Two Cellular Phone Firms in Southland in Promotional Battle

Until last month, the major problem with Southern California’s cellular telephone system was that it was too popular, with too many customers trying to cram their conversations onto too few frequencies.

But with the activation five weeks ago of the region’s second system, which virtually doubled available space, overcrowding is largely a problem of the past. And now, the cellular companies, which share the nation’s largest and hottest mobile phone market, are fighting for new customers.

LA Cellular Telephone, the region’s new player, is promoting a fancy traffic advisory service and cut-rate phones and is preparing to waive certain fees to lure customers. PacTel Cellular, which has been offering car phone service since June, 1984, is trying to retain its tremendous size advantage with special giveaways and low-cost equipment leases.

And that’s what happened just in the first month of what is rapidly becoming the hottest competition among cellular phone companies in the nation, a battle that is expected to add 10,000 to 20,000 cellular users to the region’s total by the end of the year.

“L.A. is the King Kong of the cellular industry, the biggest system in the world,” said Robert Maher, president of the Cellular Telephone Industry Assn., a Washington trade group. “And while competition is stiff all over, it’s stiffer in L.A. because the market offers so much profit potential.”

Southern California, whose current 80,000 to 90,000 cellular subscribers comprise about 12% of the nation’s total, is considered an ideal market for the car phone because residents spend so much time in their cars. Further, the Southern Californians are considered relatively affluent and eager to accept new technology, particularly glitzy status symbols.

Unlike the situation in other areas, the month-old cellular battle here has not produced a fare war--yet. Both companies charge identical basic rates: $45 monthly access, 45 cents a minute during the day and 27 cents a minute at night.

But the similarities end there.

Capitalizing on the complaints spawned by the earlier overcrowding, LA Cellular, which has an estimated 20,000 customers, is actively promoting its digital switch technology, a system that experts say sends a clearer signal and can accommodate a larger number of users at one time.

The company is also selling new cellular phones for $599, plus installation, compared to an average price of $800 for similar equipment, and is throwing in, at no cost, the traffic advisory service. That allows customers to call a freeway watch service to learn of problems awaiting them on their commutes.

Finally, LA Cellular has petitioned the state Public Utilities Commission, which oversees cellular phone rates, for permission to waive sign-up charges and monthly access fees for new customers. Approval could come as early as mid-May.

Meanwhile, PacTel, which has an estimated 65,000 customers, is stressing that its system is proven and that it operates twice the number of signal-beaming towers. For the less technologically inclined, the company promotes its no-down-payment lease and the pending unveiling of a fancy new phone. The company is also actively considering petitioning the PUC to match the competition’s plan to waive certain fees.

“It’s a very aggressive competition . . . a very heated environment,” Robert Steuernagel, PacTel’s marketing vice president, said. And Herschel Shosteck, a Bethesda, Md., cellular market analyst, said that, because of the competition, “A second carrier is almost always a great boon for consumers.”

But rather than fight over the existing customers, both companies are trying to attract new subscribers with promotions that drive home the message that car phones can turn daily commutes and freeway traffic jams into productive, money-making time.

In some cases, just having a second, uncrowded system available has been enough to lure new customers.

For example, one Orange County manufacturer, angered about the overcrowding, refused to buy additional phones for its sales force until the second system was activated. And last week, the company snapped up 43 devices.

“Many people weren’t buying because they had heard the system was so jammed,” said Tee Vee Muntz, cellular sales manager of Muntz Electronics in Van Nuys and daughter of the famous technology whiz, Earl (Madman) Muntz. “Now the customers may come flocking because they know their calls will go through. But who knows whose customers they’ll be?”