FL MORRIS / FMORRIS@STARBULLETIN.COM Hawaiian Telcom has mounted a program called "Operation Save the Line" to stem a decline in wire-line customers. A sign hangs in the office to encourage workers over the desk of William Nieporte, a consumer sales and service representative.

Hang On!

Hawaiian Telcom has started a campaign to stem the loss of its wire-line telephone business

FACING increasing competition and steady declines in wire-line phone customers, Hawaiian Telcom is engaged in a company-wide effort to keep its wired phone customers.

The push comes as Hawaiian Telcom prepares to bring online a new $100 million operations support system, which executives believe will enable the company to bundle and converge various telecommunications services and attract new customers and increase revenue from existing ones.

In the meantime, Hawaiian Telcom is focusing on keeping the wire-line phone customers that are the core of its business.

"It's our business; it's a big part of what we do," said Sue Berk, Hawaiian Telcom's executive director of residential customer service and sales. "Land line is pretty significant."

Created by the Carlyle Group, which acquired Verizon Communications Inc.'s Hawaii wire-line telephone and DSL assets and rebranded them under the Hawaiian Telcom moniker, the refashioned company faces a considerable challenge as it implements its "Operation Save the Line" campaign.

Residential line erosion nationally is expected to exceed 6 percent in 2006, about the same rate as in 2005, Fitch Ratings reports in a U.S. telecom outlook. Fitch attributes the losses to consumers replacing wired phones with wireless ones and to people swapping dial-up Internet services, which require a second-home phone line, for high-speed cable or DSL service, which doesn't require a second line.

Hawaiian Telcom's wire-line losses for 2005 were consistent with Fitch's national trend data, but were higher than the wire-line loss Verizon Hawaii suffered in 2004. For the year ended in September, Hawaiian Telcom's wired phone lines dropped by more than 43,000, from 694,884 to 651,325 -- a 6.3 percent decline. That compared to a wireline loss of 3.5 percent for the same period in 2004.

Analysts expect the trend to continue. In a Dec. 6 report on Hawaiian Telcom, Credit Suisse First Boston bond analyst Pat Dyson estimates Hawaiian Telcom's total wired phone lines -- including residential, business and pay phones -- will drop to less than 578,000 by 2008. That's a whopping 161,000 fewer lines than the 738,900 lines that Verizon Hawaii reported in 2002.

And Hawaiian Telcom's competition is only getting stiffer. Earlier this year, its main competitor in the broadband Internet business, Oceanic Time Warner Cable, finished rolling out its Internet telephone service to cover almost all of Oahu. And wireless startup Mobi PCS plans to enter the market early next year with a prepaid unlimited wireless phone service.

The central question is how much Hawaiian Telcom's campaign to save lines can counter the trend.

"We expect that the company's save-a-line efforts and increased focus on bundling will improve access line results," Lehman Brothers high-yield bond analyst David Sharret wrote in a Dec. 5 research report on Hawaiian Telcom. "However, we expect that line losses will remain above historical levels due to increasing competition."

Hawaiian Telcom executives declined to forecast wire-line losses heading into the future. But Ann Nishida, a Hawaiian Telcom spokeswoman, said the save-the-line campaign is getting traction.

When Hawaiian Telcom started the campaign in July, only about 6 percent of customers calling in to disconnect their land lines ended up changing their minds and keeping their lines after talking to a sales representative, Nishida said. Six months into the program, that save rate has risen to about 20 percent, Nishida said.

"We're beginning to see the results," she said. "And we believe that it's working."

On the third floor of Hawaiian Telcom's Bishop Street headquarters is the nerve center of the save-the-line campaign. Everywhere amidst the cubicles that house 135 sales and service representatives are reminders of the prime directive. Pinned to a clothesline hung across the room is a banner saying: "SAVE THE LINE."

An inflatable rubber shark is scrawled with the messages "Cut your cable, not my line," and "I eat RRs," an allusion to Oceanic Time Warner's Road Runner Internet service. An inflated inner tube carries the save-the-line message, as do innumerable yellow fliers hung on the wall and messages that flash on video monitors.

Workers have so thoroughly adopted the message that it's spilling out of them in creative ways. On a recent afternoon, Jason Respicio, a customer sales representative, cradled his ukulele, working out lyrics to a Christmas song about Mike Ruley, Hawaiian Telcom's president and chief executive. Sung to the tune of a popular Christmas song, "Michael Ruley's Coming to Town" included these lyrics about the new chief executive: "He knows when you have saved or not, so save the line for our customers' sake."

Edgar Clark, a call center supervisor, said Ruley actively rallies the troops, visiting the center several times each week.

"He's actually opened up the door for being available to us," Clark said.

Ruley also has created save-the-line incentives for employees beyond the call center. Each week an employee who saves a wire line receives a free dinner on the company.

"The spirit is infectious," Nishida said. "It's not just sales; it's everybody."

Still, it's the sales and service call center employees who are in the trenches of the campaign.

Darrell Bareng, a veteran customer sales and service operator, estimates he gets about 60 calls on a busy day. About 3 percent to 5 percent of those are people who want to disconnect their wire-line phone service, he said. Although some of those are military people or others moving away from the islands, some are simply wondering what to do.

"Those that aren't sure, I can sense that," Bareng said.

Representatives like Bareng have a list of 10 top reasons customers should keep wire lines. These include the need for the lines for fax machines, the fact that land lines work during power outages, the ability to make and receive collect calls on a land line and the clarity and reliability of the wired network.

Hawaiian Telcom is also using its DSL offering to keep people on the wire lines. Customers who want Hawaiian Telcom's DSL also must use the company's wire-line phone service. Nishida said the company will consider offering DSL as a stand-alone service if it sees market demand to do so, but she said for now the company is focusing "on integrated services that link wire-line, wireless and broadband into high-value communications tools."

Although workers like Bareng have the chance to talk customers into keeping their wire line phones, there's another type of customer that could be more elusive: young consumers who have never had a wired phone, and might never consider getting one. Berk declined to say how Hawaiian Telcom plans to connect with them.

"That's a real challenge, and that's something we'll be working on," she said.