aggressive with its two main prepaid arms, Boost Mobile and Virgin Mobile.

To stay competitive, Boost and Virgin are offering phones running on the older 4G WiMax network.

Sprint's prepaid business remained strong in the second quarter even as MetroPCS and rival Leap Wireless saw a slowdown. Likewise, even as T-Mobile's contract customers faltered, prepaid was a rare bright spot.

Keys said the company wasn't going to chase customers that weren't profitable, and that it was preparing for a big fourth and first quarter -- typically the strongest two quarters of the year.

Keys said he isn't fazed by competition from the likes of AT&T or Verizon Wireless. The larger carriers moving into prepaid legitimizes the option for consumers, bringing prepaid into the mainstream and enlarging its potential customer base, Keys said.

"If our competitors bring out prepaid offerings, it helps validate things for people who want to go off contract," he said. "The growth will be there."

 

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