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We hear you: Recycling strategy opens doors
[February 08, 2009]

We hear you: Recycling strategy opens doors

(Gazette, The (Cedar Rapids, IA) Via Acquire Media NewsEdge) Feb. 8--H IAWATHA -- As prepaid cell phone service gains popularity in the United States, HH Ventures is reaping the benefits.

The Hiawatha company owns Ready Mobile PCS, a prepaid cell phone provider that sells its phones in 23,000 locations and its prepaid airtime in about 75,000 locations. Ready Mobile PCS phones, which operate on the Sprint network, are sold in national chains like Dollar General, Radio Shack and Walgreens.

Dennis Henderson, co-founder and president of HH Ventures, says U.S. cellular phone customers are accustomed to signing up for contracts that typically require them to pay for minutes that do not get used each month.

"In Europe, prepaid cellular is pretty much the standard," Henderson said.

"Prepaid cellular has 66 percent in the United Kingdom, 76 percent in Hong Kong and 90 percent in Italy. We're starting to see prepaid gaining market share in the U.S. as customers realize that they can save money." For years, prepaid cellular was viewed as a service for those who could not qualify for contract service because of insufficient credit. Henderson said a growing number of cus tomers used prepaid cellular to hold down their expenses.

A recent Consumer Reports study found the average family with two cell phones using 700 minutes per month could save as much as $220 a year by switching to prepaid cellular from a standard wireless contract requiring monthly payments.

Henderson, a 20-year veteran of the telecommunications industry, was working for Ready Mobile PCS in late 2007 when it was owned by a publicly traded company. Key functions like finance and information technology were performed in Texas and the company was paying more for its cell phones than it was recovering from customers.

"Our business is driven by a fairly high capital requirement to buy cellular handsets. You have to sell handsets to drive usage of airtime," Henderson said. "Handsets typically are sold to a cellular customer for less than what it costs the company to buy them. The company hopes to make up the difference in the airtime that it sells to the customer." With a normal two-year contract, a cellular company either recovers what it spent for customers' phones in airtime

charges or customers have to pay back part of the handset's cost if they leave before the end of the contract.

The typical prepaid cellular customer stays for five months before switching to another provider. Ready Mobile PCS was subsidizing less of the phone's initial cost, but it was still losing money.

In November 2007, Henderson met with Curt Nelson, president of the Entrepreneurial Development Center in Cedar Rapids.

"I was really frustrated about the massively inefficient way the company was being operated," Henderson said. "I felt we bring critical functions back in-house to improve efficiency and focus on cost control, selling handsets for more than it costs us to buy them.

"Curt helped me strategize about buying the business, develop a business plan and identify potential sources of funding." While Henderson and cofounder Fred Haumesser of Naperville, Ill., were negotiating the purchase of the company, the prior owner sent a letter by fax to all Ready Mobile PCS employees notifying them that it was getting out of the prepaid wireless business and their employment was terminated.

Haumesser and Henderson finalized the deal Jan. 18, 2008, and all 20 employees stayed with Ready Mobile PCS. Employment has increased to 32 as the company stabilized.

"We were cash flow positive in May and turned a profit in July," Henderson said. "We completed three acquisitions in the second half of 2008, including the purchase of Affinity Mobile's assets." Affinity Mobile's Trumpet Mobile brand will be sold through the same 23,000 locations stocking Ready Mobile PCS. Trumpet Mobile has a different calling plan than Ready Mobile PCS, offering low international calling rates.

Ready Mobile PCS buys about 20 different brands of used cell phones from Sprint that it refurbishes and resells. The handsets are sold by Sprint without accessories like chargers, which Ready Mobile PCS is able to buy in large quantities at a substantial discount.

Haumesser, who became friends with Henderson 20 years ago when they were selling residential phone servicefor Teleconnect Co., actively is pursuing additional retail outlets.

Haumesser said refurbished phones, formerly perceived by retailers as a negative, are hailed as "green" because they are not discarded in landfills.

"In the past, we didn't call attention to the refurbished nature of our phones," he said. "Today, it's actually opened doors for us with retailers." Responding to the needs of laptop computer users, HH Ventures has launched Ready Broadband, offering a PCMCIA card or USB card that can be purchased for $50 and loaded with minutes in $25 increments.

"We had a lot of requests from truckers who need to use their laptops for fuel optimization, but don't want to pay a monthly charge," Haumesser said. "We're selling them at truck stops and other locations. We think the broadband card also will be popular with salespeople who occasionally need to go on the road." As for the future of the company, Henderson and Haumesser are focused on planned, controlled growth. They expect employment to grow incrementally as more retail outlets carry the Ready Mobile PCS and Trumpet Mobile brands.

– Contact the writer: (319) 398-8366 or

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