MasTec, Inc. - Company Profile, Information, Business Description, History, Background Information on MasTec, Inc.

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3155 Northwest 77th Avenue
Suite 110
Miami, Florida 33122-1205
U.S.A.

Company Perspectives:

"MasTec was created from the combination of two telecommunications construction and service companies with similar entrepreneurial spirits--Burnup & Sims and Church & Tower.... The similar entrepreneurial histories, blended cultures, experienced operators and powerful strengths of Burnup & Sims and Church & Tower, now MasTec, fuel the growing momentum that will drive MasTec into the next century."

History of MasTec, Inc.

MasTec, Inc., a diversified holding company, is one of the world's leading independent contractors specializing in the construction of telecommunications infrastructure. The company was founded in 1994 by the merger of publicly traded Burnup & Sims, Inc. and the privately owned Church and Tower Group, two established names in the U.S. telecommunications-construction services industry based in Florida. The principal business of the company and its family of subsidiaries consists of the design, installation, and maintenance of the outside physical plants for telephone and cable television (CATV) communications systems, public utilities, and the traffic-control and highway-safety industry. Additionally, MasTec builds coaxial fiber-optic cable networks and wireless-antenna networks. Inside buildings, the company installs and maintains telecommunications equipment and communications networks. MasTec's customers include operators of telecommunications, CATV and wireless-communication companies, as well as banks, brokerage firms, institutions of higher learning, medical facilities, multiple-product industries, and government agencies. From 1994 to 1996 MasTec revenues increased 325 percent, growing from $111.29 million to $472.8 million. A substantial part of the company's domestic revenues derives from services to BellSouth Communications and international revenues come primarily from Telefonica de España.

The Forerunners: 1929-1994

In 1929 two unemployed carpenters--Russell Burnup and Riley V. Sims--founded Burnup & Sims to provide design, construction, and maintenance services to the telephone and utilities industries. During the years of the Great Depression, the two industrious men established an office in West Palm Beach, Florida, and by 1936 had a small fleet of trucks and staff. Burnup & Sims' first telecommunications projects occurred the following year at Cape Canaveral, where it was responsible for burying 85 miles of cable.

The company contributed to national defense during World War II by building airfields and telephone systems. After the war, Burnup & Sims became involved in the laying of underwater cable from Florida to Puerto Rico, and from there to Barbados, for such companies as AT&T and General Telephone. Projects then took on a greater geographical scope, as Burnup & Sims established underground telecommunications systems and built radio towers in Costa Rica, Barbados, Trinidad-Tobago, and Venezuela.

In 1968 Burnup & Sims went public, and the shares sold helped raised capital for new, more ambitious projects. The company is remembered for constructing the first fiber-optic link between Chicago and Washington, D.C. and, according to historian George P. Oslin in The History of Telecommunications, for doing "a large and very profitable business installing cables for Cable TV." In fact, by 1982, Burnup & Sims "had installed a fifth of the 500,000 miles of TV cables in use." The company also operated a number of telecommunications subsidiaries as well as Floyd Theaters, Inc., a movie picture chain; Lectro Products, Inc., a CATV power-protection company; and Southeastern Printing, Inc., a printing business.

By the end of the decade, however, unsettled economic conditions, changes in utility spending, and aggressive competition for contracts brought tough years for Burnup & Sims. Moreover, budgetary constrictions led certain telecommunications companies to postpone payments and to cut expenditures for plant construction and maintenance. By the end of fiscal 1993 Burnup & Sims' losses amounted to $9.31 million, and senior management was seeking a buyer for the company.

Church & Tower of Florida, Inc. (CTF) was incorporated in 1968 as a privately owned company to construct and service telephone networks in Puerto Rico and Miami. However, the company had quickly overextended itself in Puerto Rico and could not build the telephone-infrastructure networks needed in Miami. When Miami-based CTF experienced financial difficulties, the company's owner asked his friend, Cuban immigrant Jorge L. Mas Canosa, to help save the business. In exchange for half ownership of CTF, Mas Canosa began to manage the company in 1969.

Seeking to improve the business, Mas Canosa himself climbed down into ditches, manholes, and trenches to observe the workers' construction methods. He sought advice from telephone company and government inspectors and studied books about the most efficient and newest construction methods. As a result, he led the company into a fast-track, cost-effective construction program that won recognition for consistent professionalism, commitment to excellence, and cost-effective methods. BellSouth Telecommunications, Inc. awarded CTF a long-term contract for projects in the greater Miami and Fort Lauderdale areas. By 1971 Mas Canosa had turned the failing company around, borrowed $50,000, and bought the remaining shares of the firm.

Jorge Mas, Mas Canosa's eldest son, began working at CTF in 1980 and became company president in 1984. At this time the development of new technologies and the removal of legal and regulatory barriers were laying the foundation for corporate alliances among the nation's largest telephone, CATV, computer, entertainment, and publishing businesses. Telephone companies were planning to invest billions of dollars to install fiber-optic systems to bring the new technologies to homes and businesses. A rapid increase in Florida's population was placing the existing telecommunications infrastructure under tremendous strain.

In 1990 Jorge Mas established a new subsidiary, Church & Tower, Inc. (CT), to engage in selected construction projects in the public and private sectors. For some time the Mas family had been thinking about taking the company public, but 1992 Hurricane Andrew's passage over southern Florida delayed the plans. The CTF Group, owner of a long-term maintenance contract with BellSouth, was responsible for reconstructing the damaged telecommunication infrastructure of Miami. In the wake of the hurricane, the senior managements of Burnup & Sims and of the CTF Group realized their mutual interests. Employees from both companies began talking to each other; top management met and struck a deal.

The Defining Year: Founding of MasTec, Inc.

On March 11, 1994--in a reverse acquisition--the privately owned Church & Tower Group acquired 65 percent of the outstanding common stock of publicly traded Burnup & Sims, Inc. The name of Burnup & Sims was changed to MasTec, Inc., the Church & Tower Group became a wholly owned subsidiary, and the senior management of the CTF Group took over leadership of the new entity; Jorge L. Mas Canosa became MasTec's chairman and Jorge Mas was named president and chief executive officer. Mastec was now a regarded as a "minority business enterprise," publicly traded on NASDAQ under the symbol MASX.

At this time MasTec was one of the nation's leading companies of its kind and the fifth-largest Hispanic-owned public company. To express their entrepreneurial spirit as concisely as possible, MasTec's management adopted the former Burnup & Sims slogan "Opening the Lines of Communication" and added their own vision of the future: "Throughout the World."

Following the acquisition, one of President Jorge Mas' first moves was to express the company's philosophy of leadership in word and deed. In an introduction to the company's 1994 annual report, he asserted that "MasTec's improving performance and future capabilities are in large part due to the commitment of its 2,400 employee-owners...who work hard, work smart and complete their jobs on time and on budget." In April 1994 he had already set up this success-driven philosophy by distributing five shares of MasTec stock to each employee and encouraging all to invest in their company's benefits program.



Realizing that the telecommunications industry was fragmented and operated mainly by family-owned businesses, MasTec initiated a program for acquiring profitable, market-dominant companies in high-growth metropolitan areas nationwide. MasTec launched this acquisition program with the purchase of Designed Traffic Installation, Inc., an installer of traffic control systems in southern Florida; and Buchanan Contracting Company, Inc. the holder of two master contracts with BellSouth in Memphis, Tennessee, and Montgomery, Alabama. Furthermore, BellSouth awarded MasTec contracts for telephone networks in Nashville and Franklin, Tennessee, as well as for networks in four of North Carolina's fastest-growing cities.

From the beginning and throughout MasTec's evolution as a provider of telecommunications services, long-term (master) contracts, such as those with BellSouth, and short-term contracts with alternate-access providers--such as MCI Telecommunications Corp. and US West Communications Services, Inc.--were the backbone of the company's business operations. The deregulation process had enabled alternate-access providers to enter the territory of the regional Bell operating companies, to build networks and sell services to high-volume users, such as those clustered in downtown office buildings and commerce parks. Several MasTec subsidiaries provided fast-track construction services to these competitive-access companies.

Another item on MasTec's business agenda for growth was to increase the Latin American presence it had acquired from the merger. By the mid-1990s many international telecommunication companies had been lured to South America by its improving economy and the privatization of telecommunications, including CATV services. These companies, however, had neither the personnel nor the in-country resources to implement system upgrades of the aging infrastructure for telecommunications. They needed the services of independent contractors who could apply cost-effective methods to the upgrade and construction of these infrastructures. According to its 1994 annual report, President Jorge Mas believed that MasTec had "the cultural ties, management expertise and existing regional operations to serve these needs."

Consequently, the company's international subsidiaries secured contracts for upgrading telephone networks in Guayaquil, Ecuador; for building 35,000 telephone lines in San Salvador, El Salvador; and for constructing fiber-optic facilities in Caracas, Venezuela. Furthermore, Video Cable Comunicación, S.A. awarded a design-build contract to MasTec Argentina, S.A. for upgrading its CATV system in Buenos Aires from 30 channels to 100. This is believed to have been the first contract of its kind in Latin America. At year-end 1994 MasTec had met the challenges of establishing itself as a new company; it reported a net profit of $7.5 million on revenue of $111.29 million.

1995 Consolidation: Divestitures and Acquisitions

Ready to seize opportunities created by unprecedented changes occurring in the telecommunications industry, MasTec decided to divest itself of some subsidiaries--part of the Burnup & Sims acquisition--that were not related to its core operations: Floyd Theaters, Inc., Lectro Products, and Southeastern Printing, Inc. The proceeds from the sale of these operations was used to reduce debt and finance the acquisition of other companies related to MasTec's core business.

MasTec then acquired Utility Line Maintenance, Inc., a company engaged in clearing right-of-ways for utilities in southeastern United States. Church & Tower Fiber Tel, Inc. expanded its business to include installation of "smart highway" systems, that is, electronic systems that control highway messaging and traffic signalization. The acquisition of Tri-Duct Corporation brought two more BellSouth master contracts in Huntsville and Decatur, Alabama, thereby complementing existing contracts in Montgomery, as well as in Memphis. Consolidating administrative functions in these adjacent geographic areas reduced the company's operating expenses and enhanced service capability in the region. MasTec won new contracts to install telecommunications networks in the Dallas/Fort Worth area; to manage construction for Metro Dade Water & Sewer Authority's Pump Station Program; to install part of MediaOne, Inc.'s new CATV network in metropolitan Atlanta; and to develop and maintain infrastructure telephone services in eastern Colorado for US West.

To continue expanding into foreign countries, MasTec had to compete with large international companies having significantly greater experience and resources. The company acquired a 36 percent equity interest in Supercanal, S.A., a CATV operator in Argentina, and equity interests ranging from 14 percent to 35 percent in four other companies. The company also won a contract from The Virgin Islands Telephone Co. to restore damaged telephone facilities on the island of St. Thomas, U.S. Virgin Islands; and a contract from Tomen Corp., a leading Japanese telecommunications company, for the construction of 35,000 telephone lines in Manila.

By the end of 1995 the company had combined the strengths of its subsidiaries and organized its operations into three principal business segments: telecommunications and related construction services, CATV infrastructure construction and maintenance, and general construction services. Due primarily to acquisitions made in 1994 and expansion into new contract areas, in 1995 MasTec's total revenues increased by approximately $63 million, or 57 percent, from $111.29 million in 1994 to $174.58 million in 1995. Providing telecommunication-construction services to regional Bell operating companies, especially to BellSouth, accounted for a majority of the company's growth.

Toward the 21st Century

As MasTec entered the second half of the 1990s, the telecommunications industry continued to undergo fundamental changes. The U.S. Telecommunications Act of 1996, agreements among countries in the European Union and continuing privatization and regulatory initiatives in Latin America were removing barriers to competition. Furthermore, the U.S. government auctioned off radio-frequency bandwidth for the creation of personal communications systems (PCS), which are pure digital networks superior to the traditional analog-cellular systems. Customers' growing demand for enhanced, integrated voice, video and data telecommunications emphasized the limitations of traditional networks and increased the need for the installation of PCS networks.

MasTec competed in the new markets created by these worldwide developments by concentrating on additional relevant acquisitions and expansion of its core telecommunications services through contracts for: 1. upgrading existing networks to broadband technology, such as fiber optic cable; 2. becoming a major infrastructure-construction provider to large telecommunications companies who needed to reduce construction costs by outsourcing their outside-plant work to independent contractors; 3. constructing infrastructures for new service providers entering previously monopolistic markets; and 4. performing inside-wiring services to install intra-company communications networks having the greater bandwidth capacity required for the powerful multimedia computers being brought into businesses.

In a major acquisition, MasTec bought Sintel, S.A., the engineering and installation unit of Telefónica de España, S.A., Spain's national telephone company. Sintel was the leading builder of telecommunications infrastructures in Spain and had operations in Argentina, Chile, Peru, and Venezuela. Although Sintel's revenues, like those of the former Burnup & Sims, were spiraling downward at the time of its acquisition, the purchase actually merged the strengths of both the American and the Spanish company: it more than doubled the size of MasTec, gave it access to Sintel's established operations in Spain, opened the door to competitive opportunities in other European countries and created the possibility of Sintel's expanding in, and beyond, its existing markets in Latin America.

Among other acquisitions that reinforced MasTec's internal growth and geographic diversification were the following: the purchase of Harrison Wright Company, Inc., a telecommunications contractor with operations and BellSouth master contracts principally in Georgia and the Carolinas; and the acquisition of Shanco Corporation and Kennedy Cable Construction, Inc., CATV contractors providing services to six southeastern states as well as to New Jersey and New York. MasTec's subsidiaries installed a 370-mile fiber loop for Telergy, Inc. in upstate New York and completed a fiber loop for MCI Metro in Raleigh, North Carolina.

The limitations of analog networks were propelling the upgrading and installation of the more efficient digital networks. For instance, in a report titled North American Premises Wiring System Markets, the market-research firm of Frost & Sullivan Inc. noted that revenue for the premise-wiring industry in 1996 totalled $2.3 billion and could reach $4.38 billion by the year 2003. MasTec increased its penetration into this premise-wiring market (the installation of coaxial and optical-fiber cables inside offices) by combining two of its subsidiaries, Carolina Com-Tec and Burnup & Sims Communications Services, to form a new company: MasTec ComTec. This subsidiary brought single-project, turn-key and maintenance solutions to the communications problems of Fortune 500 corporations, government agencies, colleges, universities, and medical institutions. As a certified installer of wiring systems for most of the major manufacturers of network components, MasTec ComTec installed both local-area networks (LANs) and wide-area networks (WANs). The company was hired to fast-track construction of the enormous fiber-and-copper infrastructure of telecommunications equipment for the 1996 Olympic Village; to build LANs and WANs for the nationwide offices of a major stock-brokerage firm; and to install and maintain a bank holding company's consolidated voice, data, and video network.

Another subsidiary, MasTec Technologies, Inc. was established in 1996 to provide fast-track, turn-key construction management services of wireless networks. In little more than a year the company installed over 130 PCS tower-and-antenna sites for PCS companies, thereby establishing state-of-the-art wireless networks in southern Florida, Tampa, Orlando, and Phoenix.

By year-end 1996 MasTec's revenue had increased 171 percent, from $174.58 million in 1995 to $472.8 million in 1996. Earnings per share had increased from $0.50 in 1995 to $1.20 in 1996. In January 1997 MasTec announced a three-for-two stock split and on February 14 of that year began trading its common stock on the New York Stock Exchange. President Jorge Mas, in a company news bulletin released after the New York listing, declared that "MasTec's joining the world's premier exchange is a tribute to the dedication and hard work of its 7,000 employees worldwide. The fact that a company formed by Cuban exiles is able to trade among the Fortune 500 companies is living proof that the American dream is very much alive." MasTec celebrated by offering its employees a new stock-purchase program that enabled them to buy stock at a 15 percent discount.

As the 21st Century drew near, MasTec was the nation's leading telecommunications company for infrastructure construction and a major supplier of premise-wiring services to Fortune 500 companies. In short, MasTec was a world leader for the design, construction, and maintenance of leading-edge telecommunications networks and hoped to remain in that position as by "Opening the Lines of Communication Throughout the World."

Principal Subsidiaries: B&D Contractors of Shelby, Inc.; Burnup & Sims of Texas, Inc.; Burnup & Sims Telcom of Florida, Inc.; Church & Tower, Inc.; Church & Tower Fiber Tel, Inc.; Church & Tower of TN, Inc.; Designed Traffic Installation, Inc.; Harrison-Wright Company, Inc.; Kennedy Cable Construction Co., Inc.; MasTec ComTec of the Carolinas, Inc.; MasTec ComTec of California, Inc.; MasTec International, Inc.; MasTec Technologies, Inc.; R.D. Moody & Associates, Inc.; R.D. Moody & Associates, Inc. of Virginia; Shanco Corporation, Inc.; Sintel, S.A. (Spain); Utility Line Maintenance, Inc.

Additional Details

Further Reference

Bussey, Jane, "Mas," The Miami Herald, September 2, 1996, pp. 17-21.Frost & Sullivan, Inc., North American Premises Wiring System Markets, Report No. 2762, Mountain View, Calif.: Frost & Sullivan, 1997, 430 pp.Lunan, Charles, "MasTec Buys Firm in Spain," Sun-Sentinel, April 2, 1996, p. D2.Oslin, George P., The Story of Telecommunications, Macon, Georgia: Mercer University Press, 1992, 507 pp.

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