T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

0m10s Speaker 0

Hello, and welcome to the two hundred and thirty second episode of the week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Antner. How are doing, Roger?

0m23s Speaker 1

I'm great. I'm excited about our guest today.

0m26s Speaker 0

Yeah, me too. So this week we're continuing our Titans of Prepaid series, And here to talk with us is Robert Gandria, former chief marketing officer at TracFone, and honestly, one of the pioneers of the prepaid model in general. So we're very, very happy to have Rob on the podcast. Rob, welcome.

0m43s Speaker 2

Thank you. Thank you for having me. Looking forward.

0m45s Speaker 1

Yeah, I know. So I met Rob when like February, 02/2001. Yeah. When I started working with Tracfone. And Rob was like F.

0m58s Speaker 1

J. Pulak's right hand man. And F. J. Was like the true pioneer in this market.

1m6s Speaker 1

One of the sharpest and at the same time most unassuming people I've ever met. You know, you came into a meeting room and you didn't even realize him. The moment he opened up his mouth, you know, this was the sharpest, most intelligent man in the room. Unfortunately, he passed way too early. And Rob had the privilege of working with FJ such a long time.

1m29s Speaker 1

And Rob and FJ were really pioneering and starting the prepaid industry, which spawned so many other things that you're probably not aware of. So Rob, welcome. How did this all start?

1m44s Speaker 2

That's a great question. It all started FJ was co founder with David Top of TracPhone. And he saw that 40% of everyone that applied for a cell phone got turned down because they didn't have enough credit. And there was no solution for them to have a cell phone. And FJ believed in the purpose that cell phone ownership was a right, not a privilege.

2m10s Speaker 2

And so long story short, with the developer of the ATM machine, the debit credit technology, he stuck the technology of debit and credit into a phone so that you could actually add those debits and credits. And lo and behold, you have a phone. And from there, no one had a blueprint for us to follow. The learnings were painful. Back then, the average revenue per user for wireless was $100 a month.

2m43s Speaker 2

So we would only assume that we would enjoy a $100 a month average revenue as well. Only come to learn that the prepaid cash in the pocket customer, those 40% that were getting turned

2m57s Speaker 0

down, were much lower ARPU customers.

3m0s Speaker 1

Yeah. Well, maybe 10. Right?

3m2s Speaker 2

10. And so we had to figure out how do you make money on a

3m6s Speaker 0

$10 a month customer?

3m8s Speaker 1

Yep. Rude awakening.

3m10s Speaker 2

Yeah. And we were trying to sell a technology, by the way, at the time. We stuck that technology in a phone. We took that phone to, I say, all the carriers. Back then, there was 72 carriers in The United States.

3m24s Speaker 2

And nobody wanted to buy our technology. Why would you not want to buy our phone and then use it for someone that you just got turned down? But they didn't want it. So we were forced to think differently. And so we said, we'll sign the carrier contracts.

3m39s Speaker 2

We'll stick this thing in a box. We'll create the first, quote, phone in a box, and we're gonna go and put the phone where there is no wireless. We will put it at a seven Eleven, a grocery store, and away from the wireless aisle, if you will, where those customers were. Then, of course, there was no point of sale activation technology. Nobody would merchandise it because of theft.

4m5s Speaker 2

And the airtime cards were treated like cash. And so the sales weren't there. So we had to pivot again and develop the whole point of sale activation technology that everyone enjoys today and takes for granted.

4m15s Speaker 1

And you brought this to Walmart. Right? And you were personally responsible for that when I met you, which was like huge.

4m23s Speaker 2

We did bring it to Walmart. We were able to get the product in over 100,000 retail stores. So we had different channels of verticals that we targeted as a consumer product, which wireless is not typically marketed as a consumer packaged goods brand. And so in the first few years, we realized we weren't ready for Walmart because of the volume. But then, we did get into Walmart.

4m49s Speaker 2

Never forget the phone call when the warehouse received the product for the first time and the warehouse manager bought one for his kid. Called the CEO of Walmart the next day and that manager said, You don't have enough of these, okay? You do not have enough. Walmart made us improve our connectivity with Walmart to be able to handle 1,500 transactions per second. Of course, we ended up selling more airtime than bananas at Walmart.

5m19s Speaker 1

Yeah. You know, you told me a really cool story about your, what was that, first or second day, which was actually CES.

5m29s Speaker 2

FJ hired me, and my first day on the job was the first day at Consumer Electronics Show. And long story short, I showed up at the booth at 09:00 as instructed, and there was already 200 persons in line to learn about this concept called prepaid. FJ was in a small panic. He had some meetings to go to. He asked me if I knew anything about the product.

5m51s Speaker 2

I told him I did. He said, okay, just take everyone's name and address and phone number, tell them we'll contact them. I said, FJ, you might fire me right this minute, but watch how I roll. So I took all 200 people, put them in front of me. I said, no sense all of you waiting to hear what I'm about to tell the person in front of me.

6m6s Speaker 2

Gather around. I gave the whole sales pitch. It's a phone in a box. It's a phone to go. It's a phone that doesn't have a home until anyone gives it one.

6m14s Speaker 2

You buy the phone, you buy the airtime,

6m16s Speaker 0

and we're good to go. You don't know me,

6m17s Speaker 2

you don't know us, and that's the way we all like it. Give me your name and address. FJ looked at the rest of the employees and said, okay, Rob is now in charge of the entire booth, all of sales and marketing, and I've got meetings to go to. And then I was in charge ever since.

6m33s Speaker 1

Yeah. And you guys were inseparable, you know? You guys were like Dawn and me, you know, talking first thing in the morning.

6m41s Speaker 2

You are right. You are right. He'd go

6m44s Speaker 0

sign a contract with the carrier and say, Rob, go roll out that region. I'd go

6m48s Speaker 2

roll out the region. I'd get

6m49s Speaker 0

a phone call from RadioShack saying, you weren't authorized to train my stores yet. What are you doing? And FJ goes, okay. Well, we've got to get going here.

6m56s Speaker 2

But you're right, FJ and I were a one, two tag team. And I was proud, you know, a lot of people don't view this in life, but every number one CEO needs an amazing number two man. And I was proud to be that amazing number two guy, you know?

7m11s Speaker 1

Yeah. So what are some of the other early learnings or the learnings that you had? And by the way, you brought this from like next to nothing to like 20 something million. This is like a huge scaling exercise.

7m27s Speaker 2

Yeah. Yeah. 21,000,000 subscribers. We also invented, if you will, the SafeLink brand where we took Ronald Reagan's lifeline service that nobody was providing the discount for home phones. We went to the government and said, give us the $10 and we'll give away a free phone.

7m42s Speaker 2

So it was another way of putting phones in the hands of persons that needed it so that they could get the job when they got the call from the unemployment office. But the learnings were huge. I think one key learning is that we didn't target a demographic. What we learned was targeting behaviors, usage behaviors. A person that buys their devices in the indirect channel, if you will, has a different behavior than a person that might buy it from Walmart, that might be buying it from even a Dollar General, and then subsequently even a Target and Circuit City.

8m20s Speaker 2

And so hence why interestingly, ended up coming and developing the multiple brands that we had. We ended up with nine brands, if you will. And so it's very unique when in order to serve the customer, the learning was always about keeping that customer as the North Star, understanding your segmentation, your targeting, your positioning. And then another learning is that these customers keep evolving. You have to stay with them because they're always changing the rules of what they want, when they want it, how they want it and when.

8m56s Speaker 2

And if you're not doing that, you're not serving them. You just end up not getting the business you're looking to get.

9m2s Speaker 1

Yeah. So one of the big challenges in prepaid is also churn. Right? Yes. How were you able to to keep that in check?

9m13s Speaker 0

That's a great question.

9m15s Speaker 2

It was about really staying close with the customer on what they wanted, when they wanted. You know, one of the challenges, but if you're able to get it done, and we did this ferociously, if you will, is you've got to have the full assortment of handsets and the airtime service plans available and in front of them. Because often a person will churn because maybe they can't afford that one card that's always about how much money do I have in my pocket today. And hard to believe that airtime is literally no cost of goods to all of the distribution, And they only get charged for that airtime card when it's sold. But yet not everyone would carry the full assortment of airtime cards.

10m4s Speaker 2

We had one retail chain, 4,000 doors. We did an analysis and they were short almost 180,000 pegs of airtime because the buyers were making the decision as to which one card or two should they carry because certainly it makes no sense to carry all five. And so really having that merchant set and having that full assortment to serve what the customer stated they needed in the first place in front of them to capture them not from churning was one big item. And then, of course, we went into rewards, having the right phones, coming up with financing, n minus one strategy. You know?

10m43s Speaker 2

N minus one wasn't a strategy back in the day where you would take I remember working with Apple. The last thing Apple ever wanted to do was sell last year's model. And we showed Apple the huge market opportunity for an n minus one, n minus two, n minus three strategy and putting those iPhones into these persons' hands for $2.03, $4,500 less than the brand new model, even though it's a brand new phone and it was only last year's model. So things like that.

11m13s Speaker 1

That really smart. You guys also then further innovated with Straight Talk. You know, I remember very vividly at a presentation to Jack Plating and Scott Landman, who were at the time Chief Operating Officer of Verizon Wireless and Chief Marketing Officer. We were showing them the success of Straight Talk and Jack, I love Jack. He's as colorful in his language as me.

11m43s Speaker 1

He's like, who the f are these people kicking our butt? And I told him like, you know, that's TracPhone and they're on your network. And he kind of lost it.

11m57s Speaker 2

We did $1,000,000,000 in revenue the first year of Straight Talk, 2,000,000,000 the second year, 3,000,000,000 the third year, 4,000,000,000 the fourth year, and 5,000,000,000 the fifth year.

12m8s Speaker 1

So how did you do that?

12m10s Speaker 2

Well, we asked the customer what they wanted. We were very big on I'm a customer centric nutcase. Okay? We can talk about that another day. And you are too.

12m19s Speaker 2

That's what you're all about. Right? It's not only looking at the data, but also we made them do dream states. So this was revolutionary back then. We asked the customer what they wanted.

12m28s Speaker 2

Here's what they said. Could somebody just print on the package how much I'm going to pay out of my pocket, period? Just put that stamp right on the package and tell me what I get for it. And so we said, okay, let's do that. We were the first ones to actually put $45 unlimited on the front of a box.

12m54s Speaker 2

It was the most major upheaval I ever had where everyone was against it. Because what would happen if we changed the price and we have all these packages out there? And so what we designed and patented was a replaceable sleeve package to go over the plastic in the event we ever changed the rate plan to be able to take that sleeve off. It was the only way I could get that concept to market. And that's what the customer was looking for, was simplification.

13m20s Speaker 2

Tell me I've got coverage. Tell me what I get. Tell me how much I pay for it without all the smoke and mirrors and ah 's and surprises. They picked the color, they designed the package, and off we went. And it was, I'd rather be lucky than good.

13m36s Speaker 2

And let me tell you what, it was a big business. It still is today.

13m40s Speaker 1

It was a big business, yep. Very big business. Jacqueline went to John Stratton and took him to task because he negotiated that thing with FJ. And so I heard like the story from like all the different sides of how that then played out.

13m57s Speaker 2

Yeah, I don't

13m58s Speaker 0

know why.

13m59s Speaker 2

You know, the business, I don't know why there's all these conflicts. I had to get a contract plan because of doing overseas travel, and I didn't wanna go through all the cumbersomeness of all of the, long story short, the Internet. But, you know, I went to a major carrier store about eight months ago with my smashed phone, and I said, I need to buy a new phone. And they wouldn't sell me one. They said, no.

14m22s Speaker 2

We don't sell phones here. I said, I'm in the middle of the biggest largest carrier in The United States store. You don't sell phones? I see them right there. I'll pay cash.

14m29s Speaker 2

It's $1,500 I'm on a contract. Let me pay cash. No. You have to go to Best Buy if you want to buy a phone. And I mean and and it's still really the opportunity for anyone listening is customer is the North Star.

14m43s Speaker 2

And there's never enough ongoing customer data of what they want, when they want it, how they want it, where they want it. We did Dream State Labs. I could share with you a lot more opportunity of what's out there, what the customers want, that they still don't get served that today.

15m3s Speaker 1

Well, that's what we specialize in, right? We survey

15m5s Speaker 2

You do, and that's why we used your services. Nobody better.

15m9s Speaker 1

Yeah, thank you. So, you know, you mentioned that there's still so much opportunity. What would be one idea that's so like sticking out that you think somebody should do? And Rob, you still are giving advice to companies, so I want to put that out there. So what would be one thing that you would tell companies you should focus at that?

15m31s Speaker 2

Customer experience. You know, that word gets thrown around a lot. But if you really have to, you know, peel back that onion seven layers and then go build a seven layer cake after that, if you really ask the customer the entire experience and their journey mapping, all the golden nuggets are there from how you get them sold, if you will, and how you keep them. I know. I've done it.

16m0s Speaker 2

I've got the data. And if you do that, there's a lot of money in them, Darhills.

16m6s Speaker 1

Oh, yeah. No. Absolutely. Well, Rob, awesome. This was you know, time flew by.

16m13s Speaker 1

This was so insightful. Thank you very much for coming on the show.

16m18s Speaker 2

Always happy to help. Thank you for having me and keep up the great work you're doing. I love your, you know, your big computer software automated system that persons can use to mine data from. I'm very impressed with that. We didn't have that back twenty five years ago.

16m33s Speaker 2

So very nice. So thank you again.

16m34s Speaker 1

Thank you. Thank you, gentlemen. Roger, we'll

16m37s Speaker 0

talk next week.

16m37s Speaker 2

Thank you. Thank you, Don. Take care.

16m39s Speaker 1

Bye bye.