MobileMedia Corp. sought Chapter 11 bankruptcy protection, received a commitment to borrow $200 million and said its service to customers will not be affected as the company restructures finances and operations.
But things don’t look so good from the other side of the fence.
Resellers charge that MobileMedia is billing for erroneous charges, the company’s computer system is malfunctioning and that support to resellers has diminished.
MobileMedia filed Chapter 11 of the U.S. Bankruptcy Code in a Delaware court last Thursday. If granted, Chapter 11 protection will help facilitate short-term financing requirements and aid in forming agreements with Motorola, said MobileMedia. Motorola has been MobileMedia’s main equipment supplier, but discontinued product shipments in December after the carrier lost its ability to pay the bills.
Chase Manhattan Bank of New York is the lead bank in a group that will provide MobileMedia with debtor-in-possession, or DiP, financing, once the carrier has signed agreements with key paging equipment suppliers to sell pagers and provide services.
Paging analyst Jeanine Oburchay, Bear Stearns Inc., said she believes MobileMedia “will continue to be an operator through the reorganization,” as opposed to being purchased or liquidated. She said she expects MobileMedia “to come out (of Chapter 11) as a smaller but more capable company.” Oburchay foresees MobileMedia’s biggest challenge will be finding a suitable person to lead the company. “MobileMedia knows and the market knows they need a strong operating person … A turnaround team is in place now, but ultimately they need someone with experience in this type of industry.”
Consultant Joseph Bondi of Alvarez & Marsal Inc. will lead MobileMedia’s effort to resolve financial problems and get operations back on track.
MobileMedia said it has adequate cash to fund operations and pay employees through its bankruptcy period.
Chapter 11 shouldn’t be viewed as an end, but the first step in restructuring, said spokeswoman Krista Grossman. “MobileMedia believes the Chapter 11 filing is a decisive step toward resolving the company’s financial and operational challenges,” she added.
“It makes the most sense for business and for customers,” Grossman continued. “The customers will not be affected. That’s MobileMedia’s message.”
One customer believes MobileMedia is abandoning the indirect, or reseller, market for the direct market to increase revenue. Alexander Ott is president of Affordable Message Center, which sells equipment and services for a variety of carriers to smaller resellers, and operates an alphanumeric dispatch center.
“We’ve noticed their reps and operational people are moving toward the direct side,” said Ott.
David Honig, director of national sales for AMC, said MobileMedia was represented only by direct side sales, rather than indirect, at the Consumer Electronics Show in Las Vegas last month. “It was really awkward,” he said.
MobileMedia said it still strongly supports its resellers.
Grossman did comment, “The profit level in the reseller channel has not been satisfactory and we are working to improve profitability … managing our pricing more carefully.
“All our customers are important to us. We’re working with resellers to make sure they make more money and make sure we make more money,” she added.
In a Dec. 23 letter from MobileMedia Chairman and acting Chief Executive Officer David Bayer, addressed “Dear Customer,” he says, “MobileComm is here for the long term and your paging service will not be interrupted … We have the nationwide and local coverage, the technological expertise and infrastructure to support seamless operations and to serve your needs fully.”
Ott said MobileMedia is erroneously billing him, the company’s computer system is mixed up and little has been done to resolve the situation. MobileMedia for years has falsely billed AMC for overcalls, said Ott, which were later removed-about mid-1996-after which dispatch charges started appearing on AMC’s bills.
“The overcall charges were just renamed to dispatch charges,” and both are billed at 35 cents per call, explained Ott. As a dispatch provider, AMC obviously does not use other dispatch services, he continued. AMC programs its customers pagers for “no access” to their carrier’s dispatch center 800-number.
Ott said he contacted Chuck Nylander, MobileMedia’s vice president and general manager of indirect distribution, about the charges and that Nylander maintains that the dispatch charges are coming from somewhere, though Mobilemedia cannot determine from where.
“The problem is that MobileComm’s system will allow blocked calls to go through,” said Ott. “They cannot explain why a PIN number that is blocked goes through their dispatch or through their Web site … direct 800 number or local access numbers.” Ott said a paging customer with a MobileMedia account can make-up a PIN number and the company’s dispatch center will accept it.
“We have acknowledged before there have been problems with the computer systems … integrating,” said Grossman. She said MobileMedia continues to work to resolve them. In the meantime, the company is working with individual customers to solve problems, she added.
AMC also is being billed for accounts it has tried to cancel through MobileMedia’s online access. However, said Ott, if after a cancellation is entered and the computer finds a unique characteristic in a customer’s profile, the cancellation is not registered.
Ott added that MobileMedia recently stopped itemizing bills and he cannot distinguish what he is being charged for, and if the charges are legitimate.
Nine months ago, AMC’s net additions with MobileMedia were between 300 and 400 per month, said Ott. “Today we’re taking off 200 to 300 per month,” he said, noting those paging users are still AMC customers, but now have different carriers.
Another MobileMedia reseller, Multi Communications of New York, operates eight stores and has 20,000 units in service, spread chiefly among four carriers. MultiComm President Randy Stewart reported trouble using MobileMedia’s online system to close customers’ accounts, and said cancellations are registered only about half the time. He, too, said he is billed incorrectly for overcalls.
Stewart said he tried closing his company’s MobileMedia account, but that has not been done, and he still receives bills. Today MultiComm has 900 MobileMedia users, down from 3,600 subscribers six months ago, but is being billed for about 3,000, Stewart asserted.
Stewart also said MobileMedia has contacted his customers and told them MultiComm is going out of business. He said MultiComm’s customers were offered a service upgrade if they terminated their current account and opened a direct account with MobileMedia.
Parrot Cellular, which resells MobileMedia’s paging services in California, said it is fed up with the carrier’s lack of support, but feels trapped. Customers who experience problems with their service often blame the reseller, but switching them to a new service plan with another carrier is difficult because that requires customers to switch their pager numbers.
“We’re not happy with our service,” said a spokeswoman for the Campbell, Calif-based company, which has 28 retail stores. Prior to MobileMedia’s Chapter 11 filing, Parrot said MobileMedia has not provided them any straight answers about its dire financial situation and future plans.
A spokeswoman for Chicago reseller Rayco Communications said the company has experienced billing problems with MobileMedia, but reported no problems with service. Recently, Rayco was incorrectly billed for 4,000 overcalls for one month, and 200 overcalls in another month.
“We knew there was something wrong with their computer,” said the Rayco spokeswoman. She said the re
seller, which operates two stores, pays what it owes and has not had any conflict with MobileMedia or customer complaints about th
e carrier. “We know they merged … it takes a while to get the kinks out.”
