The announced merger of SBC Communications Inc. and Ameritech Corp. has raised speculation there may be another paging unit on the sale block sometime soon.
SBC will be the controlling company after the merger. Given SBC’s lack of any real paging interests in the past, some have questioned the company’s intentions toward the 1.3 million paging subscribers Ameritech Cellular and Paging Services Inc. claims in several Midwestern markets.
Ameritech’s paging business has been fairly successful, and the company has never expressed much interest in selling it. Its strategy has been to keep the paging unit as a branding ploy to introduce paging customers to Ameritech. The company then uses that relationship to introduce other Ameritech services to the subscriber, such as Internet, wireless voice and long distance.
However, once SBC management begins calling the shots, that could change. The question remains: Will SBC want to remain a regional paging player, or will it insist on either national coverage or nothing?
For most paging carriers, messaging is their only line of business. Of the larger paging players, only AT&T Wireless Services Inc., AirTouch Cellular and Paging Inc. and Ameritech own networks other than paging, and AT&T is trying to sell its paging interests.
Employees in Ameritech’s paging unit have voiced little concern, at least for now. Sources at Ameritech said that SBC’s resale agreements with PageMart Wireless Inc. is taken as a sign that SBC is not opposed to having some type of paging option available. But the paging game has become a nationwide one, and most carriers without a national footprint are either merging to become so or selling off their operations.
Industry analysts have listed several possibilities: SBC could spin off Ameritech’s paging unit into an independent entity and resell services from it, sell the unit outright, buy a national paging carrier to complement Ameritech’s footprint, or just leave things as they are.
According to securities analysts, any sale in the paging industry today would have to have a de-leveraging effect on the company buying it, meaning that the sale would reduce the debt of the buyer rather than increase it. Whether Ameritech’s paging unit can fit this bill remains to be seen.
Ameritech’s Midwestern markets could prove attractive to a company needing to fill in its nationwide coverage. One such possibility could be TSR Wireless Inc. The company has a proven acquisition strategy of buying carriers that complement its coverage. When it acquired American Paging Inc. earlier this year, TSR gained footprint in seven more states. President Mitchell Sacks has made clear the company’s intention to continue buying properties if the right deals came up.
“As things become available, we’ll be as likely as anyone to take a look at it,” he said. Once API’s integration is complete, “we would aggressively pursue an opportunity if available.”
Sacks has stated his desire to increase the company’s footprint in Michigan and Ohio, two areas where Ameritech has a strong paging business. He also has hinted that TSR could announce another acquisition before the end of the year, pointing to the privately held company’s relatively low debt-to-cash flow. “It puts us in a strong position to be a consolidator if we want to be,” he said.
But TSR also has ambitions to expand into the Southeast and the Pacific Northwest, areas where Ameritech has no presence. Sacks wouldn’t comment on what company, if any, TSR is interested in acquiring.
SBC may take the opposite route and buy one of the national networks available. AT&T has been looking to unload its paging unit for months, but there has been little action-perhaps due to the reported asking price of $450 million, which analysts believe is too high.
MobileMedia Corp. continues to be another prime carrier available, especially if the company emerges from Chapter 11 restructuring with the healthy debt-to-cash ratio many expect.
One analyst suggested SBC might opt to buy Mobile Telecommunication Technologies Corp. The company’s stock prices continue to rise, and analysts expect it to report a net profit before the year’s end. Also, Mtel’s President and Chief Executive Officer John Stupka was once president and CEO of SBC’s cellular operation, Southwestern Bell Mobile Systems. He later took the helm of strategic planning for SBC before moving to Mtel. SBC stockholders like Stupka, evidenced in that many bought stock in Mtel after his move.
Whatever the possibilities may be, SBC isn’t talking.
