Almost a month after the apparent demise of TSR Wireless L.L.C., which was the nation’s fourth-largest paging carrier before it suddenly closed its doors and filed for bankruptcy, there is little concrete information about why and how the company moved from what appeared to be a smoothly running carrier to a ghost network with creditors pounding at the door.
TSR Wireless filed for Chapter 7 bankruptcy Dec. 8 in New Jersey, a week after it turned away its 1,700 employees without any mention of a severance package, and has been keeping its network running with a skeleton crew and some court-approved operating cash.
“It’s our intention to keep the network operating until the sale of operations,” said Charles Forman, bankruptcy trustee for the company.
Forman said he has been working to sell all or parts of the company since it filed for Chapter 7, which is the most severe type of bankruptcy and calls for the liquidation of all the company’s assets.
Forman said a sale would take at least two to three months, and the network would continue to operate until then.
“I’ve been very impressed by the efforts of the remaining TSR employees to keep the network operating,” Forman said.
The network and its 2.6 million subscribers are probably the most important assets the company has left. It also has more than 275 retail stores, two two-way paging licenses, close to 2,000 antennas and related paging equipment.
TSR Wireless also has $200 million in debt owed to about six banks.
That debt-along with its extensive retail operation, expensive paging network and a lack of profit amid cutthroat airtime pricing wars among the nation’s paging carriers-are what many say led to TSR Wireless’ shutdown, and may be symptomatic of the entire paging industry.
“They have piled on entirely too much debt and have never developed a business plan that leads to profitability,” said Tom Cook, president and owner of Cook Telecom Inc., a 15-year-old regional paging company.
Cook described TSR Wireless’ bankruptcy as a casualty of an undervalued industry that sells its services at a price too low to support its massive operating expenses. The result, he said, can only be bankruptcy if companies continue to operate on borrowed money and sell their services below operating costs.
“The business managers in our industry will never make the hall of fame,” Cook said.
Charles Franklin, president of regional paging carrier RadioCall Acquisitions L.L.C., said the paging industry got off on the wrong foot in the early 1990s when large paging carriers began selling their airtime to resellers for ridiculously low prices.
“I put the blame for that whole run on PageNet and, by extension, Motorola,” he said. “They’re the ones that drove the perceived value of paging down.”
Franklin said Paging Network Inc., which recently merged with Arch Communications Group Inc., began an airtime pricing war that continues to today, a war TSR Wireless could no longer afford to fight. In addition, Motorola Inc. upped the ante with its ReFLEX paging system, which Franklin said is too expensive to build and operate, but nevertheless became a must for national paging carriers.
“The whole paging industry has been devalued,” Franklin said. “TSR went along with it.”
Cook likens the paging industry to an airplane heading straight toward a mountain. The controls are stuck on dangerously low airtime prices and accumulated debt is keeping it from gaining any altitude.
“All the other companies in the industry followed the same path” as PageNet, Cook said. “They’re willing to fly the plane into the ground.”
Evidence for Franklin and Cook’s dire view of the industry is hard to ignore.
Stocks for the nation’s three largest paging carriers, Metrocall Inc., WebLink Wireless Inc. and Arch Wireless Inc., are all trading near or below a dollar.
“It’s sad to say that the three leading companies in our industry this year will report operating losses of close to $600 million combined,” Cook said.
This may lead some to say paging is dead. Tony Leonardo, who worked for four years for TSR Wireless as a sales manager in New York, would agree.
“I don’t want to stay in paging,” he said. “Paging is done.”
Like many others, Leonardo blames TSR Wireless’ bankruptcy on poor management-management that expanded the company’s retail business too far, too fast and management that got caught up in unprofitable pricing wars.
“They got crazy with their prices,” Leonardo said of competing carriers in the New York market.
However, Leonardo said TSR Wireless was the “Cadillac of paging,” offering the best service of any competing carrier. This, he said, made most of the paging resellers in New York rely solely on TSR Wireless.
The result, Leonardo said, was about 35,000 new activations a month for the company, a huge number for a paging carrier. The market for paging was there, but everybody knew it and the competition was intense.
Leonardo said TSR Wireless sold its airtime to resellers for about $1.30 per month last year, which was seriously low, but not as low as other carriers in other markets were prepared to go.
For example, some carriers in Florida, including TSR Wireless, dropped their airtime prices below 50 cents per month, a number that most agree isn’t enough to continue to operate, no matter how many new subscribers it brings.
While it is clear pricing wars, debt and a variety of other factors contributed to the demise of TSR Wireless, many questions are left unanswered. Why did the company withdraw its application for an initial public offering in 1997, a move that could have garnered TSR Wireless some needed financing? Why did the shutdown come so suddenly? And why did the company file for Chapter 7 instead of a Chapter 11 reorganization?
“I just don’t know why this all happened,” Leonardo said.
The paging industry is struggling, and TSR Wireless’ shutdown may be a precursor to more upheavals, but paging itself may not be coming to an end, Franklin said.
“True paging will be around a long time if we can figure out the pricing,” he said.
If paging can remain fast, cheap, reliable and simple, it will provide a service many people will pay for, Franklin said.
“If you keep those principles there’s a market,” he said. “This is an everyman’s way of being contacted.”
