Technology News
Mon, 07 Feb 2000, 7:45pm EST
Metrocall Shows Paging Has Transformed Into Wireless Data: David Wilson
By David Wilson
Metrocall Ties Paging to Wireless Data: David Wilson (Update1)
(Commentary. Updates to reflect today's trading.)
Princeton, New Jersey, Feb. 7 (Bloomberg) -- ``Paging' has
the sound of obsolescence about it, like buggy whip, LP record and
Apple II computer.
``Wireless data,' on the other hand, conveys images of the
21st century: the Internet in the palm of your hand, information
on the run, access from anywhere.
Companies that built their business on paging, enabling
people to call someone who isn't near a telephone, are creating
networks that tap into the Net. They are also working to provide
two-way services that permit customers to ask for information they
want at any time.
That transition came into focus when Metrocall Inc., the
second-largest paging company, said last week that it will raise
$51 million from three investors: the investment firm of Hicks,
Muse, Tate & Furst Inc.; PSINet Inc., a provider of Internet
access, and Aether Systems Inc., a maker of software used to
transmit data over wireless networks.
The Alexandria, Virginia-based company also said it will
create a joint venture with the new investors to provide advanced
pagers that send and receive electronic mail, and enable users to
obtain access to Web sites.
Metrocall's competitors have also embraced wireless data.
Paging Network Inc., the industry's largest company, set up a unit
called Vast Solutions in June to help companies that plan to
provide wireless access to information. In October, WebLink
Wireless Inc. introduced the ``e-pager,' a wireless device that's
linked to an Internet address instead of a phone number.
WebLink took another step in December that demonstrated its
view of the future: changing its name. Before then, the company
was PageMart Wireless Inc.
Years of Decline
Judging by WebLink's stock price, the moves were well-
received by investors. Its shares more than quadrupled since the
company unveiled its e-pager. They jumped 57 percent in the last
four trading days, including a 4 1/4-point gain today to 26 1/4.
The latest gains reflected investors' interest in following
the lead of Hicks Muse, PSINet and Aether and putting their money
into paging. Metrocall soared 540 percent after the announcement
and closed today at 13, its highest price since June 1996.
Arch Communications Inc., a Westborough, Massachusetts-based
competitor that's offered to buy Paging Network for $1.36 billion
in stock and assumed debt, rose 62 percent to 8 15/16 during the
three-day period. Paging Network, or PageNet, tripled in a week
and closed at a six-month high of 3 1/2.
The rallies contrasted with the stocks' performance during
the past few years, when price cuts and competition from mobile
phones with built-in paging took a toll on the industry.
Metrocall's shares ended last week more than 60 percent below
their all-time high of 30 in September 1995. For Arch and PageNet,
the figure exceeded 90 percent. And WebLink's stock has traded
below its initial sale price of $13 for most of its 3 1/2 years as
a public company.
New Money
Hicks Muse agreed to invest $17 million in Metrocall. The
firm, based in Dallas -- also the headquarters of WebLink and
PageNet -- will pay $2.19 a share and own a 9.9 percent stake.
PSINet and Aether received the same terms. Each company will
appoint one director to Metrocall's board.
The amount of money is next to nothing for Hicks Muse, which
has invested more than $2.5 billion during the past two years in
media and telecommunications companies. None of those companies
were in the paging business, though.
Similarly, Herndon, Virginia-based PSINet is the first
Internet service provider to make a significant investment in a
paging company, said Cynthia Hswe, an analyst at Strategis Group,
a Washington-based research firm focusing in telecommunications.
Aether, the third investor, makes software that enables
companies to provide data over a range of wireless networks and
devices. Shares of the Owings Mills, Maryland-based company have
soared more than tenfold since it went public last Oct. 21.
Metrocall's largest common shareholders will also include
AT&T Corp.'s wireless unit, which agreed to take common stock in
exchange for preferred stock received when the company bought its
advanced messaging division in October 1998. The swap will give it
a 16.9 percent stake.
The two companies reached agreement on another transaction as
well. Metrocall will buy NationPage, a paging service in New York,
New Jersey and Pennsylvania, from the AT&T subsidiary for $13
million.
New Services
Metrocall's proposed venture with its new investors will
offer wireless data and paging as part of a package of services
for home offices and small businesses. The package will include
``broadband' Internet service, which provides relatively fast
access to Web sites, and online storage of e-mail.
The company already has a service called OnTheGoInfocast,
described as ``your wireless link to the Internet' on its Web
site. Paging customers who sign up for the service can receive
news, sports and weather information of their choice.
Having firms such as Hicks Muse, PSINet and Aether behind its
expansion will help, as wireless data networks don't come cheaply.
When WebLink released its fourth-quarter results last week, the
company said its network cost more than $540 million, including
interest expense and operating losses.
Along with the e-pager, WebLink is gearing up to provide two-
way data service. In its fourth-quarter earnings release last
week, the company said the first ``subscriber devices' -- the
successor to pagers -- had just arrived from Motorola Inc.
Glenayre Technologies Inc. will also make devices for use with the
network.
Arch's takeover of PageNet, which the company expects to
complete by June, will bring Vast Solutions under its corporate
umbrella. The unit works with corporations on providing wireless
access to information.
The combined company will only have a 19.5 percent stake in
Vast Solutions, though. The rest will go to holders of PageNet's
bonds and stock, which have risen in recent weeks on speculation
that the stake's value is increasing.
Those gains aren't surprising. After all, the Internet has
allowed paging companies to reinvent themselves as providers of
wireless data -- and to avoid going the way of buggy whips.
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