PCS Wireless - Overview and History
Playing a pivotal role in the rollout of 2Ghz cellular networks in the 1990s
Nature of the business
PCS Wireless was a developer and manufacturer of cablevision based cellular base-station distributed antennas, founded in 1993, which entered into strategic joint venture partnerships with ADC Telecommunications and Allen Telecom in 1996, and eventually merged with Unique Broadband Systems in 1997. The key assets of PCS Wireless were initially acquired from the Nexus Group of Companies (see Nexus Engineering - Overview & History).
Personal Impact
My role as co-founder and President/EVP of PCS Wireless gave me valuable experience running a dynamic, fast moving technology company, and its public company status rounded out my knowledge and experience dealing with public company issues, boards of directors, investors, and financial institutions. PCS Wireless' success also granted me financial independence and allowed me to pursue my dream of creating and funding my own technology company, Intrinsyc Software (see Intrinsyc Software - Overview and History).
Corporate History
PCS Wireless was both a technical and financial/return-on-investment success, stemming from its unique, pivotally important wireless products and patents, as well as its corporate valuation increase from an initial $2.7 million pre-pubco in 1993 to more than a $2 Billion market cap at its peak in 1999 (post merger with Unique Broadband).
PCS Wireless played a significant role in the rollout of 'next generation' 2Ghz cellular networks in the mid 1990s with its 'distributed antenna array' RAD/MEX technologies - products that allowed for centralized cellular base stations and flexible distributed antenna leveraging existing cable-TV infrastructure. Its customers included literally all of the major telco equipment providers: Nokia, Motorola, Ericcson, Nortel and AT&T, as well as all of the top US cable-TV network operators: Cox Cable, Cablevision Systems Corp, Adelphia, US West, TCI, Jones and Time Warner.
PCS Wireless, its technologies, and successful pre-FCC auction field trial results, literally changed the landscape of the 2Ghz wireless auctions by encouraging the formation of a cable-TV network operator alliance with Sprint Communications, which was to become the lead successful bidder in the 1995 FCC auctions, paying more than $7 Billion in license fees for a US national network - all potentially to be based on PCS Wireless' RAD/MEX technologies. For this reason, investment banking analysts predicted in early 1995 that PCS Wireless' market potential for its products was in excess of $1B - with an exclusive patent protected technology/product offering.
But I am getting ahead of myself here: The story of PCS Wireless (from my perspective) started with my employment position as a VP of Nexus Engineering a few years earlier. The RAD (Remote Antenna Driver) and MEX/BEX (Microcell Extender/Base station Extender) technologies were acquired from Nexus in late 1993 after development and trials driven by Dr. Basil Peters (CEO of Nexus) and his relationship with Roger Communications in Canada as well as many of the leading US Cable TV providers in the US spanning 1991 to 1993.
The board of directors of Nexus had voted to sell their core business, their cable TV infrastructure product lines, to Scientific Atlanta in the summer of 1992 (see Nexus Engineering - Overview and History for more information). The Nexus board hired Greg Peet (of local ALI fame), who had recently left his job as CEO of Norsat, to oversee the sale of non-core assets to other bidders, while he was in the process of negotiating with Milt Wong and Paul Lee to join ALI as its CEO when ALI was still a small venture exchange listed company. Greg had time on his hands and Nexus needed his assistance divesting some assets . . .
My own job with Nexus had been 'put in play' with the pending sale of the core assets to Scientific Atlanta and I was in fact working for a period at the end of 1992 as a 'consultant' to Nexus as the SA deal was being put together, but after a while I faded away and ended up focusing on running my Performance Solutions consulting firm, working with other local firms like ERNEX/CSI Credit Systems (see CSI/ERNEX Credit Systems - Overview and History for more information).
In early 1993 Ralph Scobie, the former CEO of Integra Systems (see Integra Systems - Overview and History for more information) called me up and inquired as to what I was doing and whether there were any non-core Nexus assets worth acquiring. He had also been talking with Kelly Edmison (now CEO of the Pender Financial Group, but back then he was a legal partner with Ladner Downs who had prior business dealings with both Nexus and Integra) and was aware of the Nexus situation. Ralph represented himself to Nexus (and myself) as an EVP of Abe Simkin's family business out of Winnipeg, looking to acquire technology businesses for their portfolio of companies, and so I was 'hired' (or so I thought) as a consultant to work on their behalf to advise on a potential transaction involving the Nexus RAD/MEX product line.
Working with Greg Peet on the RAD/MEX Acquisition
I had previously worked for a short time with Greg Peet in 1991-1992 after Basil Peters and Peter van der Gratch, his partner, had sent me over to Norsat to explore a potential JV between these two local cable-TV/satellite equipment manufacturing firms. Greg had an easy going manner and seemed to take our due diligence questionnaires and negotiations in stride. In parallel with my due diligence work, I was actually writing the PCS Wireless business plan from scratch at home, and as I wrote it and reviewed it with Ralph over the weeks and months, I got more and more excited about the potential for the product line and the business.
It became clear to me by early summer 1993 that Ralph wasn't actually working on the PCS Wireless deal for the Simkins, but rather, he was looking to leave the Simkin family, and start a new enterprise of his own. With a new born baby at home, and no revenues forth coming from Ralph or the Simkins, I had to make a judgment call, and in the end I was impressed enough with the prospects for PCS Wireless that I sat down over breakfast with Ralph at the Bayshore Inn Hotel across from his office in July 1993 and worked out a 58/42% partnership deal that formed the basis for our relative stake in the company moving forward.
As we worked with Greg Peet on the terms of the deal, we ran up and down the length of Howe Street looking for investment capital to fund a transaction that was shaping up to be $2M or more in total consideration. After several false starts Ralph turned to an old working relationship with Don Sheldon, a Howe Street promoter (who had been associated with Integra Systems), and arranged for an informal reverse takeover of a shell company, Golden Trio Minerals, which, for cash and shares valued at $2.7M, acquired the RAD/MEX assets from Nexus on October 29, 1993, and in the process, went public with a name change to PCS Wireless on the same day.
Ralph and I had worked through the fall of 1993 as 'CEO' and 'President' as we contacted Nexus cable-TV provider customers who had been involved in RAD/MEX 2Ghz cellular trials, but when we went public I was unceremoniously demoted to EVP. Such was the auspicious start to my life as a public company executive.
The wild and woolly early days of PCS Wireless
While I had some early experience with being a manager in a venture listed public company from my days at Integra Systems, I had never before been so totally immersed in the world of venture public financings and the wild west promoters who were part of the game. As a naive 'engineer' who thought 'linearly' about problem solving, this was a real eye-opener for me. Ralph was thick as thieves with the promoters and investment bankers, while I struggled to come up to speed, and I quickly realized that I need two distinct skill sets to survive and prosper at this game: operational/technical excellence in terms of running the company, and street smarts and deft handling of the power politics, fear and greed that ruled the Howe Street investment banking world we were now playing in.
My wife, Cheryl, a lawyer by trade, counseled me by night while I did battle during the day downtown. We both got to the point by early 1994 that I was more than willing to walk from my share of the PCS Wireless deal for a $500,000 buyout from the other significant investors. After receiving a $50,000 down payment towards a buyout of my position, fortunes for the company and its investment backers reversed and the deal fell through - and I was stuck making a go of it with my strange new bed fellows.
What I didn't realize at the time was how quickly I was indeed coming up to speed on the world of venture financings and pubco operations, and similarly, how strong my personal list of investment banking contacts was becoming. I was learning the industry, via the school of hard knocks, and after a period of adjustment, I took to playing the game along side the rest of the team. I counted Peter Brown, CEO of Canaccord, Chan Buckland, his partner, and Bob Disbrow, Vice-chair of First Marathon, as investment bankers who I had fairly regular contact with at that time.
The lead-up to the FCC Auctions
Once the dust had settled on the PCS Wireless 'IPO' we realized that it would be a few more years before the RAD/MEX technology and the wireless markets were truly ready for our vision of a 'distributed antenna' based cellular universe. Our stock price languished, and some of our most hoped-for early customer deals fell through or were delayed to the point that by the end of 1994 we were running out of money and it looked like we were going out of business.
There were positive signs that the FCC 2Ghz wireless spectrum auctions were going to proceed in the spring of 1995, and due to the fact that our RAD/MEX technologies were classified by the FCC as 'pioneer preference' technologies, any auction bidder who deployed our technologies would be offered a 15% discount on the successful price of wireless spectrum. All we had to do was hang in there and our ship might indeed come in . . .
Ralph and I were down in Napa Valley in early November 1994 when we received a call from Ericcson's top US sales executive. We couldn't believe what we were hearing on the phone - he had tracked us down to the Sonoma Mission Inn and Spa where we were taking time off after a board meeting with our wives (golfing and drinking fine wine, spa time, etc.) and he wanted a quote for 10,000 RADs ASAP - these were almost $10,000 each so he was asking us for a quote worth close to $100 million.
No sooner had we arrived back in Vancouver than Motorola's executive offices in Schamburg, IL called me up and right on the first introductory phone call said 'hold the presses - don't do an exclusive deal with Ericcson'. They suggested that if we were having operational cash flow problems, they could arrange for a $500,000 advance towards an eventual RAD/MEX deal with them. We ended up telling everyone that we would not enter any exclusive deals, took Motorola's money, and waited out the FCC's auction process.
The Auction Results, our customer orders, our stock goes nuts
Once we heard that our cable-TV network operator customers had formed an alliance with Sprint called 'Sprint LP', had bought up a complete national network, and had emerged as the lead 2Ghz network provider, we realized that our world was about to change - in a big way (see our news release 'FCC Auction Ends, PCS Wireless' Customers Amongst the Winners').
Within days of putting out our news release of a deal with Motorola and the above noted news release in early March 1995 we were in play on Howe Street. We were able to quickly close an $11M financing lead by Canaccord and Sprott Securities, which was taken down by the 'who's who' of the Toronto institutional scene, and our stock caught fire. Bankers and investors at the time told us that PCS Wireless woke up the whole venture market which rebounded in part due to the very active trading in our stock (see PCS Wireless Press Coverage and Stock Trading Data).
Another few weeks into April 1995 and we had closed over $40M in RAD/MEX equipment orders and had pitched all of the top tier institutional fund managers, counting Fidelity Investments (www.fidelity.com), Putnam Investments (www.putnam.com), and Altamira (www.altamira.com) as our largest shareholders by that time. We were toasted in NYC and San Francisco by the leading tech bankers there who were encouraging us to list on the NASDAQ stock exchange. And our future never looked so bright.
Sprint reverses direction, Ericcson cancels our deal, our fate shifts
Within a few months all of the leading telco equipment providers had announced deals with us but there was dark cloud forming in the distance. Spring LP had raised most of its investment capital from European sources - primarily France Telecom and Germany Telecom (about $4.6B) and various US industry insiders in high places were making noises about the optics of using European $ to fund the rollout of a US GSM based cellular network (using European sourced technology). Sprint faced mounting pressure from Washington, that was in a position via the State Department to disallow them their $4.6B funding, to switch from GSM to CDMA technology - an unproven American cellular network standard.
PCS Wireless had worked with both GSM and CDMA technologies, but in a twist of fate, we had decided to focus almost all of our development and marketing efforts on GSM technologies as that was clearly where our customers were focusing themselves. When the Sprint announcement to switch to CDMA technology for its network rollout hit the news wire in the summer of 1995, we were shocked. Not only did our customers lose their huge contracts, but our contracts with them were immediately thrown into question.
I remember the day the bad news hit quite well as I had received a rude wake-up call at home at 5:30am from the wireless analyst at Bank of America in NYC telling me their investment in PCS Wireless was about to go up in smoke. I put on a brave face in an interview with the Globe and Mail later that morning and stated that our agreement with Ericcson was 'non cancelable' (famous last words) - I now know better than to think that any contract is secure no matter what language the contract contained as Ericcson did indeed cancel it and we were left in the end with a $1M settlement after threatened litigation.
To make matters worse, within weeks of the decision, Lockheed Saunders announced that it had partnered with AT&T to spend $100M developing CDMA RAD technologies at the same time that it secured an agreement to supply Sprint LP with products for its national network. We were out on our asses. Only a year earlier I had sat in Qualcomm's executive offices in San Diego where they offered us an exclusive CDMA deal for cable-TV distributed antenna use for $250,000 - a deal our board turned down (I was keen on the licensing deal but it wasn't my money on the line). This was a deal that Lockheed Saunders was happy to sign for ten times the price in mid 1995.
PCS Wireless JVs/sells the RAD/MEX products to ADC Telecommunications and Allen Telecom
The PCS Wireless stock got hammered after the Sprint CDMA decision and we went into a defensive posture corporately, with a legal fight brewing with Ericcson and the bottom falling out of our personal and corporate net worths. I was asked to fly to Boston to meet with the head of Fidelity Canada, Alan Radlo, where he strongly suggested that Intrinsyc immediately seek out the protection of one or more investment JV partners for the continued development of the RAD/MEX technologies. Fidelity had pre-existing strategic investments into ADC Telecommunication and Allen Telecom and after they made the introductions and I wrote letters of inquiry to their Chairmen and CEOs the planes flew into Vancouver and we started to negotiate.
The writing was on the wall for me personally by this time (September 1995). I had sold some of my stock on the run up past $4 and so did Ralph and many of the other executives. We were past the point of being 'locked at the hip together' as we each had enough money to seek out our independence, and the stress of the pending breakup of our dream was bearing down on the whole team. Ralph quickly maneuvered to take over the negotiations with ADC and Allen Telecom (which, as CEO, was his right and responsibility anyway) and after the first few meetings I backed away and started to think about my own future outside of PCS Wireless.
PCS Wireless Merges with Unique Broadband - an eventually huge stock play
By January 1996 I was out of PCS Wireless operationally and off the board as well as it had completed the two JVs with ADC and Allen Telecom - resulting in the eventual loss of the RAD/MEX technologies and the long, slow winding down of PCS Wireless' Vancouver base of operations. Basil Peters, who had essentially founded PCS Wireless while CEO of Nexus Engineering, re-entered the picture in the spring of 1997 and had helped Ralph wrap up the business affairs of PCS Wireless and put together the Unique Broadband deal that saw the two firms merge.
Basil was certainly onto something as Unique Broadband caught the wave of the Internet mania in 1999 and eventually saw its stock rise to $17 on over 15 million shares of daily trading volume, reaching a peak corporate valuation of more than $2 Billion in 1999. I had sold a good portion of my PCS Wireless stock holdings by then. Hmmm, what if I had held on to all of my shares and options until 1999 . . .
Forward to PCS Wireless Analyst Reports