The Northeast regional office of ProNet Inc. is raising prices for some of its smaller resellers to $5 per number. The company believes the rate increase may drive these resellers to do business with ProNet’s larger, preferred resellers.
The new rate, which goes into effect Nov. 1, represents a 60 percent to 100 percent increase over current rates. Mitch Carron, director of sales for ProNet Communications in Lake Success, N.Y., wouldn’t say how many resellers will receive a rate increase.
One New York reseller, who did not receive a rate increase, said ProNet told him fewer than 100 of about 500 total resellers will be affected by the price increase, and that those dealers are no- or slow-growth businesses with fewer than 25 ProNet units in service. ProNet may apply the price increase to other resellers later, depending on their growth, he added.
The price increase is based on costs, said Carron. The company, while employing more than 100 people, conducts business “with more than several hundred resellers,” among which some “are not really resellers to us,” Carron explained. ProNet is not staffed to support a reseller 75 miles away that has only has 15 units on line, he added. Preferred resellers, or master agents, “can do it better than we can.”
In ProNet’s Partners Program, preferred resellers are those firms that conduct large volume business. They operate on a lower cost structure and receive a discount on airtime, or pager numbers, by buying in bulk. Carron said smaller resellers benefit by operating through a preferred reseller, which may be closer to them than ProNet, “speaks their language” and provides a fair price. Also, preferred resellers have the staff and infrastructure to handle many customer service and billing issues.
ProNet Inc. of Plano, Texas, has pursued an aggressive acquisition strategy, gaining about 19 companies in two years, said Bukasa Tshilombo of Northern Business Information Inc., New York. “With all these relationships, it makes sense to consolidate to control costs,” he added. Tshilombo said he views the preferred resellers much like wholesalers.
Previously, ProNet’s key path to growth was direct sales to the medical field, Tshilombo noted.
Carron, previously of AirTouch Communications Inc., started with ProNet in April and set out to improve operations, he said. In the last two years, ProNet Inc.’s acquisitions of RadioCall, Contact Communications and Carrier Paging were integrated under ProNet Communications. Among these resellers, rates vary greatly and in some cases a single reseller receives more than one rate.
“It is a mess,” said Carron, and he wants to clean it up. In some cases, ProNet is decreasing reseller rates.
A letter from ProNet Communications-dated Nov. 1, but which circulated more than a week ago-notifies select resellers of the rate increase and suggests they move their accounts to a ProNet preferred reseller to continue receiving lower rates. The letter was intended to be confidential, but was delivered to RCR anonymously, seemingly by an angry dealer.
One mid-sized Manhattan reseller, who has not received a rate increase, said ProNet wants to cut overhead costs by decreasing its dealer base and increasing business with each remaining dealer. ProNet took a financial blow from “all of the lawsuits, and they need to increase cash flow,” added the reseller. ProNet shareholders filed a lawsuit earlier this year charging the company violated securities laws by inflating prices to effect numerous acquisitions.
The reseller also noted paging in New York City is so competitive that carriers lose an average of $20 per pager sold to a reseller, which places even more pressure on carriers to cut costs.
E 5 Communications, a mid-size New York reseller with offices in Manhattan and Queens, also has escaped without a rate increase. Manager Kai Chan said ProNet represents a small portion of his wireless resale business, about 400 to 500 numbers in service. E 5 would oppose dealing through a preferred reseller, but for competitive rather than cost reasons, said Chan. For instance, both E 5 and Affordable Message Center, a preferred ProNet reseller, are resellers of MobileMedia Corp.’s MobileComm service.
But Chan does support ProNet cutting ties with resellers that are not focused in the industry. “Almost every video store and photo developing store (in New York City) sells beepers on the side,” said Chan. “They are selling something they don’t know about.”
E 5 pays $3 per numeric number and resells for $5.95 based on a 12-month contract. Customers who want only one month of service pay E 5 about $10. Wireless Paging of Westbury, N.Y., resells ProNet services and pays $2.95 per number. Affordable Message Center, of Islandia, N.Y., buys its numbers from ProNet for between $2.45 and $2.95.
ProNet’s effort to consolidate represents a definite trend, said Tshilombo. He said it doesn’t make sense to continue doing business with firms not making much money. Convergence among wireless industries and competition is creating pricing pressures and necessity for controlling costs.
“Paging companies are not showing profit. Let’s keep in mind many are public and someone out there is not getting paid,” said Tshilombo. “Stockholders will put on pressure to make money.”
In the market, the “differentiator is no longer going to be the price. It is going to be the package and the service; who is better equipped to provide customer service,” said Tshilombo. At “some mom-and-pop shops, all you get is a pager and a contract.” Many of these small companies lack the means to provide ongoing customer support or add-on services, like voice mail, he added.
“Customers want to be able to call 24 hours a day to ask about their pager or service,” continued Tshilombo.
