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Q4 2015 Pacific DataVision, Inc. Earnings Conference Call

Brian McAuley, Chairman, Morgan O’Brien, Vice Chairman, John C. Pescatore, Chief Executive Officer, and Timothy Gray, Chief Financial Officer, will host the call to discuss the financial results and provide a business update. Investors can participate in the earnings call by dialing into the conference lines 888-267-2860 or 973-413-6102 and using the conference code 452685.The earnings call will also be available for replay until June 23, 2015 and can be accessed by dialing into the conference lines 800-332-6854 or 973-528-0005 and using the conference code 452685. A replay of the call and the transcript will be posted on PDVW’s website under Investor Relations.

Pacific DataVision Q4 Earnings Update – Call Transcript

9:00 AM EST

OPERATOR: Good morning ladies and gentlemen and welcome to the Pacific DataVision 4th Quarter Earnings conference call. At this time all participants have been placed on listen only mode and we’ll open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, John Pescatore. Sir, the floor is yours.

MR. PESCATORE: Thank you. Good morning everyone and welcome to pdvWireless’ earnings call for the 4th quarter and year end 2015. Joining me today to discuss our results are: Brian McAuley our Chairman, Morgan O’Brien our Vice Chairman and Tim Gray our Chief Financial Officer.
Before we begin I’ll hand it over to Tim to remind everybody of a few important items.

MR. GRAY: Thank you John. Before we begin the substance of today’s call, I’d like to make some brief introductory comments.

Earlier this morning we issued a press release which outlines the topics we plan to discuss today. If anyone has not yet seen a copy of this press release, it is available on the pdvWireless corporate website at WWW.PDVWIRELESS.COM. It is also available on the SEC’s website. Additionally, I’d like to remind our listeners that this conference call is open to the public and a transcript of our discussion will be available on the company’s website. During this call, we will discuss some factors and matters that are likely to influence our business going forward; including statements relating to regulatory issues, expected market launches and our spectrum initiatives. Any matters discussed today that are not historical facts constitute forward looking statements. These forward looking statements are subject to risks and uncertainties; including those found in the risk factors section of our filings with the SEC which could cause actual results to differ materially from those suggested by our forward looking statements.

We encourage all of our listeners to review our SEC filings; including our annual report on form 10-K which we plan to file later this week and any of our other SEC filings for a more complete description of those risks and uncertainties. We undertake no obligation to revise or update these forward looking statements to reflect events or circumstances after the date hereof.

In addition, the financial information we plan to discuss in this conference call includes a non-GAAP financial measure, Adjusted EBITDA. The company defines Adjusted EBITDA as net income or loss, with adjustments for depreciation and amortization, interest income or expense, income taxes and stock based compensation. We use Adjusted EBITDA to evaluate the company’s performance and provide this financial measure to investors as a supplement to the company’s reported results; because we believe this information provides additional insight into the company’s operating performance by disregarding certain non-recurring items or items that are non-reflective of the day to day offering of its services.

Adjusted EBITDA should not be considered in isolation, as a substitute for or as superior to financial measures calculated in accordance with GAAP and, the company’s financial results calculated in accordance with GAAP and any reconciliation to those financial statements should be carefully evaluated. As appropriate, the most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the company’s financial results, prepared in accordance with GAAP or included in the earnings release which is posted on the company’s website. With that, I will turn the call back over to our CEO John Pescatore.

MR. PESCATORE: Thank you Tim. Welcome again everyone. I’m excited to be able to share the progress PDV continues to make on achieving it’s near and long term business imperatives. It has been a very busy and productive year and I would like to discuss some highlights and achievements. Before I do, I want to remind everyone that our strategy has two important components that we are aggressively pursuing. In the near term: we are in the process of deploying our next generation dispatch services to a market niche left with limited choices with the de-commissioning of the Nextel network. Simultaneously, we have been advancing our regulatory initiatives aimed at increasing the efficiency and value of our spectrum and allowing us to become a private, enterprising critical infrastructure focused broadband carrier.

In May, we successfully completed a follow-on public offering. We pursued the offering because, as we advanced the regulatory process toward broadband, we believed there would be opportunities to put additional capital to work to increase shareholder value, including; by acquiring additional spectrum to augment our current position. We believe the success of this offering was a vote of confidence by our existing and new shareholders in the company and its strategy.

In the most recent offering, when you include that, the gross proceeds of our fund raising efforts over the last 12 months, yielded just shy of 300 million dollars. Since the closing of the private placement during our first quarter, ending June 30th 2014, we’ve made substantial progress toward reaching our business goals. We’ve close to doubled our team to more than 50 employees. We’ve acquired our nationwide spectrum position at 900 MHz for about 6 cents a MHz pop.Motorola Solutions became our near term technology partner and they made a 10 million dollar investment and leased some of our spectrum for an up-front payment of seven and a half million dollars.

We’ve made significant progress on our regulatory agenda which Morgan will speak to shortly. We also made a, met a commitment we made to investors in early February when we began trading on the NASDAQ capital market. In October of 2014, we actively began the build-out of our dispatch networks; and, I’m pleased to report that in late March we began beta testing our first DispatchPlus network. We’re bringing state-of-the-art, digital two-way radio plus our proprietary suite of business productivity solutions to the Houston market.

Our coverage and network performance has exceeded our expectations. We have distribution agreements in place with dealer partners and their feedback has been very positive and we look forward to bringing on customers in the near future.

As most of you know, building out a wireless network is a process that happens over time. We have been actively working that process in many markets beginning with; market assessments and prioritization, moving through to the design and build-out and ultimately to placing sites and service and launching markets.

We expect to have sites and service in three additional markets by the end of this month and we will announce those markets in the coming weeks. We have already begun identifying and signing up distribution partners in those markets, but, we recognize that it’s important to have sites on the air, to be able to fully demonstrate the quality of our network and the unique nature of our bundled solutions. Although we fully expect that it will take time to ramp up our sales efforts, once those sites are in service, we can begin limited sales and marketing activities as we continue to add more sites to the networks.

As a reminder: we plan to deploy DispatchPlus networks in a total of 20 major metropolitan markets throughout the US. I’ll now hand it over to our Vice Chairman, Morgan O’Brien, who will give you an update on our regulatory agenda.

MR. O’BRIEN: Thank you John and good morning everybody. Let’s go back a little bit to June of 2013; at that point Sprint was operating a, it’s iDEN network on roughly 20 MHz of spectrum and of that, 14 of the MHz were a contiguous spectrum at 800 and roughly 6 MHz at 900 MHz non-contiguous. That sort of sets the stage for the PDV business plan.

In June of 2013, Sprint shut down the iDEN network so that it would be able to access the 800 MHz contiguous spectrum to deploy LTE. Obviously the, it is necessary to have contiguous spectrum to be able to use the broadband technology; that made the, roughly 6 MHz at 900 MHz non-contiguous spectrum not, not necessary any longer by Sprint and so they began to look to see what the best outcome for that would be and after some negotiations, they sold that spectrum to us for a hundred million dollars.

So, it’s roughly 6 MHz at 900 MHz non-contiguous. So, the business plan of PDV is two folded. On the one hand it is to immediately deploy the non-contiguous spectrum that we’ve bought from Sprint with a narrowband technology. So, we’re deploying Motorola Turbo technology and as John says, “we’re starting in Houston and working aggressively in the next year and a half through the top 20 markets.”

The position we bought from Sprint is nationwide and it resulted from a series of acquisitions; started back in the 1980’s by Nextel, followed by several auctions that the FCC conducted for this spectrum: for basically 90% of the spectrum that we bought from Sprint had been auctioned by the FCC.

So, the concept is to, it is twofold: it is to deploy immediately in the top markets of the US; dispatch narrowband technology. We call it DispatchPlus”. It’s narrowband technology enhanced by PDV functionality and that’s the first phase of the operation and that’s to address the, what we see as, as an opportunity in the market place that was left by the shutting down of the iDEN network for a, the ease of use, reliability, purpose built nature of a dispatch market. So, that’s the first aspect of what we are doing.

The second aspect of what we’re doing is the spectrum opportunity. In here, as I say, these a, 90% of the spectrum we bought from Sprint was auctioned off by the FCC and it’s important to understand that the, that inherent in the FCC’s auction process is the, an obligation and an opportunity for the licensee to take that spectrum, which is acquired at auction, and the concept there is: the spectrum goes to the highest bidder who’s going to put it to the highest and best use and there’s inherent in that a, a flexibility over time, to be able to use the spectrum more intensively, more efficiently and to introduce new technology. The concept of the FCC, the spectrum management concept is to let spectrum go the highest bidder and then have, encourage that highest bidder to push technology and push spectrum efficiency to get more competitive services out to the public.

So, because we believe that, is the FCC’s fundamental spectrum management position and policy; our second phase, which we’re now about 6 months into, is to approach the FCC and request that the rules be changed so that the spectrum which is currently non-contiguous be made contiguous; and that involves a process.

So, we’re about six months into that process. We filed back in November, alongside of Enterprise Wireless Association. We filed a petition with the FCC. It’s on, the whole petition and all the comments filed thereafter are on our website.

In that petition, proposed essentially the following: that, of the total 10 MHz’s spectrum, at 900 MHz, which is the band 896 to 901 paired with 935 to 940 that, that spectrum be assigned into two new blocks. 6 MHz or a 3 by 3 would be for broadband and the remaining 2 MHz, or 2 by 2, 4 MHz would be where narrowband incumbents would be reassigned to. So, it’s a familiar process where the FCC re-purposes spectrum to introduce, to permit the introduction of new technology. It requires several serious responsibilities on the part of the proponent, such as ourselves for example. Comparable facilities: if the FCC accepts our proposal to re-purpose this spectrum to introduce broadband technology, we as the proponent of that have the obligation to pay, to oversee the process and to pay the costs and to guarantee comparable facilities to incumbents.

So, in essence; it takes spectrum which is inter-leveed and it re-purposes that spectrum so that north of a certain point there’s broadband operations and then south of that point, in the spectrum, there’s narrowband operations. In order to do that, it doesn’t require moving or replacing facilities, it’s simply requires re-tuning of spectrum and that’s a process that we’re now well into evaluating exactly how that process will go; and, we have proposed specific rules to the FCC as part two of the petition we filed back in November. We filed a few weeks ago, proposed rules as to exactly how this process would work.

The net/net of where we are from the FCC standpoint is that: based on history, it would, it normally takes something in the process of 18 to 24 months to go from filing of the petition for rulemaking to final rules by the FCC; normal process 18 to 24 months. We are about 6 months; slightly over six months into that normal process. We think we’re doing very well. We think we’re slightly ahead of that schedule, that you would normally expect. The petition has been filed. Comments and re-apply comments were filed and laying out the basic reaction of the incumbents in the industry to the proposal; supporting and non-supporting comments all on file. Following that, we submitted proposed rules and that process now, after having coordinated a lot of those proposed rules with the industry, and the FCC subsequent to our filing those rules; set another comment and reply-comment schedule. The comments are due toward the end of this month, June; and the reply comments by middle of July.

At that point, which will be roughly 8 or 9 months into this process, the FCC will have a pretty well defined record. They’ll have the proposal. They’ll have two sets of comments, two sets of reply comments and specific proposed rules and reactions to those. So, we feel good about where this is going but needless to say, this is not a decision which is made by PDV. This is a decision which is made by the FCC after they carefully review the comments that are filed in the record.

We continue, as we have been doing even before our petition was filed back in November, we continue to work with the associations that represent the major incumbents in the 900 MHz and, doing everything we can individually; meeting with large incumbents to address their concerns: to make sure we understand what those concerns are.

I would say at this point, from a PDV standpoint, we have a much more in-depth understanding of the mechanics of our proposal. We feel that the public interest will support making this kind of a rule change. That we can live up to our comparable facilities and non-interference obligations as the proponent of this. And, we anticipate that the FCC will, on the record, will make a decision in favor of this but of course there are no guarantees.

Let me just make a couple of additional points about what it is that, that is really at the heart of our concept at PDV and it’s the following: there is a global standard now, first time ever, in mobile, for LTE broadband and it’s making all assumptions about mobile and mobile functionality and the cost and performance characteristics have to be rethought; because of the, literally, billions of devices that are going to be developed at LTE and the enhanced functionality that everyone of us enjoys every day for data and video capability on mobile devices.

It is PDV’s central thesis that: enterprise, versus consumer, that enterprise and the needs of enterprise for those broadband services, have not been addressed as fully as consumer by the existing market. And that: there is an opportunity for PDV. PDV joined with Motorola as a technology partner to keep push-to-talk and voice at the core of an offering for dispatch; for enterprise as we are doing now with our narrowband technology. But, to re-imagine for enterprise what a push-to-talk and voice-centric service looks like when it has additional data/video capabilities added to it; and that’s the promise of getting this broadband spectrum available, for enterprise.

A key point that we’ve made to the industry and to the FCC is that: critical infrastructure; we’re not talking about public safety but we’re talking about critical infrastructure like utilities, and petroleum’s, the railroad. Those types of users, have no dedicated spectrum where they can get priority access broadband services. We’re proposing here in our petition and in the comments we have filed since then; we’re proposing that the commission’s new rules put, for the first time, an obligation on the part of 900 MHz broadband to give priority access to critical infrastructure.

So, there’s many complex engineering issues involved when you take spectrum that’s been in play and in use since the middle 80’s such as this 900 MHz spectrum we’re talking about here; many complicated issues as you take that spectrum and you try to upgrade it from narrowband to broadband. There’s unavoidable inconvenience factor, because of the incumbents that are operating systems at 900 MHz narrowband.

But we say, and this is what the FCC will have to finally determine, that “net/net the benefits,” particularly the benefits to critical infrastructure from having dedicated spectrum for broadband and giving them priority access. That, the benefit of that offsets the disadvantages of having to re-tune radios and move spectrum amongst users.

It’s a well-known process. The FCC has gone through it several times. In fact, the spectrum at 800 MHz that Sprint is now deploying LTE on, having shut down iDen, that 800 MHz spectrum used to be configured precisely the same way as the spectrum here at 900 is configured; i.e. it was inter-leveed and the process was gone through at the FCC; driven in large part by Nextel to take the position, then, as we take the position now that: it’s incumbent upon a licensee to push the frontiers of technology and efficiency of spectrum, moving towards broadband, always being more efficient at introducing new technology on broadband as a licensee obligation.

So, net/net, the process here is on track. If anything it’s ahead of schedule. We of course can make no predictions about how the FCC will finally decide this. But, the relevant industry players have had, will have had by mid-July, two opportunities to fully comment and reply on the process and that will tee it up for an FCC decision sometime after; in the middle of July.

As I say, we’re optimistic. We feel good about the way the process is unfolding and we’re very enthusiastic about the ability to take dispatch functionality, sort of the core push-to-talk voice-centric services, enhance that with the data/video capabilities that we’re all used to on our smart phones and come out with devices that uniquely meet the needs of enterprise and in particular, critical infrastructure.

So, I think I’ll stop there and we can have questions; if anybody wants me to get more into the details of how this would work. So, I’ll pass it back to Tim.

MR. GRAY: Thanks for the updates Morgan. I would now like to walk everyone through the key financial highlights for the FY-15 fourth and year end quarter ending March 31, 2015.

pdvWireless’ revenue for the quarter was $815,000 compared with $908,000 the previous quarter. For the fourth quarter, the company reported a net loss of ($5.58 million); or – ($0.44) per share compared with the net loss of ($0.3 million), or ($2.41) per share the previous year.

Revenue for the FY-15 ended March 31, 2015 quarter was $3.17 million compared with $3.54 for the full fiscal year; excuse me, that’s full fiscal year numbers.

The company reported a net loss of ($14.71 million) or ($1.46) per share compared with the net loss of ($1.21 million), or ($9.56) per share for FY-2014.

The expected decline in revenue for the 3 and 12 months period is a result of decreases in the lower-margin international business. The US business has been the company’s primary focus over the last several years as it has significantly expanded the functionality of the solutions.

The US operations revenue declined over the prior year, which is attributable to accounting changes and higher customer churn. The increase in general and administrative expenses for the year is primarily attributable to stock compensation expense associated with the grants for restricted stock units and stock options issued during the 2015 fiscal year; primarily due to the actions approved by the Board of Directors, in connection with the June 2014 private placement. The company incurred higher costs for legal and accounting fees as it moved to become publicaly listed on the NASDAQ stock exchange. Additionally, we had an increase in head count and related costs in order to support our new business initiatives.

Adjusted EBITDA for the quarter was a negative ($3.26 million) as compared with a negative ($0.18 million) for the prior year. For the full fiscal year, Adjusted EBITDA was a negative ($7.08 million) as compared with a negative ($0.75 million) the prior year. The increase in Adjusted EBITDA losses in the fourth quarter and the year, were caused by the combination of the decreasing gross margin and higher SG&A costs as the company incurred costs to implement its new business plans.

At the end of the quarter, pdvWireless had a strong cash position of approximately $120 million; and, this has been enhanced by our latest capital raise. Our capital expenditures of $4.7 million in the quarter, represent the build-out of our network and the capital spend will continue to increase in the coming quarters as we move forward on additional markets. I will now hand it over to John for some final comments.

MR. PESCATORE: Thanks Tim. As Tim mentioned, we currently enjoy a strong cash position. We plan on using that cash to deploy our dedicated dispatch networks, to enhance our spectrum position and to further develop our broadband strategy.

Tomorrow is June 10th, which is exactly one year since we closed the private placement raising the capital that allowed us to purchase the 900 MHz spectrum from Sprint. Many of you participated in that offering. While we have significant work ahead, we’ve come a very long way. We moved from the business plan to the execution of the plan and are looking out at fiscal 2016 with excitement.
I’d like to turn it back to the operator to facilitate questions. Thank you.

OPERATOR: Thank you Ladies and Gentlemen, the floor is now open for questions. If you have any questions or comments please press star one” on your touch-tone phone at this time. Pressing “star two” will remove yourself from the queue should your question be answered. And lastly, while posing your question please pick up your handset if listening on speaker phone for optimum sound quality. Please hold while we poll for questions.

Our first question is coming from David Dixon from FBR Capital; your line is now live.

MR. DIXON: Yes, good morning. Thanks for the update Morgan on the regulatory approval process. I just wanted to ask a question with respect to the comments that you’ve said so far; and perhaps clarify my understanding here. Industry has previously lobbied the FCC to convert this spectrum to broadband prior to PDV’s existence and I wanted to just confirm that there’s been no fundamental change in their position on this. Do you think the industry comments that you’ve seen rather, reflect the normal concerns regarding disruption of existing service?

MR. O’BRIEN: Yes David. I think that the fairest way to put this is, is the: particularly the utility industry, has a strong regulatory program saying to the FCC, “we can’t, we the utility industry, critical infrastructure, cannot depend solely on commercial wireless providers for broadband.” They of course access it and use it but, their point is, in a crunch, they want to have full use of broadband capability and the knowledge that they can’t be preempted by other users; so they want priority access. That’s their well-established position.

We came along and said, well, “here at 900 MHz, due to a variety of circumstances, there appears to be an opportunity” and as the largest user at 900, the largest licensee roughly 60% of the 10 megs; “we propose that the rules be changed and if they are changed, we would agree to have an obligation on the part of the broadband carrier to provide priority access to critical infrastructure.” So, in other words, giving a 6 MHz broadband capability to critical infrastructure as they had requested.

Largely, the response that we’re getting is from incumbents saying, “well, we of course support the need for dedicated spectrum for priority access but couldn’t it happen someplace else; so that we don’t have to go through the process of re-tuning?” Other critical infrastructure players, who are not incumbents, are a lot more inclined to be supportive. On the other hand, you have to understand that the process for a large utility, of going through a re-tune, is an inconvenience; and even though they understand that we would have, as PDV, we would have the obligation to provide comparable facilities and pay costs and we won’t be able to interfere, etcetera, etcetera, they’re still hesitant to have to have that inconvenience. So, that’s what I meant about the FCC. In the final analysis the FCC has to balance the interests of: more efficient spectrum, bringing the benefits of broadband to the industry, allowing the, essentially the auction winner, to move to the new level of spectrum efficiency and they have to offset that against the inconvenience factor.

Typically, my sense of it is, historically; the higher efficiency trumps the inconvenience factor and I would expect that to happen here.

MR. DIXON: Right.

MR. PESCATORE: And, to add one point David, to add one point to Morgan’s is that: the types of issues that were raised, were exactly the kind of things that we would have expected; so nothing out of the ordinary and it all came from within the incumbent group versus outside.

MR. DIXON: Right. And that’s a good segue actually to my follow-up really which is: how would you compare or contrast a lobbying interest in focus, relative to the 800 band, if that’s what you’ve experienced?

MR. O’BRIEN: Oh, well there’s, there are two big 800 MHz re-band-ings; the earlier one which didn’t involve public safety, was a, was quite comparable but more complicated than this one. But, it went relatively smoothly. The one most people are aware of is the re-banding process in which public safety and iDEN had to be separated; and that has been a multi-year, very complicated, several billion dollar operation.

The big contrast is: there, there were, there was not equipment in many cases that could, could make the, that could be re-tuned. And so, there was a very extensive need to replace systems and that’s the process that’s going on.

The politics in advance of that, in big contrast to here, is that: the wireless industry and CTIA were all out opposed to the whole process of 800 MHz re-banding. And so, that was a several year political fight and the, it wasn’t that the wireless industry opposed resolving interference issues for public safety, but they were very much opposed to the fact that: as part of that whole process of the 800 MHz public safety re-banding, Nextel now Sprint, was getting, without an auction, an additional allocation of spectrum.

So, the politics of 800 MHz re-banding, particularly the public safety side of it that’s now just finishing up; those politics were drastically more complex. Here we really haven’t had, other than industry players, we really – two-way radio industry players and incumbents, we really haven’t had anybody from outside jump into the fray.
And, we’ve also had, very importantly, we’ve had Motorola supporting the proposition that broadband spectrum can be brought into this space without having any harmful interference to the incumbents; the re-tuning incumbents.

MR. DIXON: Terrific. Thanks so much.

OPERATOR: Once again, if there are any more questions it is “star one” on your touch-tone phone at this time.

We have a follow-up coming from David Dixon from FBR, your line is now live.

MR. DIXON: Okay great. I just wanted to take the opportunity John to explore the Houston market launch; if I could for a moment. Just, if you could provide us with some color on: the number of dispatch services that are in place? The costs to launch the service that was on par with what you expected secondly? What the existing competition is in that market and just how you see your distribution strength there?

MR. PESCATORE: Sure David. As you know, the initial market we, now we’ve disclosed as Houston; we’ve put up in a beta mode, at the end of March. So, it was our first opportunity to really begin testing our assumptions and the design and, you know, we had integrated our suite of business applications into the Motorola Moto-Turbo technology; so we had an opportunity to begin testing that.

So, we’ve been, pretty much in beta versus what I would call a “market launch” and it, in the next couple of weeks, we’ll have more of a formal launch. But, during that beta we not only tested the network from an engineering standpoint, and the results of those tests including our coverage objectives, were exceeded and, if you were to look at our wide area network compared to the other wide area networks in LMR; I would say we’re extremely pleased that, in that our network is far deeper and stronger than the competition as it relates to land mobile radio.

We started signing up dealer partners. They were also involved, some of them, in the design process of the network. They helped installation efforts so they got to know our product as we were deploying.

So, we do have dealers under contract. They’re excited but they also, we talked a lot leading up to it; we were at an industry event in Vegas where we had an event that we hosted that many dealers came and we had the opportunity to talk to them about our solution DispatchPlus; about the bundled applications that would be a part of the service offering and they’ve continued to be excited but of course, these are entrepreneurs who want to see, once the network is up, they want to test it themselves. They want to know that if they’re going to make investments in sales and marketing that it works the way we said it would work; and I’m happy to report that it does work the way we said it would work and it’s performing very well.

So, we have dealer agreements that have been signed. They’re building their pipelines and we’ll have more of a formal launch in the next couple of weeks where I would expect that, then we see even more activity on the sales front.

MR. DIXON: And, just as a follow-up there: how many markets doing you think you would need to have up and running, performing well before you’d start to see interest, if you haven’t already, in replicating the PDV platform in some tier-3 and tier-4 markets?

MR. PESCATORE: Well, to replicate it, we’ve talked; I don’t know if you’re getting at the potential for us to maybe franchise or part the — network to others beyond the top twenty; is that what you’re getting at?

MR. DIXON: Yes. Yes exactly John.

MR. PESCATORE: Well, we have discussions that, we don’t have a particular deal but we do see some interest and I think, of course, when we see traction that will spur more interest from out there. But, we do have markets where we are not scheduled to launch, that there’s interest from local parties who might partner with us and launch and integrate with our solutions; because the one thing that is for sure: when we show the, some of the unique capability, the dispatch-centric functionality, what we call intelligent “Q-ing,” that portion of our solution, when we show that to dispatch-centric customers and dealers, it does create some excitement and you get a “wow” factor and so, I think that would help drive that interest as well. So, that’s about all I could say.

You did ask about cost, which we didn’t answer and the cost to build-out the Houston market is within the parameters we’ve previously discussed.

MR. DIXON: Right. So, the superior coverage that you’re seeing; is it just the technology? Were your assumptions too conservative?

MR. PESCATORE: Of course we wanted to be conservative in our initial approach. We want to deliver a service that’s at least as good or, if not better than what was out there in the market; and at least as good or better than what we were saying. So, when the engineers got in a room and looked at all the modeling that they do and the coverage parameters; when you launch the market it’s always different and now we have more of that experience. We’ve been drive testing and collecting data and so we’ve adjusted a little bit the engineering assumptions but we still want to have the best coverage we can have for the investment that we’re making.

MR. DIXON: Alright. Thanks very much gents.

MR. PESCATORE: Thank you.

OPERATOR: There are no further questions from the phones at this time.

MR. PESCATORE: Okay. Well, we appreciate everyone’s time today and your support. If there are any follow-up questions you know how to reach us and we’d be happy to talk one-on-one to any of you.

MR. O’BRIEN: Thank you.

OPERATOR: Thank you Ladies and Gentlemen. This does conclude today’s teleconference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

OPERATOR: Once again, if there are any more questions it is “star one” on your touch-tone phone at this time.

Okay, there appear to be no more questions on the phones at this time.

MR. PESCATORE: Well, then I want to thank everyone for their support and attendance today and we’ll look forward to talking to you in the future. Take care all.


OPERATOR: Thank you Ladies and Gentlemen. This does conclude today’s tele-conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.





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