Extreme makeover, wireless edition

Restructuring your wireless service arrangements following a reorganization or downsizing

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And what is to be done with devices that neither the original customer of record nor the spin-off wants? There are numerous organizations through which an enterprise can donate its used wireless devices for re-assignment to those in need. One of the most reputable is ReCellular. Devices that are unsuitable for donations to the needy (high-performance smartphones, for example) should be recycled, and again there are a number of firms that will recycle wireless devices. One that we like, because it donates proceeds from the recycling to charities designated by the enterprise customer, is CollectiveGood. Another firm, which uses proceeds from cell phone recycling to fund programs to improve the environment, is EcoCell. The Environmental Protection Agency also has an "eCycling" wireless device recycling program. Giving unusable devices to a charitable organization may give downsizing companies a charitable deduction that can help offset the cost of purchasing new devices that are compatible with a different carrier’s network.

Come together

When two or more entities merge or one acquires the other, different approaches to managing wireless services will have to be reconciled for the good of the whole.

What happens when one of the merging entities favors one carrier and the other favors another? This is not necessarily a bad thing. The efficiencies that might be achievable by consolidating all (or most) of an enterprise's business with a single carrier are far outweighed by the benefits of maintaining a healthy tension between two providers. We believe strongly in maintaining a relationship with two primary carriers (and possibly one or more secondary carriers if the enterprise has coverage or technology needs that neither of the two primary carriers can meet).

If a faltering company or business unit is acquired by a healthier organization, as we have seen with so many financial institutions in the past few months, the acquired entity may have little say in the choice of wireless provider, service and devices. Much will depend on the extent to which the acquired company is to be integrated into the acquirer. Tight integration requires compatibility of service, equipment and management policies between acquiring and acquired entities. But if the acquired entity will operate with a high degree of autonomy from the acquiring entity, it may be able to retain the services, devices and policies it adopted prior to the acquisition. The watchword here is "gradual": Sudden changes to devices, service and policies immediately following a merger will only create confusion and resentment. It is wiser to view the first year following a merger as a period for two entities to become acquainted with each others' practices and explore which would best serve the needs of the merged entity – or whether an entirely new set of practices would be optimal. However, no such caution is necessary in the drive to seek cost efficiencies through contractual consolidation.

The opposite problem – the merging companies each have an agreement with the same wireless carrier – is more easily addressed. The merging companies should combine their two agreements after coming together rather than trying to manage two potentially conflicting sets of rates, terms and conditions. This is one of many issues an enterprise customer can provide for in advance through careful contract negotiation. No one knows if or when an enterprise customer will need to take advantage of a "merged entities" clause, but in this economic climate it behooves corporations to plan for all eventualities.

The "gold standard" of merged entities clause requires the carrier to allow either one of the merging entities to terminate its agreement without liability, seamlessly move its service arrangements to the other merging entity's agreement with no interruption or degradation of service, and port over the best rates, terms and conditions into the surviving agreement. If the size of the post-merger entity justifies even more aggressive rates or terms than either of the pre-merger entities was able to negotiate, the customer should seek to leverage the opportunity to argue for improvements to the surviving contract. The thorniest issue will be how to deal with corporate-liable lines that are not being ported over to the surviving agreement. If the merging entities had negotiated robust ETF waivers, bolstered by a strong "business change" clause, this shouldn't be a concern; if they have not, they may be able to negotiate waivers for any employees who convert their corporate-liable lines to individually liable status.

Where such "gold standard" clauses exist, it will be necessary to identify both barriers and opportunities in the merging entities' contracts to cherry pick the most cost-effective rate plans and feature pricing. Without such a clause, it is unlikely that the carrier will willingly roll over, ignore its margins, and allow you to pick and choose among the optimum pricing, but simply being able to demonstrate to the carrier that there are pricing differences between the two contracts will give you negotiating leverage. Given all the other changes with which the newly merged customer will be grappling, it is unlikely to have the time or resources to devote to onerous negotiations over combining wireless contracts, but where one entity's contract is distinctly better than the other's, the carriers typically will not object strongly to migrating all users from the inferior to the superior contract (although they may make noise about termination charges).

Control costs by optimizing rate plans no later than the first quarter. Keep in mind, however, that pre-merger usage patterns and rate plans will be poor predictors of post-merger efficiencies; too many changes are occurring too rapidly, and employees of merging entities will not have the same usage patterns post-merger as they did when they worked for independent companies. And because usage may be higher than usual in the months immediately following a merger, re-optimize again after the second quarter. Indeed, some experts believe the greatest savings can only be achieved by optimizing plans every month for at least six months after a merger, and then at least quarterly thereafter. If you do opt for monthly optimizations, insist on timely implementation of rate plan changes to ensure that your efforts are not in vain, and closely monitor the carrier's implementation of all change orders.

And please don't try to do this yourself. There are too many variables, too many unpublicized rate plans from which to select, and too much data to handle. Use an established entity that specializes in optimization.

As we noted above, merged enterprises might consider pooled (or shared) plans as an option for cost cutting. In the post-merger environment, it would be a mistake to try to combine users from organizations from each of the pre-merger entities in the same pooled plan. Low-volume users often feel as if they are subsidizing high-volume users, and the issue can be divisive enough when the participants in the pool are all from the same organization. When they come from different entities, thrust together by economic necessity in a merger, it can be truly disruptive. For this reason, we recommend creating smaller pools, perhaps for each cost center, at least for the first year following a merger. Once the two cultures have worked through other differences, the merged entity may want to explore using larger pools to obtain greater savings. And it should strive for even greater savings by optimizing those pools, as explained above.

One of the toughest "culture clashes" to deal with when companies merge is if one manages wireless services and devices centrally and the other distributes management responsibility. By distributed management we mean delegating the day-to-day choices regarding an enterprise's wireless service and equipment to individual business units or even individual employees. Proponents of each approach can match each other point for point when debating their respective advantages, but two things are certain: Centralized management is best for cost control, and trying to force one entity's approach on the other from the outset is a recipe for disaster.

As noted above, the less integrated the merging entities, the less critical it will be to settle on a common management style, but if the entities' operations will be integrated in to a meaningful degree it will be important to find a common path forward. To that end, the merging entities should engage the leading stakeholders in both organizations to assess which approach will best serve the needs of the merged entity. It may be that a hybrid approach is the path of least resistance. Under that regime certain management functions are decentralized to the cost center level (not the employee level – that guarantees chaos and profligacy!), while major decisions (e.g., which devices and rate plans to make available) are reserved to a central authority.

So what do you do now?

With some advance planning, enterprises can provide for unplanned corporate reorganizations in their existing contracts. If your wireless agreements don't include provisions like those discussed above, don't wait for them to expire before you re-negotiate their terms. Unless you're in arrears in your payments, the carriers should be amenable to amending your contracts now to address these issues, and the customer will be in a far stronger position to negotiate reasonable terms for corporate reorganizations when your relationship with the carrier is on solid ground and your company is still intact, than you would be when a reorganization is imminent and the carrier knows you have few options and little time. (The carriers may attempt to extract a modest term extension or a commitment/attainment tier increase as consideration for the contractual improvements. Whether that makes sense depends on what you are getting and what you are giving.)

A little upfront planning can prevent a great deal of trouble later. With so many elements over which you have no control, it makes sense to plan ahead to address matters over which you do have control. And wireless consolidation can be one of the latter.

DiLallo is a partner in the Washington, D.C. law firm Levine, Blaszak, Block & Boothby, LLP, which specializes in the negotiation of enterprise telecom and technology agreements. He heads the firm's wireless practice. Fox is a managing director of TechCaliber Consulting, a global technology and telecom consultancy that advises the world’s largest companies on strategies for reducing their costs for telecom and technology products and services.

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Copyright © 2009 IDG Communications, Inc.

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