When Metrocall Inc. reported third quarter earnings, the company also said it has shifted its course toward increasing revenue per unit and away from expansion in the reseller channel.
For the last several years, Metrocall has pursued an aggressive course of acquiring carriers and signing on resellers. Once its purchase of A+ Network is completed, Metrocall will be the fifth largest carrier in the nation. Shareholders approved the mergers last week. It is scheduled to close this Friday.
But recently, revenue generated by resellers has been too low, said Metrocall, and other distribution channels are showing higher RPUs and “people that pay the bills.”
The company’s net additions for the three-months ended Sept. 30 were about 56,000. Just less than half of Metrocall’s distribution is in reseller channels. Only 4 percent is retail.
“Metrocall’s strong third quarter is the direct result of a significant and fundamental change in the way the company has executed its business plan, ” said William Collins III, president and chief executive officer. Net revenue for the quarter was $31.6 million, compared with $24.1 million a year ago, while net loss was $14.3 million, compared with $3.4 million in the same period of 1995.
Bukasa Tshilombo of Northern Business Information Inc. said, “As a rule, going through resellers or using indirect distribution channels allows [carriers] to expand very quickly and at a lower cost than doing it,” themselves. Yet once a company has “realized it has reached its potential in a market, one way it can grow is to increase revenue per unit,” he added.
Tshilombo said to increase RPU, carriers need to offer the additional functionality people want and need. As the bulk of paging customers are still numeric, features in alphanumeric and two-way paging offer that additional value.
While carriers vary in their relative proportions of distribution, the current rate of market growth and increased demand for alphanumeric service, Tshilombo said he believes a trend exists toward raising increasing RPU.
MobileMedia Corp. spokeswoman Anne Marie Drozd said the company strives to balance growth and increased RPU. She said 30 percent of the company’s distribution mix is in the reseller channel, which is a greater proportion than prior years. Most of the growth in this area has been internal. MobileComm, which MobileMedia acquired early this year, brought with it a heavy retail presence. MobileMedia’s direct sales have not necessarily decreased, but account for a narrower segment of total distribution.
Paging Network Inc. spokesman Scott Baradell said resellers and affiliates are key for marketing the company’s soon-to-market VoiceNow, voice paging service. So efforts are highly focused in these channels for the time being.
But Baradell noted, “field operations are still our bread and butter.” The direct sales channel is responsible for most of PageNet’s revenue. Unit sales from direct and reseller channels are about even, he said. The National Accounts Division is responsible for the remaining sales, at just higher than 10 percent of the whole.
