Could or would anyone buy MobileMedia Corp? If not, what will happen to this bankrupt company, which is the second largest paging carrier in the country, with more than 4 million customers.
The industry cannot assess MobileMedia’s value until the Federal Communications Commission either revokes or allows the company to retain its paging licenses. MobileMedia holds thousands of one-way paging licenses and two nationwide narrowband personal communications services licenses.
The FCC is examining MobileMedia because it violated rules in filing paging applications. Several hundred FCC Form 489s-which are to be submitted by paging carriers once construction of a paging station has been completed-were filed inappropriately. Some Form 489s were filed for unconstructed stations and others for so called “40-Mile Rule” stations predicated upon unconstructed facilities, said the FCC. Paging carriers are required to build stations, file Form 489s and begin offering commercial service within one year from the date of licensing.
Earlier this year, the FCC canceled licenses and applications for licenses for a number of MobileMedia’s unbuilt stations.
The FCC three weeks ago remanded the issue to an administrative law judge, who was asked to recommend an action within six months.
Jeanine Oburchay of Bear Stearns & Co. Inc., New York, and Harry Blount of Rauscher Pierce, Dallas, both expect the FCC will either revoke all or none of the company’s licenses. “You are either fit or not fit,” said Oburchay.
In the event the FCC decides MobileMedia is unfit to hold licenses, Blount expects the licenses-particularly those for frequencies currently supporting a large number of subscribers-would be sold for pennies on the dollar to another carrier or a number of carriers through negotiations among MobileMedia, the FCC, debtors in possession and those third-party carriers.
“If they lose their licenses, the precedent is `cease to exist,’ ” said Oburchay. Though unfortunate for the company, this would present “opportunity for the rest of the industry.”
In the event MobileMedia is allowed to retain its licenses, an outright purchase of the company is highly unlikely, said Oburchay. What “got them in the situation they’re in now was strategic and tactical. It will require more than just a steady hand to fix (the company) … People say subscribers are attractive, but what about integrating three systems?”
MobileMedia has about 4.3 million customers presently, said Oburchay, and is losing about 50,000 customers a month. Oburchay said MobileMedia could divest its narrowband PCS licenses and come out of Chapter 11 bankruptcy as a smaller, leaner company. She expects it would take at least 18 months to come out of bankruptcy.
“I think the chances of someone buying [MobileMedia] in the short term is fairly remote,” said Blount. “Arguably, the full value of their existing asset base does not exceed the full value of the debt. From the position of an equity owner, I don’t see any value to holding the stock at this point,” he added.
Most expect MobileMedia’s greatest assets are its narrowband PCS licenses. The company paid about $100 million for both licenses, one of which was won by MobileComm before MobileMedia purchased the BellSouth Corp. paging subsidiary in January 1996.
Who would or could buy these licenses? Blount said the most likely of buyers is Arch Communications Group Inc., followed by AirTouch Paging and ProNet Inc.
However, “Arch is in a campaign to lower its debt ratios,” said Oburchay. “They would be a natural, just not immediately.”
Other assets could include MobileMedia’s transmitters and network infrastructure and its local and regional frequencies, said Blount.
To acquire MobileMedia’s customers, “it is probably cheaper for most of their competitors to just try to attract those churned subscribers vs. trying to acquire the company and paying twice [as much] and inheriting all the headaches and hidden costs.”
