He Has The Connections To Get Small Fry Connected

It's not easy for small fry to break into the U.S. phone market, dominated as it is by a dozen huge operators. That's why the Federal Communications Commission has reserved 986 slots for so-called designated entities--women, minorities, and rural phone companies--when it auctions off 2,074 licenses for personal communications services (PCS).

So what's James Valentine, a self-described "balding, middle-aged," white male doing in the middle of the process? Valentine, a private investor, has signed up AT&T and Britain's Cable & Wireless PLC in a plan to help designated entities use their licenses to create a national wireless-phone network.

Valentine is promising these designated entities that if they sign up with his new company, North American Wireless Inc. in Vienna, Va., he will lease them space on a state-of-the-art PCS system to be built by AT&T, with support services from C&W, a major supplier of long-distance service to businesses in the U.S. His pitch: Instead of owning isolated licenses, the bidders will be part of a national network. For the designated entities, "it immediately gives them real credibility," says Mark Lowenstein, a consultant for Yankee Group, a Boston market researcher.

But who is this Valentine? The 48-year-old Tennessean is, if nothing else, well connected. A Harvard Law School grad who found corporate law "boring," he spent six years at Montgomery Securities in San Francisco handling private placements and bridge funding. He left Montgomery in 1986 to start a venture-capital firm with his father-in-law, George Sealy, an original investor in MCI Communications Corp.

HARDWARE HELP. Along the way, Valentine made some influential friends. There's C&W's North American CEO, C. Alan Peyser, who is on the board of North American Wireless. And there's Sandra Goeken-Martas, daughter of MCI founder John D. Goeken and herself the founder of Women in Wireless, a group trying to bring women into the PCS auction. "This would sure work for our members," says Goeken-Martas. "It allows us to concentrate on growing our business without having to worry about the hardware."

Now comes the tricky part: finding the $1 billion to $2 billion needed to build the network. Although both AT&T and C&W say they are pleased to have the opportunity to work with minority bidders, neither plans to invest in the venture. Valentine says he will fund it with private placements and bank loans. But it's clear he can't raise the capital unless he enlists at least 50 designated entities, and they won't sign on if AT&T or C&W drops out. And the phone giants will exit if the entities don't get enough spectrum to build a national network.

So Valentine is juggling a lot of balls. Add another one: MCI President Gerald H. Taylor says he has been asked if MCI wants to be a tenant on the new network. MCI, which currently has no wireless play, is considering the plan, says Taylor. Just goes to show: Opening up the telecom biz is a lot easier if you've got ties to old boys.

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