ANDRE TREMBLAY - MICROCELL TELECOMMUNICATIONS INC (MICT)
CEO Interview - published 06/12/2000

DOCUMENT # KAE622

ANDRE TREMBLAY is President and Chief Executive Officer, Microcell
Telecommunications Inc., and Executive Vice President, Telesystem Ltd.
Mr. Tremblay has devoted a significant part of his career to the
telecommunications industry. Over the last 15 years he has held a number
of positions, including advisor to Charles Sirois, Chairman and CEO of
Telesystem. He subsequently played a key role in decisions that have
guided Telesystem's development since the early 1990s. During this
period, Mr. Tremblay assumed various executive responsibilities,
particularly for the group's activities within Canada. In addition, he
has also been very involved in the area of financing telecommunications
projects. Mr. Tremblay became President and CEO of Microcell
Telecommunications in 1995, heading up a team whose mission is to take
the lead in implementing personal communications services (PCS) in
Canada. In December 1995, under his leadership, Microcell was awarded a
national license to offer PCS in Canada. In November 1996 in Greater
Montreal, Microcell inaugurated the first Canadian PCS network operating
at 1.9 GHz. In addition to his professional activities, Mr. Tremblay has
written a number of articles on telecommunications and is regularly
invited to speak on various aspects of the industry throughout North
America. He sits on the Board of Directors of the Communications
Research Centre, a research arm of Industry Canada, and on the boards of
several public companies. He also represents Microcell within the GSM
Alliance, an association of North American GSM network operators. Mr.
Tremblay holds a Bachelor's degree in Administration, a degree in
Accounting from Universit‚  Laval and a Master's degree in Taxation from
University de Sherbrooke. He has also attended the Advanced Management
Program at Harvard University.

Sector: telecommunications

TWST: Could you give us a short background summary on Microcell
Telecommunications Inc.? Then describe how you see the company and
business today.

Mr. Tremblay: To give you some context, Microcell really started in 1995
when the company was granted a PCS license from the Canadian government.
You may know that in Canada we did not have an auction, but rather a
beauty contest. At the time, there were two analog service providers in
Canada, and the licensing process ended up adding two new players '
including Microcell ' each with 30 megahertz of spectrum nationwide. So,
that's really where we started. We were the first company to launch PCS
in Canada, starting with a network in Montreal in November 1996. By the
end of 1998, we were covering 50% of the Canadian population, including
the 14 major census metropolitan areas in Canada. We have been deploying
the company with a certain number of concepts in mind. One of them is
that we want to make wireless an everyday product for everybody and
really democratize wireless services. We decided to achieve this through
a very strong mass marketing strategy. The first thing we did, and we
did it even before we launched our products, was to build a brand. We
determined that we needed a brand that would be non-technical, that
would be really appealing to mass markets, and that would carry certain
values that we wanted it to stand for. So we launched Fido.

TWST: Would you mind providing our audience with a little more
background on Fido?

Mr. Tremblay: We've been very serious about building our brand since the
beginning. Fido is one of the most highly recognized brands right now in
Canada, and it's really a very solid asset for the company. What we did
was go to market with a product that could truly become an everyday
mobile communications device for all of people's communications needs,
instead of a product solely for business use. We opted for simplicity,
affordability and transparency for our customers. We went to market with
one price point, which was $40 for 400 minutes. At the time, it was a
very bold offer. To give you an example, at the time we launched, the
lowest price for 400 minutes that could be used at any time in Canada
was $120. It was a bold statement for affordability. It was also a very
bold statement for predictability of pricing and for product
accessibility. And this concept is still in place. In fact, four years
after launch we still have that price plan. We've been adding to it, but
it's still there. The other thing we still really believe in is that
when you establish a product for everyday consumption for everybody, you
have a very solid base that allows you to provide those customers with
value-added services. It was really because of the model we had at the
outset that we were very bold about data, that we were very bold about
providing people with data-based value-added services. When we created
the company, we identified more than one source of value creation. We
identified that wireless would evolve in such a way that innovation will
be a major contributor to value creation. With that in mind, we created
two entities when the company was formed: one was Microcell Labs and the
other was Microcell Capital. With Microcell Labs, we wanted to do our
own R&D. With Microcell Capital, we wanted to find a way to invest in
other people's R&D in order to have an open window on innovation around
the world, at all times. This was a very different way of looking at
wireless because most wireless operations were totally integrated. So we
came with a non-integrated approach, where we would build not only a
service company, but an innovation arm as well. After that, Microcell
Labs began developing a platform to bridge Internet content, or content
from any source, to the wireless world with a platform of transducers
and translators. The platform would take any content and translate it
for use on any handset, depending on the form factor and format of the
particular handset. A partnership with Nortel, Ericsson, GSM Capital and
Omnipoint was created two years ago, which ended up becoming a company
by the name of Saraide last year. Earlier this year we merged that
company with Infospace, an Internet infrastructure provider. It is
creating a fantastic return for us and has been providing us with a lead
in the wireless Internet world. We also created GSM Capital in 1998. It
is a venture capital company in which Microcell invested US$15 million.
However, we were able to add eight other operators from around the globe
' three in Asia, three in Europe, and two in North America ' and some 15
financial institutions to put together a fund of some US$135 million.
This fund has so far invested in more than 20 companies, all of which
are providing solutions for either more efficiency on the network or new
products. Most of these companies are involved in wireless Internet or
something to do with wireless Internet, including management systems,
billing systems, etc. So this arm is also providing us with a very open
window on worldwide innovation. We just recently added one more
subsidiary to Microcell. We had four subsidiaries: one being Microcell
Connexions, the network operator, and another one being Microcell
Solutions, the retail service provider, in addition to Microcell Labs
and Microcell Capital which I already mentioned. On May 10 during our
Annual General Meeting, we launched Microcell i5, which is Microcell's
Internet company. We have committed to invest $50 million in this
subsidiary to create a specialized portal for us that will primarily be
defined by two things. The first is to build all the tools we need to
become the number one mobile portal in Canada to bridge Internet content
and wireless. The second is to then build a very strong mobile commerce
operation in Canada, creating around this portal the links to all the
required security and transaction tools for e-commerce, as well as to
all the content providers. We can then truly become a very efficient
mobile content portal in Canada. So to summarize, Microcell has been
primarily a wireless player, using digital technology since 1996, and
one of four national players in Canada. But it's a company that has been
seriously promoting wireless as an everyday product. Through Fido, we
have established a very strong brand of wireless products in Canada and
an extremely strong track record in building and selling value-added
services and creating value around innovation through investment in
other companies. Right now we're at a crossroads where we see everything
happening. In fact, we have been putting all the pieces together, and
the picture is very bold and very big. For instance, another significant
event last year was our application for additional licenses in Canada to
offer fixed wireless services. These particular licenses were for a
Multipoint Communication System (MCS). It's been the case in the US as
well, where MCI Worldcom and Sprint have been buying spectrum in the 2.5
gigahertz band to build high-speed Internet, or to build fixed broadband
access for residential use. There was a call for applications in Canada
last year to grant 13 licenses across the country. Microcell, with
another affiliated company, Look Communications, was awarded 12 of the
13 licenses to build a pan-Canadian MCS network for high-speed Internet.
So we've added that asset to our portfolio, and we will now look at the
world not only in terms of mobile access, but in terms of fixed wireless
access when this network is deployed some 12 months from now. So, having
started with a PCS license and now adding a high-speed bandwidth
license, we are positioning the company to become a fully integrated
telecommunications provider. With the customer at the center, we are
providing access and applications, not only through a mobile network,
but with a fixed, high bandwidth network.

TWST: When you look out over the next 12 months, what specifically is on
the agenda?

Mr. Tremblay: Very, very fast growth in terms of customer acquisition.
The Canadian market is growing by 30% a year, so we ended 1999 with 22%
penetration for wireless. We expect to end 2000 with 28%, and we are a
big believer in wireless reaching high penetration rates ' certainly 40%
and probably 60%, but at least 50% by 2005. So we're hopeful about a
very significant ramp-up on the wireless side, and we certainly want to
capture our fair share of that growth. For a young company it is
significant that five times during the last nine quarters we were able
to grab more than 30% of growth in the marketplace. In Q1 of this year,
we captured 32% of the net growth in the marketplace. So in a four-
competitor-market situation, we certainly believe we're going in the
right direction. I would say the primary task right now for us on the
wireless side is to make sure that we continue to be very successful in
capturing our fair share of the market growth. We also want to launch
value-added services. As I said, we have launched a number of them in
the past. Now we want to do it in a very integrated way through
Microcell i5, our Internet subsidiary. This will happen in the next 12
months. You'll understand that I cannot really comment on the service
we'll be launching, but I can say the market is certainly expecting a
lot from us. We have this innovator tag on the Fido brand, and we will
stand by the commitment we made to our customers and to the market in
general.  In the next 12 months we will also be implementing general
packet radio service (GPRS), which is a major development for us. It is
a high-speed packet technology that is expected to provide us with 114
kilobits per second of data transmission and retrieval capability. GPRS
commercial testing should take place in Q4 of this year and we should be
coming out with commercial launch in the first quarter of next. Based on
this, we are adjusting our build-out and strategy with VoiceStream, the
largest GSM operator in the United States, which has invested CAN$400
million in Microcell for a 15% share of the company. We are working
together to build a very strong platform that is not only Canadian but
North American, where users will find transparency and a set of services
in all major cities in North America. We are in the process of defining
all aspects so that we achieve this goal within the next 12 months. On
the fixed side, as I said, during the next 12 months we want to launch
Inukshuk, which is the name of the company we created for the deployment
of the MCS network. We want to complete everything on the technology
side for Inukshuk and start launching city after city with high-speed
bandwidth Internet access.

TWST: Give us a frank assessment of your top management team. At this
point do you have onboard the bench strength and the skill sets to meet
these opportunities?

Mr. Tremblay: I have to say that it's always a challenge to hire and
retain people. Nevertheless, we have dedicated management teams in all
five of our subsidiaries. So I would say that right now we have a very
good, very solid base of people who are committed and motivated to
achieve our goals. I cannot say that it's not always a challenge, but I
would say that it's less of a challenge for us than it is for many other
operators in North America. We have less mobility of personnel here in
Canada than in the US because there appear to be so many more
opportunities in the States. I was told that in Silicon Valley, the
personnel turnover rate is as high as 30% a year in many companies.
Here, our turnover is no greater than 10%, and we feel that we have a
very good opportunity to retain the people we really want to retain. So
yes, it's a challenge, but it's certainly a challenge that we've been
coping with very well so far.

TWST: What role might mergers and acquisitions now play? Is it too early
to bring in other geographies, technology, people, customers,
relationships? What's on your agenda?

Mr. Tremblay: We did a lot of it, and we are still doing a lot of it,
but at a different level in the company. As I said, our operating
subsidiaries have many interesting business opportunities available to
them. For example, in Labs we've merged the operation of Saraide, the
platform to bridge the Internet and mobile communications, with
Infospace, one of the big infrastructure providers for the Internet
based in Seattle. We've also been involved in another project at Labs
that is aimed at building customer profiles by taking information
directly from the call center and the switch. It is a self-fulfilling
platform for creating profiles on a real-time basis. Microcell Labs has
been developing it for a couple of years, and in May we merged that
operation with a local company that specializes in database marketing.
So we now provide the data information, and they provide the marketing
intelligence with the opportunity for mining this information. Lately,
we have been investing in different companies through Microcell Capital.
We have invested in two or three companies whose activities are
complementary to our own. In addition, as I mentioned earlier, Microcell
received a CAN$400 million investment from VoiceStream. This is part of
the strategic partnership that we want to establish for the company to
ensure that we have a very strong American ally. We want to work on a
North American platform and not simply on a Canadian one. We expect this
strategy to continue for a long time to come. I don't exactly know what
the next move will be. I certainly believe that 3G is going to be big.
It's going to be big in Canada, it's going to be very big in the United
States. I believe that around the world right now there is a strong
tendency toward consolidation, but it's not necessarily consolidation of
ownership, it's expansion of networks. What happened in the fixed
networks was that at one point people started to make network deals and
swap capabilities here and there, and I believe that this will happen in
the wireless world. When 3G comes to Canada ' this may be a hypothesis,
but it's probably a very valid one ' maybe it will be time for us to
accept another global partner or maybe to expand with VoiceStream. I
don't know exactly how it will play out, but at that time it may be a
good idea for us to accept another global partner that would link us to
Europe and Asia and put together a really strong world network for 3G.
This is going to prove to be an extremely powerful technology because it
will address all needs within the same network ' voice, data and video.
And perhaps at that time we can expect another 15%-20% investment in
Microcell to reach our goals. But right now we have nothing on the
table. We don't see any need because we just completed the first big
step we wanted to take with VoiceStream, and time will tell how it
evolves. But I wouldn't be surprised to see something in that direction.

TWST: At this point, how could the investment community better
understand Microcell? What misperceptions do you encounter?

Mr. Tremblay: I think that what is true for us and for the whole
industry right now is that most people are expecting some really big
things for the industry in terms of market penetration and impact of
data products. But nobody right now is able to define exactly what it
should look like. So, on the one hand there are a lot of people
believing in a great future for something that is far beyond the basic
business case for voice and mobile networks. On the other hand, some
people don't believe in it. Most people do believe, but even for them,
it's very hard to quantify these expectations. However, they do know
what we are doing right now. They are watching us very carefully to make
sure that we achieve every milestone that we have committed to, and they
are, I believe, willing to see a great future for Microcell.  If you
look at the industry side, and if you look at transactions that have
taken place lately, you'll see that there is a gap between the value
that the industry side is willing to give to wireless evolution versus
the valuation from the financial market. If you look at the big
transactions in Europe ' for example, Vodafone/Mannesmann ' or if you
look at the prices for 3G that we're seeing, you'll notice that people
within the industry, the big companies that want to grab that space in
the industry are expecting enormous value out of their operations in the
years to come. They are paying extremely high prices to acquire land
space and real estate right now in buying each other or in bidding for a
new sector. But if you compare that to the prices that are paid for the
operations by the financial community you see a big, big gap. I think
it's not only true for Microcell, it's true for everybody now in the
industry. There is a gap in perceived value between financial markets
and the industry. It's very normal, it's happening all the time. If you
remember when AT&T bought McCaw Cellular, I think it was for around $120
per pop. Markets were amazed to see that such a serious company would
pay such a fantastic price for wireless assets, and that was only six or
seven years ago. If you look at the way the Mannesmann/Vodafone
transaction has been structured and the way it took place, the market
can't understand such a high price, and so on and so forth. So there is
always that gap, but it's very normal, and I think it will take some
time before we can prove our case. But for Microcell right now I
sincerely believe that the value at which we're trading is part of this
mindset. It's a valuation that is based on what we're doing today '
really on what we've been able to achieve. The markets are recognizing
the trend of the strategies and, I would say, the activities of
Microcell's management. We cannot complain about that. I think everybody
is happy with the way we've been implementing the model. But we feel
that the markets are still waiting to see exactly what it means for us
to be a leader in wireless data and what it means in terms of current
and future value creation. I totally understand that point and I agree
with it. I think it's up to us to demonstrate, not for the market to
take a lead.

TWST: Finally, what is the summary statement for the investment
audience?

Mr. Tremblay: Wireless company valuations in Canada and especially for
Microcell right now are very, very low compared with the rest of the
world. In my opinion, wireless companies are exactly at the crossroads
of every technology out there right now. Anything that's good for the
Internet is good for wireless, because we all believe, and I certainly
do believe, that most of the Internet services that are directed to a
person will be transiting through a portable wireless device in years to
come. You can read in a lot of places that more than 50% of Internet
material will be transmitted through a wireless device five years from
now. So everything to do with the Internet is good. Everything happening
in IT and handsets and the evolution of devices is fantastic for us. All
the miniaturization of computers, all the increased power of computers
for lower prices, all that evolution is good for us because it is giving
our customers an opportunity to have a more lightweight and efficient
piece of equipment in their hands. Everything that is happening in IP
protocol, the fact that we're moving now from second generation to 2.5
and eventually to 3G is good for us. And when we look at everything that
is going on in the financial evaluation of technology players, we
believe that we have one very significant advantage that a lot of other
players don't have: our company is very substantially based on hard to
replicate assets. We're built on key investments, we're built on
licenses, and at the same time we benefit from everything that is
happening on the technology side. Despite the latest market adjustments,
we've all seen the movement in values for dot-com companies. We are in
the same vein, in the same domain, but we have the benefit of a very
strong asset base, and we have the benefit of being at the crossroads of
all those technologies with our networks. So I personally believe that
in the years to come mobile network operators and applications for
mobile networks are going to see a tremendous increase in value, and I
certainly believe that Microcell is going to be part of it.

TWST: Thank you.

ANDR TREMBLAY
 President & CEO
 Microcell Telecommunications Inc.
 1250 Ren‚-Levesque Blvd., West
 Suite 400
 Montr‚al, Quebec
 Canada H3B 4W8
 (514) 937-0102
 (514) 937-2554 - FAX

Each Executive who is the featured subject of a TWST Interview is
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material to be provided and sponsored by and for the company. This
Interview with Andr‚ Tremblay, President & CEO of Microcell
Telecommunications, is accompanied by an Investors Brief containing
corporate information.

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Copyright 2000 The Wall Street Transcript Corporation
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