ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, August 22, 1996 TAG: 9608220012
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
THE THREE TENORS aren't the only guys in the world likely to be happy about this success story in the making.
What do world-renowned singers Jose Carreras, Placido Domingo and Luciano Pavarotti have in common with Paul Hatam of Roanoke?
All four are hoping to make money from the sale of phone cards, those prepaid pieces of plastic that allow callers to make long-distance phone calls at a pre-established rate.
Hatam, who along with his wife Julieann operates Capital Group Communications in Roanoke, sold the idea for a "Three Tenors" phone card to agents who represent Carreras, Domingo and Pavarotti. The card commemorates their concert July 20 at Giants Memorial Stadium in New Jersey.
A total of 15,000 of the cards worth 15 minutes of long-distance talk time have been printed. The cards - which bear a photograph of the singers on the front and their logo and information about the concert on the reverse - sold for $15 each at the concert and now are being sold via a toll-free phone number that puts consumers in touch with the Kline Group, a Roanoke mail-order distribution company. The price of an individual card is $24.95 with lower prices for multiple purchases, Julieann Hatam said.
Paul Hatam said he expects the card to become a collector's item. Phone cards already have become so popular with collectors that at least one magazine, Premier Telecard Magazine of Paso Robles, Calif., has been created to tap the market. The Three Tenors card is featured in the magazine's September/October issue.
Hatam, who previously worked for Citicorp and Dean Witter Discover, and his wife, who was in marketing, formed their own company 21/2 years ago, Hatam said. They have been in the phone-card business for less than a year, he said.
Phone cards have long been used in Europe and other parts of the world in place of hard currency to operate pay phones. They only recently began catching on in the United States.
Companies such as McDonald's, General Mills, 7-Eleven and Exxon have used them for promotional purposes, Hatam said.
The Hatams are representatives of Strategic Telecom Systems Inc., a Knoxville, Tenn.-based phone-card distributor. STS is a marketing company with a structure similar to Amway or Mary Kay Cosmetics that sells through a network of distributors. Besides trying to sell cards to businesses for promotions, the Hatams sell STS's cards to others for resale and try to sign up other representatives for STS.
Other uses of the cards include fund-raising and market research, Julieann Hatam said. The message that greets users of the cards can be programmed to include questions about the products of a card's sponsor, she said. The couple said they also offer greeting cards that come with phone cards inside, some of which are on display at the Hotel Roanoke gift shop.
STS has about 100,000 sales representatives in all 50 states, said company spokesman Ken Renner. Around June 1, the company 750 representatives in Virginia, including the Hatams.
Attorneys general in at least a dozen states - not including Virginia - have scrutinized STS's operations and in at least two states - Florida and Michigan - the company has signed legal assurances that it will comply with state laws against pyramid sales schemes.
Among other things, the company assured those two states that representatives would be paid for actual sales of phone-card products to end users rather than for the recruitment of new sales representatives. The company also said it would not use any deceptive practices in the recruitment of new representatives and that it would restrict the amount new representatives can invest initially. STS said it would buy back at 90 percent of original cost the investment of representatives who want to quit.
Spokesmen for the attorneys general in both Florida and Michigan said STS appeared to be complying with the terms of the agreements that the company had signed.
From Florida's perspective, STS has been good about getting refunds processed for representatives who want out, Assistant Attorney General Todd Grandy said. "The company has been responding to our concerns," he said.
His office had fielded lots of phone calls about STS but most of them were inquiries about the legitimacy of the company rather than complaints about its operations, Grandy said. "We have received only a handful of complaints."
As far as determining whether a business is not a pyramid scheme, the "bottom line," said Grandy, "is whether there are retail sales going on." Both Florida and Michigan are requiring the company to provide proof from a periodic sampling of sales representatives that they are actually selling phone-card products.
Julieann Hatam said that at a company convention in Orlando in April, a company attorney issued a warning to sales representatives who had been making their own promotional videos and brochures. STS has been doing everything it can to keep representatives from stepping out of line and doing things they shouldn't, she said.
STS fired a representative in Florida who had made some extravagant promises on an unauthorized recruiting videotape, Renner said. State laws vary from state to state and STS makes every effort to adjust its policies to comply with those laws, he said.
The company has cooperated fully in every state where its practices have been reviewed, Renner said. "And in every case we've been reviewed, we've continued to do business in those states," he said.
LENGTH: Long : 102 lines ILLUSTRATION: PHOTO: ROGER HART Staff. Paul Hatam, along with his wifeby CNBJulieann, came up with the idea of a phone card featuring the "Three
Tenors," commemorating the stars' July concert at Giants Memorial
Stadium in New Jersey. The cards sell through a Roanoke mail-order
company for $24.95 each - less for multiple purchases. color.