THE CUTTING EDGE : Q & A: Sam Ginn : Ginn Likes New Air He’s Breathing at Pactel’s Cellular Spinoff

Title: Chairman and CEO of Airtouch Communications

Age: 57

Education: Bachelor’s degree in industrial management, Auburn University, Auburn, Ala.

Interests: Reading, golf, tennis, watching the Golden State Warriors. An avid health and fitness buff, he works out almost daily at 5:30 a.m. at the company gym.

Telephone habit: Severe enough to require three phones in his company Cadillac, including one that’s always charging in the trunk.

Family: He and his wife, Ann, have two sons and a daughter.

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Sam Ginn recently celebrated his 57th birthday in dramatic style.

He gave up his post as chief executive of Pacific Telesis Group, the parent of Pacific Bell, and moved a few blocks away to head the company’s newly spun-off wireless unit, AirTouch Communications. For the privilege, he took a sizable cut in pay--more than $300,000 off the nearly $2.2 million in salary and bonuses he got in 1993.

AirTouch is starting off on the right foot, with no debt and $1.4 billion in the bank. It also has 4,400 employees and cellular telephone licenses for areas covering more than 81 million people worldwide.

Its aim, says analyst Frederick W. Moran of Salomon Bros., “is to be the premier provider of wireless telecommunications services in the world’s most attractive markets.” As a partner with other companies, AirTouch already has licenses for Germany, Japan, France and other countries.

For 1993, the company reported sales of nearly $990 million and net income of $34.5 million.

Ginn is an Alabama native whose forebears migrated to Colonial America with James Oglethorpe, the founder of Georgia. He talked recently about the opportunities for the newly independent company.

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Q: What are your plans for AirTouch?

A: We have the opportunity to develop a very large, very profitable international company over the next decade. The utilization of wireless services around the world is a phenomenon that’s real. We would expect (cellular companies) in the United States to go from 6% (market penetration) to 20% to 25%, and in the rest of the world from under 1% to about 10% to 15%. The primary objective of AirTouch is to get more than its share.

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Q: How will you do that?

A: We’ve developed a history. Of all the major competitions that have taken place around the world in the more developed markets, we have not lost one where we have elected to stay and compete. Now, we have gotten out of a few when we thought the up-front fees made them non-economic. We’ve developed a world reputation for our technical capability and our ability to deliver on time.

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Q: Some have remarked that the new name is perhaps a little too touchy-feely. Any second thoughts?

A: The more we have focus groups, the more reinforcement we get that this is going to work extremely well in the marketplace. It’s really the only consumer-type name; everything else is sort of mobile-digital-telecom. This is going to be a lot more consumer-friendly than some of those techie names.

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Q: How do you plan to compete with companies such as Nextel, which seeks to jump from radio dispatch into a system rivaling cellular?

A: We’ve always understood that we’re going to have competitors. Through our surveys, we know that if customers think we’re doing a good or outstanding job, they don’t leave us. So we’ve instituted programs to basically test customers’ feelings about our service, and we try to put in programs that allow them to say we’re doing good or outstanding. A simple example for “gold” customers: We’ll go to the garage, test the phone in the garage, make sure it’s working--give a very high level of customer service. That’s the way you respond to competition. Plus, of course, you continue to get your costs down and you continue to look for opportunities to keep your rates down.

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Q: How do you keep costs down when you’re growing fast and you need more people and equipment and technology?

A: You get your costs down on a per-customer basis. We have this commitment among the employees of this company that we’re going to double the initial public offering price in four years. We let the (staff) see if they can essentially fine-tune their operations and deliver either the additional revenue or the reductions in costs that are required. The other thing you do is try to make sure that the new technology gives you built-in savings. For instance, we are looking at systems now where a customer calls and orders the service, and by the time the customer hangs up, the person is on-line.

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Q: When the government auctions frequencies next year for the next generation of wireless services--personal communications services, or PCS--you’ll be limited to bidding for just 10 megahertz of spectrum, in areas where you offer cellular service, out of the 120-megahertz total. Will that be worth it?

A: That’s an open question. If you could develop some specialized service, it may be. Examples: If you could put all your data customers on 10 megs, or maybe you could design a truly high-fidelity service for customers where rates don’t matter, where the quality of the connections is more important than anything else.

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Q: To whom would that appeal?

A: You know, Hollywood directors. There is a luxury segment in this business. I’m not sure that that’s a financially viable segment. No. 1, we have to finally conclude that there are some market segments that make sense. No. 2, we have to be convinced that what we have to pay for them is within the range of our own economic assumptions. If we can’t meet either of those, we’re not interested in the 10 megs. But assuming we get excited about some market segment and the economics are right, I suspect we’ll be bidding on some.

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Q: In the markets where you don’t offer cellular, do you intend to go after some of the 30-megahertz licenses?

A: I think we will. I also think what you may see is players coming together and pooling resources, because this is going to be a very, very expensive proposition. Nobody’s got the resources to fill out a ubiquitous, seamless, nationwide system. What you want in the end, if you can manage it, is as much seamless coverage as you can get nationwide.

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Q: Do you have some of these coalitions in the works yourself?

A: I’d say everybody’s talking to everybody.

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Q: How do you feel about the PCS auction as it is now configured?

A: I think the government in the end is going to configure the auction to maximize the revenue coming to the government. That’s what I would do. (A while ago) there was a frenzy about all this, which said to me that people would probably overpay. I think people have gotten a little more realistic. So I don’t know what the psychology will be when we reach that PCS bidding time. One of the things you don’t want to do is significantly overbid for these and essentially subtract value from what you’ve already created. I think there will be some of that in this process.