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

6677 Richmond Highway
Alexandria, Virginia 22306

Company Perspectives:

During the last year, Metrocall introduced My2Way and MyeLink, the latest in interactive messaging. As our subscriber base continued to grow in 2000, an increasing number of subscribers have chosen two-way service and are now realizing the remarkable efficiencies, and peace of mind, resulting from interactive wireless messaging. Together with our PCS phone services, Metrocall offers unsurpassed coverage, and communications options, for peer-to-peer messaging, wireless e-mail, Internet connectivity and mobile phone connectivity.

History of Metrocall, Inc.

With more than six million subscribers, Metrocall, Inc. ranks as the second largest paging company in the United States behind industry leader Arch Wireless, Inc.. Originally a regional paging company that served the mid-Atlantic states, Metrocall grew to provide services nationwide and is one of the largest wireless data and messaging companies in the United States. Metrocall offers advanced wireless messaging services, including two-way messaging and Internet-based content delivery.

From Regional to National Paging Company: 1965--95

Advanced Communications Inc., the predecessor company to Metrocall, Inc., was established by Harry L. Brock, Jr., in 1965. Brock incorporated Metrocall as a privately held company in 1982. When Metrocall went public in July 1993, it had about 200,000 pagers in service and operated mainly along the eastern seaboard, from New York through the Carolinas. Following its initial public offering (IPO), Metrocall completed its acquisition of FirstPage USA Inc.. Approximately 47 percent of FirstPage was owned by Pittsburgh real estate tycoon and billionaire industrialist Henry Hillman and Hillman family trusts. The Hillman interest in FirstPage resulted in a 12.6 percent ownership stake in Metrocall following the acquisition.

In 1993 the paging industry had about $2.5 billion in sales. It was enjoying annual growth of about 20 percent, due to such factors as product enhancements, affordability, and the growing acceptance of pagers by the general public. For 1993 Metrocall reported a net loss of $2.2 million on revenue of nearly $38 million, compared with net income of $3 million on $35 million in revenue in 1992. The 1993 loss was attributed to a one-time charge of $4.8 million related to the company's IPO.

Late in 1993 Metrocall acquired a paging company in California, and in 1994--95 the company added operations in Boston, Pittsburgh, San Diego, Phoenix, Las Vegas, and several Florida locations. In the process Metrocall increased its customer base to about one million, but the company felt it needed 2.5 million to 3.5 million subscribers to survive consolidation in the paging industry and become a long-term player.

After two solid years of growth through acquisitions, Metrocall ran into some difficulties in 1995. Founder and chairman Harry L. Brock, Jr., became involved in a power struggle with Metrocall's board and vice-chairman William L. Collins III. Collins, former head of FirstPage USA, became a major shareholder in Metrocall when FirstPage was acquired by Metrocall. Collins and other board members from FirstPage teamed up with outside directors to force out Brock, charging that Brock was not pursuing acquisitions aggressively enough. Brock resigned and was replaced as chairman by Richard M. Johnston. CEO Christopher Kidd also resigned and was replaced by Collins.

Another setback involved a failed bid to acquire another large paging firm, which resulted in about 100 layoffs. Institutional investors became disillusioned with the company, and Metrocall's stock fell from a high of $29 in September 1995--when the company issued four million new shares at $28.25 a share&mdashø $16.50 in January 1996. Also affecting the stock price was concern over a pricing war among paging companies and a reported shortage of pagers for new customers. However, the stock was still trading above its 1993 IPO price of $13.

Aggressively Acquired Companies: 1996--98

With new executive leadership, Metrocall embarked on a wave of acquisitions to increase its customer base and expand its paging network. Metrocall was the sixth-largest paging company in the United States with about 944,000 subscribers at the end of 1995. During 1995 Metrocall had raised capital for acquisitions through stock and debt offerings, leaving it with $123 million in cash on hand at the end of 1995. For the year it reported a loss of $20.1 million on revenue of $110.9 million. During 1995 the number of Metrocall pagers in service grew by 25 percent.

Metrocall's first announced acquisition for 1996 was Parkway Paging Inc. for $28 million. Based in Plano, Texas, Parkway had about 140,000 subscribers in Dallas, Fort Worth, and other Texas cities. Around this time Metrocall also acquired Satellite Paging, which had about 60,000 subscribers in New York and New Jersey, and Message Network, which had 50,000 customers in Florida.

Additional acquisitions included Page America Group Inc. of Hackensack, New Jersey, for $78.5 million, and Source One Wireless Inc., which served the Chicago area. Although Metrocall reported a loss of $7.7 million for the first quarter of 1996, president and CEO William L. Collins III confidently stated, 'We are successfully executing our stated strategy to grow, build and acquire.'

Metrocall's sixth acquisition of the year involved A+ Network, a paging company based in Nashville, Tennessee. A+ Network had about 675,000 customers in ten southern states and was the largest independent paging service in the Southeast. When the deal closed in November 1996, the transaction was valued at $341 million. To help finance the transaction, Metrocall was able to obtain a loan of $350 million from a group of banks led by Toronto Dominion and Bank of Boston Corp.

By mid-1996 Metrocall's stock was trading for less than $10 a share, more than 25 percent below its 1993 IPO price of $13 and less than one-third of the September 1995 offering price of $28.25 a share. Wall Street appeared to be reacting to Metrocall's widening quarterly losses and not to the company's revenue growth. Also affecting Metrocall's stock price was Wall Street's disillusionment at the time with telecommunications stocks in general, and paging companies in particular. Collins indicated to The Washington Post that as a result of depressed stock prices for Metrocall and other paging companies, Metrocall was not aggressively looking for more acquisitions for the time being. Pending acquisitions involving A+ Network, Page America Inc., Satellite Paging, and Message Network would give Metrocall some 2.2 million subscribers and make it the fourth largest U.S. paging company.

By the end of 1996 Metrocall's stock had dropped to around $5 a share, an 80 percent drop since June. Collins, Johnston, and other insiders took this as an opportunity to acquire more shares, indicating confidence that Metrocall's stock would rebound. It was a difficult year for the paging industry in general, with pricing pressures, problems with integrating acquisitions, and violations of debt contracts affecting the overall industry. For the year Metrocall posted a loss of $49.1 million on revenue of $150 million.

With investor support weakening for the paging industry, Metrocall was able to complete only four acquisitions in 1996, with the purchase of Page America closing in 1997. The company's quarterly losses continued to widen in 1997, reaching $11.7 million in the first quarter and $12.3 million in the second. Quarterly revenue more than doubled, however, rising 140 percent in the first quarter to $60.6 million and 119 percent in the second quarter to $70.3 million.

In the second half of 1997 Metrocall signed a definitive merger agreement with rival paging company ProNet, Inc. of Dallas, Texas. Under terms of the agreement Metrocall would pay $73.8 million for ProNet and assume about $170.3 million of ProNet's debt. The acquisition would give Metrocall more than four million subscribers, making it the second largest U.S. paging company behind Paging Network Inc. (PageNet) of Dallas, Texas, which had about nine million subscribers. Overall, the paging industry had about 43 million subscribers at this time.

The acquisition of ProNet increased Metrocall's workforce from 2,000 to 3,000 employees. For 1997 the company reported revenue of $289.4 million and a net loss of $60.3 million. In 1998 Metrocall acquired AT & T Wireless Services' Advanced Messaging Division for $205 million in stock and cash. The acquisition of AT & T's paging division resulted in 1.2 million new paging subscribers and a five-year distribution agreement with AT & T Wireless's retail stores, which would sell Metrocall paging products exclusively.

Also included in the acquisition of AT & T's paging division was a narrowband PCS license. To comply with Federal Communications Commission (FCC) regulations regarding the license, Metrocall was required to build out narrowband PCS infrastructure by September 29, 1999. The infrastructure would have to serve either a composite area of 750,000 square kilometers or 37.5 percent of the U.S. population. Those requirements would double over the next five years, and Metrocall reported that it expected to incur significant capital expenditures to comply with the FCC's requirements.

For 1998 Metrocall's revenue increased to $464.7 million, while its net loss widened to $129.1 million. The company ended the year with 5.75 million subscribers.

Advanced Messaging Services, 1999--2001

In 1999 Metrocall began to prepare for two-way messaging and new Internet applications. Midyear it contracted with Glenayre Technologies Inc. to upgrade its nationwide wireless network of more than 150 switches. Glenayre was a Charlotte, North Carolina-based company that specialized in building wireless platforms and manufacturing paging units. The upgrade would allow Metrocall to offer its subscribers enhanced voicemail, wireless e-mail, and Internet-based information services in addition to traditional paging services.

During 1999 Metrocall launched a wireless Internet-based content delivery service under the service mark OnTheGoInfo, using Motorola's 'i Kno!' information architecture platform. OnTheGoInfo was introduced in the Washington-Baltimore area, then rolled out nationally. It included information packages that customers could select from a menu of 'InfoChannels,' including news, business and finance, sports, weather, entertainment, health and medicine, and others. Customers could personalize their content over the web, without having to take their wireless devices to a retail outlet. Content providers with whom Motorola had partnered for the service included The Weather Channel, SportsTicker, Etak Inc., Billboard, InfoBeat,, The Associated Press, and others.

In mid-1999 Metrocall completed its national rollout of assured delivery messaging in the top 100 markets, which covered some 90 percent of the U.S. population. Marketed under the service mark MessageTrack, the wireless service enabled customers to receive Internet e-mail messages and have them stored for up to 96 hours. Toward the end of 1999 Metrocall strengthened its focus on Internet-based wireless services by forming a new strategic business unit,, to offer bundled service solutions to the small office/home office (SOHO) market and to small and midsized enterprises. Included among the services would market nationally were broadband Internet access, wireless e-mail, filtered content, and other applications and services. Through an agreement with DSL (digital subscriber line) broadband services provider Covad Communications, Metrocall would be able to resell Covad DSL services to its customers through, which was later renamed Inciscent.

For 1999 Metrocall reported revenue of $610.2 million and a net loss of $172.5 million, which was attributed to noncash, acquisitions-related amortization costs. At the end of the year the company had 5.9 million subscribers and had completed the integration of the Advanced Messaging Division of AT & T Wireless. In early 2000 Metrocall announced it would acquire NationPage from AT & T Wireless Services for $13 million in cash. NationPage, a subsidiary of a company that AT & T Wireless had acquired, was a leading regional paging and wireless messaging provider in eastern Pennsylvania, New Jersey, and upstate New York. It had about 80,000 billable pagers and was already a large reseller of Metrocall services in Pennsylvania.

In February 2000 Metrocall gained $51 million in equity financing from three new investors: PSINet Inc., a global e-commerce company; investment firm Hicks, Muse, Tate & Furst, Inc.; and Aether Systems, Inc., a leading wireless application service provider (ASP). Each firm would invest about $17 million, and each would own about 10 percent of Metrocall's common stock. News of the investment sent Metrocall's stock up from around $2 a share to close around $6 a share after peaking at $7. The stock subsequently rose to more than $11 a share.

In addition to investing in Metrocall, the three firms agreed to form a high-tech joint venture with Metrocall's new business unit, The name of the venture was changed from to Inciscent. As an ASP, it would provide a suite of technology services to the SOHO and small business markets. Included among the services to be offered were broadband Internet access, wireless messaging, two-way data solutions, and e-mail hosting. Metrocall owned 50 percent of Inciscent, Aether Systems owned 33 percent, and PSINet and Hicks, Muse each took a 6.33 percent interest, with other investors accounting for the rest.

In March 2000 Metrocall introduced My2Way, a new two-way wireless data and messaging service. The service enabled subscribers to send and receive wireless messages and e-mails and access Internet information from a wireless device. It also included address book, notepad, and calendar functions. My2Way would be marketed through Metrocall's 127 corporate-owned retail stores, through the company's exclusive interactive marketing agreement with America Online, and elsewhere. My2Way was also featured at Metrocall's Internet storefront on its newly designed web site. In addition, Metrocall supported the launch of My2Way with an eight-week business-to-business advertising campaign that included ads on national cable television network programming--including CNBC's MarketWatch--and in periodicals such as The Wall Street Journal, Fortune, and Business Week.

In May 2000 William L. Collins III, Metrocall's president and CEO, succeeded Richard M. Johnston as the company's chairman. Within a couple of months, Metrocall attempted to challenge rival Arch Wireless, Inc.'s takeover bid for Paging Network Inc. (PageNet) of Dallas, Texas. PageNet, the largest paging company in the United States, was in trouble financially. With backing from Hicks, Muse, Tate & Furst, Metrocall submitted a bid worth $1.57 billion, including $100 million in cash from Hicks, Muse, $727.5 million in stock, and the assumption of $746 million of PageNet's debt. Arch Wireless had offered stock and debt-assumption worth $1.36 billion. PageNet responded to Metrocall's offer by filing a voluntary Chapter 11 bankruptcy petition and rejecting Metrocall's bid. Subsequent litigation and backing from other investors revived Metrocall's offer, but PageNet's board of directors favored Arch Wireless. When Arch Wireless completed its acquisition of PageNet in November 2000, it became the largest paging company in the United States, with Metrocall ranking second. During the takeover bid Metrocall's stock fell from around $6 a share to just over $3 a share.

Meanwhile, Metrocall's losses were mounting and revenue was declining when compared with the previous year. For the first six months of 2000 revenue declined from $310.7 million in 1999 to $280.7 million, while losses rose from $86.7 million in 1999 to $88 million. For the third quarter revenue declined from $143 million in 1999 to $132.5 million, and losses increased from $48 million in 1999 to $60.2 million. Metrocall's stock continued to plummet through the end of 2000 and into 2001, when it was trading at less than $1 a share. NASDAQ officials notified the company at the end of 2000 that it would remove Metrocall's listing on the NASDAQ National Market System for failing to maintain a minimum bid price of $5. Metrocal had the option of relisting its stock on the NASDAQ SmallCap Market System, where it had traded in the past before being upgraded to the National Market System.

While Metrocall in particular and the paging industry in general appeared out of favor with Wall Street investors in 2000 and 2001, the company enjoyed strong financial backing from investment firm Hicks, Muse. In addition, the company's reported losses were often the result of noncash charges associated with acquisitions. Other positive developments in 2000 included the completion of Metrocall's corporate ATM (Asynchronous Transfer Mode) network. Originally intended as a virtual private network (VPN) to support internal operations, the ATM network would be made available to Metrocall's six million subscribers later in 2001. The ATM network, together with the completion of the upgrade of all of Metrocall's Glenayre messaging switches, enabled the company to allow all of its voice, data, and wireless messaging traffic to coexist on the same circuits. As a result, Metrocall would soon be able to send Internet protocol (IP) traffic through its ATM network. That would give it the competitive advantage in the wireless marketplace by being able to control the quality of its converging voice, data, video, and fax services.

Principal Subsidiaries: Inciscent (50%).

Principal Divisions: Advanced Messaging; Cellular and PCS Services; System Applications; Wireless Content and Advanced Applications.

Principal Competitors: Arch Wireless, Inc.; WebLink Wireless Inc.; SkyTel Communications Inc.; Sprint PCS; Verizon Wireless.


Additional Details

Further Reference

Bajaj, Vikas, 'Addison, Texas-Based Paging Company Files for Bankruptcy to Speed up Merger,' Knight-Ridder/Tribune Business News, July 26, 2000.Behr, Peter, 'Metrocall Acquires Texas Paging Firm for $28 Million,' Washington Post, February 28, 1996, p. C1.------, and Anthony Faiola, 'Metrocall Writes a Few New Pages,' Washington Post, March 4, 1996, p. F3.Bredemeier, Kenneth, 'Metrocall Gets Cash Infusion; Stock Soars,' Washington Post, February 4, 2000, p. E1.'Digest,' The Washington Post, May 18, 1996, p. D1.Dunaief, Daniel, 'Toronto Dominion and Bank of Boston Lead Loan to Paging Company,' American Banker, November 20, 1996, p. 29.Files, Jennifer, 'Paging Giant Challenges Rival's Bid for Troubled Addison, Texas, Firm,' Knight-Ridder/Tribune Business News, July 20, 2000.Irwin, Neil, 'Metrocall Launches Bid for Bankrupt Paging Rival,' Washington Post, July 20, 2000, p. E3.------, 'Metrocall Raises Bid for PageNet,' Washington Post, September 21, 2000, p. E3.Jones, Jennifer, 'Metrocall Prepares to Fight the Two-Way Paging War,' Washington Business Journal, July 9, 1999, p. 11.Kady, Martin, II, 'Tech Giants Team up on Wireless Venture,' Washington Business Journal, February 25, 2000, p. 3.Knight, Jerry, 'Metrocall's Stock Needs a Wake-Up Call,' Washington Post, July 29, 1996, p. F27.------, 'Washington Investing; Metrocall Shareholders May Reap Rich Rewards,' Washington Post, February 7, 2000, p. F28.'Metrocall,' CDA-Investnet Insiders' Chronicle, January 6, 1997, p. 1.'Metrocall Draws Near to Closing Deal for AT & T Messaging Division,' Communications Today, October 1, 1998, p. 4.'Metrocall Inc.,' Washington Post, April 28, 1997, p. F36.'Metrocall Inc.,' Washington Post, April 22, 1996, p. F31.'Metrocall Posts $40 Million Loss,' Washington Post, August 10, 2000, p. E3.'Metrocall Posts Loss of $12.3 Million in 2nd Quarter,' Washington Post, August 6, 1997, p. D11.'Metrocall Posts $7.7 Million Quarterly Loss,' Washington Post, May 8, 1996, p. F3.'Metrocall Reports Loss in Quarter,' Washington Post, February 19, 1997, p. D13.'Metrocall Stokes Existing Market While Acquisition Flame Cools,' Communications Today, October 13, 2000.'Metrocall Ups Ante for PageNet,' Washington Business Journal, September 22, 2000, p. 99.'Metrocall's Loss Widens,' Washington Post, November 3, 2000, p. E5.'Metrocall's Losses Widen in 1st Quarter,' Washington Post, May 7, 1997, p. C12.Mills, Mike, 'Metrocall to Acquire 2 More Paging Firms,' Washington Post, April 24, 1996, p. F1.------, 'Metrocall to Purchase Rival ProNet,' Washington Post, August 12, 1997, p. C1.Mulqueen, John T., 'AT & T Sells Paging Division,' InternetWeek, July 6, 1998, p. 45.'Nashville, Tenn.-Based A+ Network Closes $341 Million Union with Metrocall,' Knight-Ridder/Tribune Business News, November 18, 1996.Olson, Thomas, 'Hillman Takes Paging Firm Stake, Signals Interest in Beeper Merger,' Pittsburgh Business Times, October 17, 1994, p. 1.

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