Along with reports of a $17 million net loss and 85 percent increase in revenues for the fourth quarter, Metrocall Inc. became the fifth largest paging carrier in the nation, stated William Collins, III, president and chief executive officer.
The company’s loss, calculated at 83 cents per share, is compared with a $13 million, or 89 cents per share, loss a year earlier. Revenues for the three-month period, ended Dec. 31, totaled $45.3 million, compared with $24.5 million in 1995.
Net new subscribers totaled 736,418 for the quarter, 660,000 from the merger of A+ Network Inc., completed Nov. 15. Total units in service reached 2.1 million at the end of December, compared with just more than 944,013 a year earlier.
But new subscribers no longer are the most significant measure of growth, said the Alexandria, Va.-based company. Revenue per unit is the new gospel.
Metrocall’s growth goal for 1997 is 25 percent, down from a goal last year of 30 percent growth and achievement of 31 percent growth, said Collins. Metrocall’s fourth quarter average RPU was $8.21, compared with $7.95 in the third quarter, said Vince Kelly, chief financial officer.
“We don’t want to lease pagers that don’t cover our capital expenditure costs,” noted Kelly. He said the company is measuring performance in its various distribution channels and focusing most on the profitable channels.
Fifty-four percent of net additions came from direct sales, and 46 percent came from indirect business. The reseller channel was responsible for 43 percent of net new subscribers, and 34 percent of Metrocall’s net new additions came from rentals, reported the company. A+ Network also saw the most subscriber growth in these channels.
In a recent Bear Stearns Inc. & Co.’s industry forecast, the firm stated, “We look for slowing subscriber growth in 1997 (but still in the 20 percent plus `growth’ stage), expanding margins, firming ARPU (as the mix shifts toward higher-revenue alphanumeric subscribers across the board), and a move toward positive free cash flow as the industry growth slows and cutthroat competitive intensity diminishes.”
Among top carriers that reported fourth quarter results, ARPU fell between $6 and $10. For third quarter, the average RPU among top carriers was $11, a slight decrease from previous quarters, reported Bear Stearns. ARPU has gradually declined among most carriers in the last several years, but the New York firm said ARPU is beginning to stabilize.
Collins said Metrocall “has delivered two solid quarters of strong growth and has achieved one of the lowest debt-to-operating-cash-flow leverage ratios in the industry.”
This, he said, should be an indicator of the company’s performance at or above the investment community’s expectations.
The company started selling its product through Staples stores and formed agreements with U.S. Communications Inc. to market each other’s products and services. USCI’s cellular products and services will be available in Metrocall’s retail stores, which now number 75, and Metrocall will provide USCI with access to the paging frequencies. The USCI relationship began with A+ in the Southeast region.
Metrocall issued a tender offer for A+ Network high-yield public notes during the fourth quarter and received about $40 million in equity financing from Sun America Inc., John Hancock Mutual Life Insurance Co. and UBS Capital L.L.C., said the carrier.
Also, the company finished its buildout of a FLEX nationwide paging network, and completed buildout of its national Customer and Operations Center in Alexandria, which has the capacity to support up to 4 million customers for a variety of wireless services.
Metrocall plans to complete its acquisition of PageAmerica’s assets in the second quarter. The price is about $60 million, including $55 million in cash, stock and junior preferred stock, and $5 million for 830,333 shares of common stock. Metrocall originally was to pay about $78.5 million, but the companies renegotiated price as a result of PageAmerica’s performance and Metrocall’s stock declines-71 percent since then, reported Bear Stearns.
PageAmerica’s properties include a strip from Maine to Virginia, and Chicago, which Bear Stearns said “is a platform acquisition that opens new geographies for Metrocall in the Midwest.”
Metrocall also reported successful integration of Parkway Paging, Satellite Paging and Message Network-acquisitions completed in the third quarter.
