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FEWER OPERATORS CONTROL MUCH OF PAGING MARKET

NEW YORK-The numbers vary depending on the source, but there is unanimity about the trends unfolding in the nation’s paging sector during the past year: subscriber growth, consolidation in the number of paging providers and overall increases in revenues despite price squeezes due to competition and consumer resistance.

By the end of last year, the total number of paging subscribers, or units in service, had skyrocketed to just more than 34 million, according to preliminary estimates by Washington-based Economic & Management Consultants International Inc. Goldman Sachs & Co., New York, pegged the year-end 1995 total at 29 million subscribers.

Last year’s total represented a quantum leap compared with 1994, which closed out with some 27 million or so pagers in service, according to EMCI and Paul Kagan Associates Inc., Carmel, Calif. Goldman Sachs tallied the year-end 1994 total at slightly more than 24 million.

EMCI estimates that 1996 will end with more than 39 million paging units in service, while Goldman Sachs projects there will be 35 million paging subscribers.

Many industry observers are predicting double-digit growth in paging beyond this year. Goldman forecasts as many as 73 million units in service by the end of 2000. Kagan projects that by 2006 there will be up to 100 million paging subscribers.

Motorola Inc. continues to dominate as a paging unit manufacturer, with nearly 90 percent of total market share, according to Dorothy Salmon, paging analyst for EMCI. NEC Corp. is gaining market share, and now accounts for about 10 percent, she said.

“The industry has not slowed, in the sense that a lot of people thought it would max out,” Salmon said. “There is a lot of room for growth and adding consumers into a market that is switching from a business tool to a personal tool.”

Paging service revenues also are growing at a brisk pace. Whereas revenues totaled between $2.7 billion and $3 billion at the end of 1994, according to EMCI and Kagan, respectively, EMCI’s preliminary figures indicate they reached nearly $3.6 billion at year-end 1995. And Kagan forecasts by 2006 these revenues will hit the $11 billion mark.

“Paging profit trends are improving in spite of constantly lower revenue per unit,” said Sharon Armbrust, vice president and senior analyst for Kagan.

Amid the growth in revenues and units in service, the industry continued its consolidation trend during the past year.

At the end of 1994, Paging Network Inc. had nearly 4.5 million subscribers, there were three other players each with between a million and two million subscribers, and the remaining top 10 players had between 400,000 and 800,000 subscribers each, according to Ann E. Lynch, senior analyst for wireless and mobile communications at the Yankee Group of Boston.

“One year later, the number of subscribers held by the top five companies has grown by a factor of two thirds to 16.2 million subscribers, or 57 percent of the total market-up from 44 percent at the end of 1994,” she said in a report released May 13.

According to Kagan’s Armbrust, the top dozen paging carriers accounted for two-thirds of subscribers at the end of last year, whereas they accounted for just 47 percent at the end of 1994.

PageNet, based in Plano, Texas, solidified its top spot in 1995, accounting for nearly 6.8 million paging units in service. “PageNet’s status as a large-capacity nationwide provider allowed it to enter reselling agreements with MCI (Corp.) and with Sprint (Corp.) and GTE (Corp.) during 1995,” Lynch’s report said. “With mass media advertising, MCI has sold 548,000 units between the fall of 1995 and the end of the first quarter of 1996.”

To a significant degree, PageNet’s might has prompted other major players to act decisively to enhance their own scale and scope, according to Lynch.

MobileMedia Communications Inc. of Ridgefield Park, N.J., saw its units in service nearly triple during 1995 to slightly more than four million, largely due to its acquisitions of MobileComm of Ridgeland, Miss., the nationwide paging and wireless messaging subsidiary of BellSouth Corp., and of the paging assets of Dial Page Inc. of Greenville, S.C., a leading paging provider in the Southeast.

In terms of size and value, the MobileMedia/MobileComm merger “is the most significant to date in the history of paging,” said Lynch of Yankee.

Arch Communications Group Inc. of Westborough, Mass., with just more than two million units in service at year-end 1995, is vying for third place with AirTouch Paging of Dallas. Until MobileMedia’s acquisition of MobileComm, Arch’s purchase of USA Mobile Communications Inc., Cincinnati, Ohio, last fall was the largest in paging history. Arch also announced in December its now completed acquisition of Westlink Paging Inc., San Diego. Between the end of 1994 and the end of 1995, Arch’s subscriber base grew five-fold to more than two million.

AirTouch Paging, whose subscriber base also is in the two-million-plus range, acquired Message Center Beepers Inc. of Hartford, Conn., thereby adding nearly 300,000 subscribers in the Northeast.

EMCI’s Salmon said she expects further acquisitions as the consolidation trend continues. However, she added, “the carriers will get pickier in the future.”

In her recent report on the paging industry, Yankee’s Lynch predicts: “There is reason to believe this acquisition trend will intensify over the next 12 to 18 months to consolidate the industry around a small group of nationwide players, with perhaps another three or four specialist players.”

In fact, as just one example of things to come, there was a May 16 announcement that Metrocall Inc. of Alexandria, Va.-ranked eighth or ninth depending on the source-would merge with A+ Network Inc. of Nashville, Tenn. Metrocall has approximately 900,000 subscribers, while A+, which is ranked in the top 20, has nearly 530,000.

As the size of the major players has grown, so too does the trend toward going public in the capital markets. MobileMedia and PageMart Inc., Dallas, the fifth largest paging company, both sold initial public offerings in 1995. There were a dozen publicly held paging companies at year-end 1995, compared with just three in the late 1980s, according to Yankee.

Another new addition to the publicly held paging sector companies is Preferred Networks Inc., a Dallas-based reseller that sold its IPO in March.

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