First MessageLink Inc. founder Don Buzzelli decided to take advantage of the paging industry’s consolidation frenzy by acquiring enough small paging carriers to reach 500,000 subscribers and $50 million in revenues.
Now the company’s president and chief executive officer is shifting to take advantage of the ongoing convergence between the Internet and wireless industries. His original plan eventually to sell the company to a larger paging carrier has changed: He’d like to merge with an Internet service provider.
“When I wrote the business plan two years ago, I thought the major carriers wouldn’t look at anybody under 500,000 subscribers,” he said. But in the time it takes to reach that figure, paging carriers are expected to be making deals in the multimillions. While Buzzelli has not ruled out joining with a paging carrier at some point, “an ISP will have more of an eye on us than a big paging company,” he said.
Buzzelli said ISPs face the same challenges as paging carriers-falling average revenue per user, increasing churn, high customer acquisition costs and an extremely competitive industry. But each has something to offer the other that may alleviate these concerns, he said. ISPs have the content, while paging carriers have the connection.
“I would envision we would provide ISPs with the ability to send the application they want over the paging product,” Buzzelli said. “They’re connected to their customers only when they turn on a computer. We’re attached 24 hours a day.”
And while he looks to form strategic relationships with ISPs, Buzzelli continues to acquire additional paging companies. The company recently completed its fifth acquisition, and today boasts 100,000 subscribers and $15 million in revenues, with an operating cash flow of $3 million.
MessageLink owns two companies in Southern California, two in Denver and one in Fort Lauderdale, Fla., totaling 24 storefronts in all. It has converted them to one accounting package and is in the process of converting to a common billing platform-InTouch II.
Looking forward, Buzzelli said he has letters of intent to acquire four others in the same areas.
“We plan to close those in the first quarter of 2000,” he said. “They will add an additional 160,000 subscribers to our current base,” with 45 storefronts in all.
Beyond that, Buzzelli said the company is looking at an additional seven or eight carriers in the same regions. He already has visited their sites and is evaluating their financial statements.
Although Buzzelli’s original plan called for MessageLink to have eight acquisitions by this time, he said the company is further along than expected in terms of subscribers.
“We are really ahead of schedule,” he said. “My first-year goal was to have 85,000 subscribers by now.”
Originally hoping for 25,000 subscribers in each market, he now is shooting for more than 100,000 in each, and expects 150,000 in Fort Lauderdale alone following the first quarter deals.
He also never expected to be in first-tier markets like Los Angeles.
“If we continue as we are today, we can reach our goal six months to a year ahead of schedule. We’ll either surpass that goal or get there quicker,” he said.
To do so, Buzzelli is seeking additional financing. His initial funding came through venture financing from CD Ventures and an $8 million credit facility from Finova Mezzanine, which he is negotiating to increase to $10 million. In addition, the company is in the due diligence process with a new credit facility for another $30 million.
