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August 1, 1998

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No. 2 Won't Do

Posted: 08/1998

No. 2 Won’t Do

Sprint Wholesale’s Alves won’t settle for the ‘Avis’ role

By Peter Meade

Being No. 2 may be good enough for Al (Gore) or Avis, but not for Alves. Paget L.
Alves, president of Sprint Wholesale, has taken a sharpshooter’s aim on making his
operation into numero uno in the wholesale telecommunications services market.

While Sprint’s resale operation has only been in official operation for less than
three years, it has already posted some impressive gains. Although Sprint does not break
out revenue numbers for its various business units, it does disclose that Sprint Wholesale
has moved past AT&T Corp. and MCI Communications Corp. in the resale market. But
merely challenging front-runner WorldCom Inc. is not enough for the 43-year-old Alves, who
says he will not be satisfied until he reaches his goal.

Our goal is simple:" says Paget. "To make Sprint the market
leader in the wholesale sector." The target date: by the end of 1999.

This no-nonsense declaration echoes as the opening salvo in what expects to be quite a
battle. Because if today’s telecommunications industry were a battlefield, Alves has
pitched his tent on the front line. Arguably, there is no segment of the telecom market
today that is more competitive than long distance, and within that market, wholesale is as
challenging as a "double-diamond" trail, Alves says, referring to a most
challenging ski trail.

In Alves’ favor, he’s no stranger to the front line or his troops. Named to succeed R.
Michael Franz as Sprint Wholesale president after Franz was announced as the new president
of Sprint Business, Alves served as Franz’s lieutenant after joining Sprint in 1996 as
vice president and general manager of the wholesale group. Now responsible for the sales,
marketing and customer support for the Kansas City, Mo.-based resale business, which
markets wholesale long distance and other products and services to carriers and resellers
nationwide, Alves’ battle cries since taking over in February have focused on a diehard
devotion to customer service and a full-scale assault on new product rollouts and customer
segments. This troika represents the keystone of his strategy to differentiate Sprint
Wholesale from its competitors.

Reliable and Responsive

For us to be successful, we must differentiate," says Alves. "We’ll never be
the low-cost alternative. That is not our strategy. Instead, we want to set ourselves
apart as the carrier that is the most reliable and responsive to its customers. It’s hard
to succeed without achieving differentiation."

The plan for achieving just the right mixture of R&R hinges on Sprint Wholesale
combining "small company responsiveness with large company resources," Alves
explains. He takes great pride in the fact that even though his organization has grown to
top 300 employees and is part of a company that has $15 billion in annual revenues and 16
million customers, Sprint Wholesale has maintained an entrepreneurial spirit in its
day-to-day operations. This unique ability delivers great value to its customers, says
director of marketing Mickey Freeman.

"We’re a reliable, responsive carrier with a portfolio of products and services
that all can be delivered from a single source," he says.

Expanding that product portfolio is the biggest story that Sprint Wholesale is trying
to tell this year, according to Alves. The first chapter was unveiled at May’s
Telecommunications Resellers Association (TRA) Spring show in San Francisco, where Sprint
launched three new products;

  • Dedicated Internet Service, which gives resellers an unbranded data service that will permit them to offer their customers electronic mail, electronic data interexchange and web access.

  • VPN, which offers resellers the benefits of giving their customers a software-based virtual private network without the associated operational hassles of a dedicated private network.

  • DeskTop Manager, which delivers to customers an online interface to access real-time database and account information. The service lets resellers use their own computers and web browsers to provide real-time access to Sprint’s customer information database.

More recently, Sprint Wholesale has added frame relay service to its product menu,
Alves says. "Customers want a diversified portfolio," he says. This is where
Sprint Wholesale expects to shine, by leveraging the ample resources of its
Washington-based parent.

Many resellers today are asking about wireless capability, Alves says. In response,
expect Sprint Wholesale to add the assets of Sprint PCS, with its growing all-digital
network that serves 149 metropolitan markets including more than 800 cities, to its
wholesale mix soon. But before that can happen, Alves says he must be sure that all new
rollouts can be integrated with Sprint Wholesale’s billing platform.

‘A Seat at the Table’

While Sprint has had a wholesale operation since 1986, it had operated as a kind of
step-sibling to its clearly delineated Sprint Business and the Consumer Services groups
until the fourth quarter of 1995, when Sprint Wholesale debuted.

While Sprint’s retail operation, the "branded" side of the house, always
appears to be the favored son, Sprint Wholesale earned its recognition as a separate
business unit from years of steady growth. Now with its own profit-and-loss
responsibilities, the operation as importantly has "a seat at the table" when
Sprint’s other long distance groups gather, Alves explains. This gives the business unit
the opportunity to articulate its own strategy and deliver a consistent focus to its
booming market while expanding its focus on product and infrastructure, he says.

"Resellers are paying more attention than ever to Sprint," says Paget as
proof that the independent strategy is paying dividends in the marketplace. "We
believe Sprint has the best network in the wholesale market," he says. "So we
wanted to take advantage of the growth we saw in the [wholesale] market, while
complementing what our retail operation was offering."

One of the byproducts of giving Sprint Wholesale a seat at the corporate table is that
the parent receives a window for seeing what is going to happen next in the industry.

"The wholesale market is a microcosm of the entire industry," Alves explains.
"It is where you are likely first to spot future industry trends, and see how the
market is going to change." For examples, Alves points to the fact that realities
such as dial-around and international callback first manifested themselves in wholesale
market before becoming widespread on a larger scale.

While these trends are more likely to involve changes in marketing than product, Alves
says these changes have become more pronounced now that Sprint Wholesale has gone through
a transition of its own–from being a sales-focused operation to one that now is more
marketing driven. This process began late in 1996 as a reaction to customers wanting more
from us than service, Alves says.

"They want information, such as details about slamming or dial-around," he
says. "Our policy is to deliver what other carriers can’t or don’t know. We’re
careful not to tell them what to do, but we pride ourselves in delivering to them the
information that will let them make their own decisions."

After all, "at the end of the day, we live or die on sales," Alves says.
"It’s not necessarily about price or even our network. It’s more because we show that
we care."

Adds Freeman: "We only succeed if our customers do."

Sprint Wholesale’s customer are divided into three segments.

  • Resellers and traditional carriers, "the TRA crowd," Alves says;

  • The regional Bell operating companies (RBOCs), whose expected entry into the long distance market in the next 12 to 18 months Alves categorizes as "having the largest single impact on the wholesale market." Sprint Wholesale is well-positioned here, having signed contracts with four RBOCs, which through mergers have been reduced to two–Bell Atlantic Corp. (New York) and SBC Communications Inc. (San Antonio, Texas). Sprint expects to realize substantial business from these pacts when the RBOCs are allowed to offer long distance services within their own regions, Alves says; and

  • Emerging markets, such as cable companies and utilities. To reach its goal being the No. 1 provider of wholesale telecom services, Sprint Wholesale has increased its focus on utilities that might want to bundle Sprint’s ever-growing menu of telecom products and services with their existing utility services. While Alves acknowledges that interest from the cable companies in such a bundling scenario has not lived up to his or the market’s expectations, he says utilities are the real deal. With their established customer bases and business practices, utilities will be "the next likely growth engine after the Bells," he says.

Extra Levels of Support

To make sure each and every account receives the high level of customer support that is
being extolled by Alves, resellers each have their own national account manager, who leads
the team and serves as the primary contact. This person is assisted by a technical
applications consultant and customer service representative. What sets Sprint Wholesale
apart, according to Alves, is an additional tier of support, a trio of product and subject
matter experts who also work on each account: a network engineer, applications support
manager and sales support manager.

Even with this extra level of support, Alves says Sprint Wholesale runs on a flattened
management structure. In fact, he prides himself in being only "two phone calls
away" from even the smallest of his customers.

Sustaining this high level of contact and availability means Alves spends some 50
percent of his time on the road meeting with present and future customers. Meanwhile, his
vice presidents’ primary responsibility is an even higher level of getting in front of
customers. "It kills us if we get too disconnected from our customers," he says.

So far, Alves looks and sounds very connected. While the overall market for wholesale
telecom services has enjoyed double-digit growth over the past several years, Sprint’s
wholesale group has far exceeded this pace. By just how much, Paget declined say, but
nevertheless, he’s on the heels of WorldCom.

While acknowledging his rival’s leadership position, Alves says Sprint has already
displaced the front-runner as the source that is defining the future direction for the
wholesale market.

"You can obtain a leadership position without having the largest market
share," he says. "We have worked hard to create relationships with our customers
and will continue to expand on that in the future."

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