Toll Free Cellular has laid off most of its employees and put the company up for sale after AT&T Wireless Services Inc. opted not to proceed with plans to offer nationwide #800 cellular service.
Seattle-based Toll Free, which partners with mobile phone carriers to sell 800 numbers to businesses willing to pay for incoming airtime charges, was banking on a contract with AT&T Wireless to take the #800 service national and had expanded its resources within the last year on the basis that a contract would be signed, said company Chief Executive Officer Mark Lazar.
“We had been building up our staff and putting up a fourth round of financing predicated on this contract coming in,” Lazar said. “We had confirmation from them that they were going to be doing this. The contract was ready to sign. It was a big shock to us … We found ourselves not able to recover quickly.”
AT&T Wireless spokesman Mike Broom said company representatives advised Toll Free throughout negotiations “that no final deal could be made without a final approval in context of AT&T’s business priorities.”
AT&T Corp. recently streamlined its businesses to focus on reducing costs and concentrate on its core communications business. Broom said AT&T Wireless couldn’t make a business case to move ahead with the service.
“We’ve tested toll-free service in Western regions for more than a year. We have not been able to generate the numbers of customers or the revenue stream to justify the time and resources necessary to move forward with a nationwide service,” said Broom. “We had been in discussions about it, and the whole way through, we told them they needed to make a justifiable business case.”
Toll Free’s Lazar said the company is in discussions with possible buyers. He said Toll Free plans to continue offering service to its current wireless partners while it searches for a buyer. Toll Free employs some 70 to 80 people, said one source close to the situation.
“This is clearly a difficult situation for our company,” said Lazar. “We had an opportunity to take a service national that needed to be national to replicate what 1-800 means. AT&T was an important player in helping us do that.”
About a year ago, Toll Free announced plans for national expansion of #800 service, propelled by an infusion of capital, provided primarily by limited partnerships affiliated with Goldman, Sachs & Co., and supported by agreements with a number of wireless carriers, including Southwestern Bell Mobile Systems, AirTouch Communications Inc., 3607 Communications Co. and CMT Partners, as well as ongoing negotiations with as many as 20 mobile phone operators.
At the time, Lazar announced that the Seattle market-where both AT&T Wireless and AirTouch launched the service for the first time two years ago-was a success and had proven that the demand for free cellular calling exists. AirTouch has since expanded the service to most of its major markets, said spokeswoman Lisa Bowersock.
The enticing aspect of the service for mobile phone operators, says Toll Free, is that #800 service allows them to generate new revenue through incremental use. Toll Free acts as the middleman, negotiating contracts between businesses and carriers. The business pays Toll Free a monthly fee and pays for all incoming airtime minutes, and the carrier is paid for the airtime.
Lazar said he was surprised by how slow carriers, including AT&T Wireless, moved to adopt #800 service. “It’s just mind-boggling that carriers have not seen the opportunity to build this business … There’s no investment for carriers,” he said. “Landline 800 took a long time to build up some steam. I’m disappointed that [AT&T Wireless] wasn’t able to see the long-term opportunity.”
