Puerto Rico Telephone’s New Top Management Will Invest An Additional $160 Million This Year To Launch A New Era Of Technology-Driven Services, Offer Cheaper Intra-Island Long Distance, And Improve Customer Satisfaction

By MARIALBA MARTINEZ

‘Do it right the first time’: President & CEO Cristina Lambert wants Puerto Rico Telephone to become the most respected telecom company on the island. Here’s how she intends to do it.

Imagine sitting at your computer videoconferencing with your son or daughter at the University of Indiana while paying bills through your bank’s electronic checking system. While catching up on the week’s highlights, you continue monitoring your e-mail to find a notice that the movie you rented from an electronic media service will be available for viewing at home over the next three days.

When you get up to go shopping, you will be able to transfer your phone calls from home (that is, if you still have a wireline phone at home) to your wireless device (a phone, a personal digital assistant, or both). You may even be able to transfer only incoming calls from a specific telephone number, allowing the voicemail service at home to record messages for others, which of course you can access from your wireless device at any time.

If you are a Puerto Rico Telephone customer, you will be able to do all that this year—and it will cost you much less than you imagine. The possibilities for innovative telecommunications solutions are infinite and just around the corner. In 2004, Puerto Rico Telephone (PRT) will incorporate these and other new services through infrastructure and operational investments of more than $160 million, bringing the total new investment in the formerly government-owned telecom giant to approximately $1.4 billion since it was privatized in 1999.

To provide these services, the island’s major communications provider will use broadband technology, which transfers multiple signals over a single medium at high speed. The bill for these bundled services will be significantly lower (some say as much as 50% lower) than the cost of the services individually.

Not only that. Next month, PRT will begin converting the island’s 68 local calling zones into 10 regional zones, part of a federal legal settlement concerning long-distance access rates for carriers. That means you will pay less for some intra-island phone calls. A call from Caguas to Dorado, for example, will be a local call before year’s end. The first regional calling zones, Aguadilla and Mayaguez, will be activated on Feb. 2, followed by Arecibo, Fajardo, San Juan Metro, Guayama, Naranjito, Ponce, Cayey, and Manati.

«Our mission is to transform PRT into a more efficient, market-driven corporation, one sensitive to what our customers want,» said Cristina Lambert, the new president & CEO of both PRT and Verizon Wireless.

«Since 1999, we have implemented new technology such as digital subscriber lines [DSL], cable modem, Asynchronous Transfer Mode, and relay stations [see glossary], in addition to new processes, procedures, and operational systems. We have also invested heavily in our employees, asking them to commit to delivering services to our customers.»

Lambert, who replaced the recently retired Jon Slater, is confident about PRT services in the pipeline. «I believe converged broadband and wireless is probably the most exciting [service] in the industry. The quality of data transmission over the wireless network will continue to improve, and with EVDO [Evolution Data Only] as the next-generation broadband technology for wireless, we’ll have higher speeds to equal wireline DSL,» said Lambert. A typical DSL service allows Internet access via wireline at speeds up to 512 kilobits per second (Kbps), compared with up to 56 Kbps from an analog modem.

«I also believe the convergence of voice and data in the wireless industry will probably be the next huge step in the transition of telecommunications,» said Lambert.

Placing herself on the side of customers, Lambert said, «I am most excited about having DSL capability at home along with voice capability. It will be important when I drive to Mayaguez, for example, to be able to continue working on my wireless network at the speed of my DSL connection at home. I’m also looking forward to a package of services that, regardless of where I am on the wireline or wireless network, will have a flat rate for my voice and data traffic and will allow me to use as much time as I want.»

For reasons concerning competition, Lambert declined to reveal when PRT would be launching these services, but she did say that it will be this year and that Puerto Rico customers will be getting them at the same time as Verizon’s customers on the U.S. mainland.

Can PRT make a buck providing new, cheaper services?

Wireless and data technology isn’t for the faint of heart—or for those with an acronyms phobia. «This year you will hear a lot about VoIP [Voice over Internet Protocol] and its multiple uses,» said Lambert. «We are scheduled to give customers the capability to make a voice call over the Internet. Voice traffic will migrate into VoIP and wireless from the switch network. Broadband capabilities—DSL and cable modem, both deployed in Puerto Rico—will continue to grow as more customers prefer broadband services to narrowband.

»Also, the local number portability (LNP) regulation implemented in November 2003 will give customers flexibility," said Lambert. PRT had to jump on the LNP bandwagon after the Federal Communications Commission ordered wireless companies to allow customers to keep their original telephone numbers when switching providers.

As these services become industry standards, and every other telecom provider offers similar services at cheaper rates to lock in customers, revenue will go down. According to Lambert, VoIP is an evolution that will increase customers’ value proposition as they seek better prices, more bandwidth, and converged networks, but it isn’t a revenue generator for the company.

«We know the wireless industry is price-sensitive from the churn [turnover rate] in the marketplace,» said Lambert. «As somebody comes up with a new price plan, customers are willing to make a change. Intra-island calls are diminishing as customers make calls over the wireless network and through VoIP. We will continue making investments in wireless and broadband to maintain quality and implement procedures and processes that will allow us to retain our customers. Everyone knows it costs more to acquire customers than to retain customers, so we will be focusing on customer retention.»

The employee mantra: Customer service

PRT is set to conclude negotiations with one of its two labor unions this year. So far, the company has met little resistance (at least none that has been made public) in its attempt to transition its former government employees to a private-sector corporate culture.

«I don’t know that I ever put a number on change, but I will tell you there are people in the company who are clear about the change that has occurred, clear about the competitive environment, the urgency to serve customers—all the things we need to do to acquire or retain our customers,» said Lambert. «[Some employees] aren’t as clear about the fact that customers have choices, that as employees they have to do everything they can to make customers feel important. We have to be attentive and sympathetic of their needs. We have the skills and the tools to serve our customers well.»

According to Lambert, since its privatization five years ago, PRT has been effective in transforming the corporate culture to that of a more market-driven organization. The company has developed new procedures and systems to improve service and efficiency, invested in infrastructure and employees, and deployed the newest technology, all at a price tag of $1.2 billion in five years, $200 million more than originally committed under the acquisition agreement.

«In that time, however, the industry has changed completely; a new era of telecommunications has begun,» said Lambert. «So our job in the next few months is to reach a larger mass of our 5,000-employee base so that it embraces what it means to be customer-driven or customer-centric. I think we have begun to translate those words into active behavior.»

Lambert said her key priority is to engage employees as partners in delivering excellent customer service. The first step will be to complete labor negotiations with Hietel, on which Lambert wouldn’t comment.

Because of her own background in the operational side of the business—for almost five years she was PRT’s vice president for wireline services, under Slater—Lambert is keenly aware that offering a competitive quality of service is critical to fulfilling the company’s vision of becoming the most respected telecom company in Puerto Rico.

«We have to meet our service commitments. We have to understand that if a customer takes a morning off from work to be home when we told him we would install his phone, we have to be there,» said Lambert.

She said the company is committed to shortening waiting times for wireline installations and repairs, training employees in «customer service first» skills, solidifying Verizon’s position as the best wireless network on the island, and implementing operations systems and procedures to improve the quality of service.

The bottom line: Making do with less

As recently as five years ago, wireless phone service cost $0.25 per minute and wireline long-distance rates were $0.15 per minute. Today, rock-bottom rates are available for wireless service, significantly reducing revenue from wireline service.

For the nine months ended on Sept. 30, 2003, PRT’s revenue decreased $12 million, or 1%, to $961 million from $973 million for the same period in 2002. Net income during this period was $70 million in 2003, compared with $136 million in 2002, a 49% decrease.

Revenue from PRT’s wireline services fell 3%, from $835 million in the first nine months of 2002 to $810 million in the same period last year. Wireless revenue increased 10% from $137 million to $151 million, primarily from the addition of 15,000 wireless telephone customers and the resulting equipment sales.

PRT has approximately 5,300 employees, down from 7,200 when the company was first purchased by GTE in 1999. The reduction was achieved through attrition and early retirement windows, closely supervised by PRT’s labor unions. Labor and benefits for the first nine months of 2002 amounted to $303 million, 32% of the company’s total revenue. Another $4.7 million was spent on voluntary separation and retirement agreements.

«[Competition] drives us to be more efficient, and that is the message we have to share with our employees,» said Lambert. «We must become more efficient as the trends in technology change and revenue declines. Everyone knew that new technology trends, good or bad, would bring cheaper prices. So, for the past five years, we have managed the company realizing the impact of technological changes on the bottom line.

»We don’t foresee any layoffs, and we hope our market position and market growth will enable us to manage this size of a company. We may continue rightsizing through attrition and by other means that we have used in the past. But our intention is to continue to make this business grow and to run an efficient operation," said Lambert.

New technologies, consolidations in store

As sure as there are dozens of companies on the island vying for wireline and wireless customers, dozens more will fall by the wayside as new technologies arrive.

«I believe there will be consolidations in the industry, not only in Puerto Rico but on the U.S. mainland as well,» said Lambert. «Costs are higher, the margins lower, and you can’t make it as a profitable business. However, PRT has made improvements to its structure and has more to make.

»This is a journey we intend to continue. We have the technology and are technology leaders. It is how that technology benefits our customers and how we translate that technology into value for our customers that will make the difference. I expect to engage more of our employees in becoming a part of our team and delivering excellent service," said Lambert.

CARIBBEAN BUSINESS staff reporter Jacques-Christian Wadestrandt contributed to this story.

Christina Lambert: A life in telecom

Cristina Lambert was named president & CEO of Puerto Rico Telephone in October 2003. She is responsible for the performance of the overall wireline, wireless, paging, Internet, intra-island, and offisland long-distance businesses.

Lambert has taken the helm of Puerto Rico’s largest telecommunications provider at a time when the industry is undergoing a transformation driven by local number portability, expansion in wireless services, steady growth of Voice over Internet Protocol (VoIP), and ever-increasing demand for broadband services.

Before to her appointment as president, Lambert was vice president & general manager of wireline services for PRT, a position she had held since June 1999. She was responsible for managing the sales / marketing and network operations functions, leading a team of 2,600 employees and serving 1.3 million individual, business, and wholesale customers.

Among Lambert’s most significant accomplishments at PRT have been the launch and aggressive positioning of Puerto Rico Telefonica Long Distance as the No. 1 long-distance provider on the island and the acquisition of Coqui.net and its integration with PRT.net to create the largest Internet Service Provider in the Caribbean. In addition, she has been responsible for deploying an impressive list of new products, such as VoIP, IP-Virtual Private Networks, Frame Relay, Asynchronous Transfer Mode capabilities, and for launching the first multiservice bundles for consumers and businesses on the island.

Before coming to Puerto Rico Telephone, Lambert served as GTE’s assistant vice president for customer care. In this capacity, she developed, directed, and implemented business strategies for GTE’s National Customer Care organization. Before that, she was assistant vice president for process planning.

In 1974, Lambert began her telecommunications career at Contel, which merged with GTE in 1991. She advanced through many line and staff positions of increasing responsibility, such as district customer operations manager, director for process re-engineering, and general manager for customer operations at GTE’s Illinois offices.

Lambert earned a bachelor’s degree in business management from Indiana University and a master’s degree in business administration from Indiana Wesleyan University. Born in Panama, she speaks and writes English and Spanish fluently.

Lambert and her husband, Jim, live in Dorado. Their grown children, Bill and twins, Christine and Monica, live on the U.S. mainland with their families. Lambert communicates often with them through PRT’s wireline and wireless networks.

Puerto Rico Telephone over the years

In 1974, the local government paid International Telephone & Telegraph $165 million for Puerto Rico Telephone Co. (PRTC). After a failed attempt by Gov. Rafael Hernandez Colon in 1990 to privatize the agency and use the revenue for infrastructure and educational projects, pressure from the labor unions forced the administration to call off the sale.

In 1997, the Rossello administration announced new plans to sell PRTC. Once again, there was heated opposition from the labor unions, which engaged in a two-month strike. The Federal Communications Commission and the local Telecommunications Regulatory Board approved the sale in February 1999, and it was made official in March 1999. The government-owned Telecomunicaciones de Puerto Rico Inc. (Telpri), parent company of PRTC and Celulares Telefonica, was sold for $444 million in cash to a consortium made up of Texas-based GTE Corp. and Puerto Rico’s Popular Inc.

GTE has kept a 52% majority interest in the local exchange carrier, now known as Puerto Rico Telephone (PRT). The local government owns 28% of the shares, Popular 13%, and PRT employees 7%.

In 2000, GTE merged with Bell Atlantic to create the corporate entity named Verizon, and Celulares Telefonica’s name was changed to Verizon Wireless. At the time, PRT President & CEO Jon Slater said, «The merger means more than improving our economic power. Bell Atlantic serves areas with high concentrations of Puerto Ricans and we plan to take advantage of this opportunity.»

Within 15 months of PRT’s acquisition, Slater was announcing that pending installation orders at PRT had dropped 20% and repairs were being completed in 24 hours or less, a 50% improvement. Cristina Lambert, who succeeded Slater in November 2003, said that the time customers wait for installations had decreased from 10 days in 2000 to eight days in 2003.

«One of our priorities is to encourage personal development [of our employees],» said Lambert. «In 2003, we provided 78,249 hours of technical training and 30,313 hours of management training, figures similar to previous years. And we recognize and reward their performance and maintain communication with them to ensure understanding.»

This year, Verizon Wireless announced that it would spend $25 million to switch on new transmission sites and cover 95% to 97% of the island’s population.