NEW YORK-Metrocall Inc. announced an escalation in paging users in two markets where broadband personal communications services have been launched, discrediting the theory that the introduction of broadband PCS services will kill the paging industry.
During the first quarter, Metrocall gained 12,500 net customer additions in its Washington, D.C./Baltimore market, where Sprint Spectrum L.P.’s personal communications services have been offered for more than a year, said William L. Collins III, president. In the Richmond-Tidewater area of Virginia, where PrimeCo Personal Communications L.P. began offering service early this year, Metrocall’s net customer additions in the first quarter totaled 9,700.
“We want to put any unrealized fears to rest about (the threat of) broadband PCS,” Collins said. “Paging is not just surviving with broadband PCS, it’s thriving.”
Collins said release of subscriber numbers in markets where there is direct competition from broadband PCS “is a one-time event that won’t be repeated regularly going forward due to the competitive nature of our business.”
Metrocall reported first quarter net revenues of $60.6 million, compared with $57 million the prior quarter, and cash flow of $16.3 million vs. $15.2 million during the fourth quarter of 1996.
With net subscriber growth of 85,213, the Alexandria, Va.-based company closed the first quarter of 1997 with 2.2 million paging units in service, making it the fifth largest paging company in the country, said Vincent D. Kelly, chief financial officer.
At the same time, average monthly revenue per subscriber was $8.31, a 10-cent increase compared with fourth quarter 1996. “We are focusing on selling vs. leasing, and in the reseller channel, we are not going after units at any price,” he said.
Churn across all of the carrier’s distribution channels averaged 2.11 percent. “Churn has remained virtually unchanged since March 31, 1996-a significant accomplishment, given the integration efforts that are ongoing for the four acquisitions we closed in 1996,” Kelly said. “A great deal of industry concern has been focused on the integration problem of our larger competitor; we feel these results demonstrate that a consolidation strategy can be successful if pursued and managed correctly.”
The integration of Metrocall’s 1996 acquisitions of Message Network, Parkway Paging and Satellite Page has been completed, he said, while “successful integration of A+ Network continues to be one of our highest priorities.”
Metrocall’s acquisition of PageAmerica Inc. of New York, will add another 210,000 customers to its subscriber base, Kelly said.
Besides churn and acquisition integration, another key concern of the paging industry is the need to use capital more efficiently and reduce leverage-the amount of debt compared to equity in a firm’s capital structure.
“Metrocall has been at the forefront of this strategy for quite some time and has, in effect, the lowest leverage ratio of any public paging company-5.02 times at March 31,” Kelly said. “For the second consecutive quarter, operating cash flow equals or exceeds capital expenses.”
Metrocall has drawn down about $180 million from a $350 million bank credit facility that requires a leverage ratio of six times or less. Assuming no cash flow growth, the company’s borrowing of about $25 million to help finance its pending PageAmerica purchase will raise its leverage ratio to 5.4 times, Kelly said.
