Two key officials have left wireless startup Wind Mobile, leading a telecommunications consultant to conclude the company has blown its first-mover advantage over other cellphone companies who are about to launch.
“We believe the company was not ready to capitalize its launch, that the regulatory pressures forced a premature kick-off” in December, the SeaBoard Group said in a research note released last week. The departures, it says, suggests things aren't going according to the company's plans.
More pricing creativity, rate plan innovation, more distribution channels (including e-commerce), more pressure from its veteran financier, Orascom Telecom Holdings S.A.E. for more handsets and committing further resources to advertising and promotion could have compensated for some of the shortcomings, the report also said.
In an interview company chairman Anthony Lacavera acknowledged its network, which now operates in Toronto, Calgary and for the last 12 days, Edmonton, has had some teething problems. However, while he wouldn’t reveal subscription numbers, he stoutly defended Wind’s performance.
“I don’t know how another new entrant can catch us now,” he said.
Wind nearly didn’t get off the ground. After parent Globalive Wireless spent $442 million on spectrum covering all but southern Quebec in the 2008 spectrum auction and getting its licences from Industry Canada, the Canadian Radio-television and Telecommunications (CRTC) ruled last fall that Orascom had too much control over the company in violation of the foreign control rules under the Telecommunications Act.
But after an appeal, cabinet overturned the commission. Within days Wind opened its doors in time to catch a little of the Christmas traffic. Perhaps, SeaBoard suggested, that was a mistake and for it the proof came last Wednesday.
On that day the company’s chief customer officer, Chris Robbins, and chief information officer Scott Waller (who looked after the IT side of operations), were let go.
Lacavera said the departure of Robbins was mutual as the company shifted from what he called a bootstrap phase to a more operational phase. Wind is about to start service in Ottawa and will add Vancouver next month.
However, in discussing both departures Lacavera said that “some people adapt with cultural change, and some people don’t as companies grow.”
He flatly denied that the departures indicate the company is in trouble.
He emphasized that he’s no rookie when it comes to startups. His Globalive group of companies, which before it expanded into wireless offered Internet and dial around long distance service, has been named one of Canada’s best-managed companies for six years.
Lacavera brought his Globalive business into a partnership with Egyptian-based Orascom to form Globalive Investment Holdings Corp., the parent company of Wind Mobile. “Every startup has challenges, including Wind,” Lacavera said. “Our challenges are not on the marketing side, because we’re benefiting from incredible demand for reasonable cost cellphones.”
But later on he acknowledged that possible subscribers haven’t understood the Home and Away zones in Wind’s plans. “It’s our job to better educate Canadians” on that, he said.
In its report, SeaBoard said Wind launched too early and with not enough marketing, particularly in the country’s biggest city where full-page newspaper ads and transit posters are “lost in the clutter of the Toronto ad cacophony.”
The company has few stores so far, and, SeaBoard complains, people can’t buy online. Wind is also hurt because bills can’t be paid at a bank. Furthermore, SeaBoard says, Wind only offers four handsets, and, according to online complaints, network performance and coverage isn’t as complete as it should be.
On that, Lacavera agrees. The company is undertaking a “massive” effort to improve quality and coverage, he said. But with only six months to build and launch the network “there’s obviously going to be hiccups here and there.”
“Now that we have subscribers, we can see where the weaknesses are,” Lacavera said “It’s to be expected.”
As for the alleged shortage of handsets, Lacavera said the number will double in three to four months, and double again in the next 12 months.
SeaBoard estimates that Wind Mobile has signed up fewer than 30,000 subscribers so far. Lacavera would only say that the company's goal is to have 1.5 million subscribers in three years.
Globalive was one of over a half dozen new companies that won spectrum in the 2008 auction. Two will launch shortly: Toronto-based Public Mobile in the Toronto and Montreal areas, and Mobilicity, which has spectrum covering most major cities. Montreal cableco Videotron Ltee. will also start its new Quebec network this year, while Halifax-based cableco Bragg Group (which operates under the Eastlink brand) and Calgary-based Shaw Communications will likely launch next year.
Based on what it believes are Wind’s faults, SeaBoard believes these new entrants can learn some lessons: Don’t launch until you’re ready, focus on distribution, on e-commerce, on advertising and on offering lots of handsets and distinctive service plans.
As for Wind, SeaBoard says that “one stumble does not make a fall.” There’s value in the packages it offers, says the consulting firm, although in its opinion they aren’t aggressive enough to persuade Canadians who haven’t bought a cellphone yet to open their wallets.
Last week Wind did make one aggressive move, offering $150 to those who break their contracts with other wireless carriers.
Still, SeaBoard said the startup “should find a way of easing the early adopter burden and find a way to reward the courageous who stepped up.”
