Arch Wireless, Inc.
Address:
1800 West Park Drive, Suite 250
Westborough, Massachusetts 01581
U.S.A.
Telephone: (508) 870-6700
Fax: (508) 366-8966
http://www.arch.com
Statistics:
Public Company
Incorporated: 1986 as Arch Communications Group Inc.
Employees: 9,000
Sales: $642 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: ARCH
NAIC: 513321 Paging; 513322 Cellular and Other Wireless Telecommunications
Company Perspectives:
Arch Wireless provides two-way messaging and universal access to your preferred information sources, giving you the ability to communicate with everyone, anywhere, anytime and in every direction. Arch Wireless keeps you connected to the wireless web, so you can receive continuous, automatic updates--from stock quotes, to news, to sports, to weather. Our 'Arch-smart' service keeps people on the go connected to the right information at the right moment. We are there when you need us most. Arch is your net@hand.
Key Dates:
1986: Company is founded as Arch Communications Group, Inc. and provides paging products and services in Boston and New England.
1992: Arch Communications goes public.
1998: Arch acquires MobileMedia Corp., the fifth largest paging company in the United States, for $649 million.
2000: Arch completes its acquisition of Paging Network Inc. (PageNet) to form the largest paging company in the United States; Arch changes its name to Arch Wireless, Inc.
Company History:
With a new name and a new corporate identity, Arch Wireless, Inc. (formerly Arch Communications Group, Inc.) is positioned to benefit from the growing demand for wireless two-way messaging services and the expansion of the wireless Internet. Founded in 1986 as a local and regional provider of paging products and services in the Boston area and New England, Arch grew by completing more than 30 mergers and acquisitions. For most of the 1990s Arch benefited from strong consumer demand for traditional paging services. In 1998 Arch acquired MobileMedia Corp. to form the second largest paging company in the United States. Around this time consumer demand for advanced messaging services began to take hold. In 2000 Arch acquired PageNet and became the largest paging company with nearly 17 million subscribers. Arch Wireless is now betting that demand from consumers and businesses for its advanced messaging services will more than offset the decline in its traditional paging business.
Growth Through Acquisitions: 1986-97
Arch Communications Group, Inc. was founded in 1986 to provide traditional paging services to the Boston area. In 1992 Arch went public and its stock began trading on the NASDAQ under the symbol APGR. In 1993 Arch gained a $55 million line of bank credit from a group of financial institutions headed by Bank of New York Co. Arch provided low-cost regional paging services focused on small to medium-sized markets. In New England the company was known as Page New England. It had grown in its first eight years by providing narrow-band wireless communications in underserved paging areas. In five years the paging industry grew more than 20 percent annually to more than 19 million subscribers in 1993. In recent years pagers became more sophisticated, allowing users to receive up to 500-character messages from a personal computer. Subscribers also could receive news headlines, sports scores, and stock quotes on the pagers. The introduction of vibrating pagers made them less intrusive.
In 1993 Arch was one of the fastest growing paging companies. Its subscriber base increased 60 percent to 400,000 users in 13 states, making it the fifth largest public paging company in the United States ranked by number of subscribers. Ranked ahead of Arch were PageNet, the largest paging business with 3.7 million subscribers, and MobileComm, Skytel, and PageMart. By 1994 Arch's larger rivals had launched digital nationwide services that enabled users to receive phone messages anywhere in the United States for a basic service fee ranging from $29.95 to $39 per month. PageNet was planning to spend $1 billion on a nationwide voice-messaging network that would allow subscribers to carry a pocket answering machine.
Arch grew by acquiring smaller paging companies, and the paging industry in general was going through a period of consolidation. From 1986 to 1994 the company made more than 25 acquisitions. In 1994 the company was expanding beyond its base in New England and the mid-Atlantic states to northern Illinois and Wisconsin and further into Florida. The company had yet to turn a profit, and for fiscal 1993 ending August 31 Arch reported a net loss of $5.7 million on revenue of $41.4 million. Nevertheless, the company reported strong operating cash flow, a standard performance measure for paging companies, and was able to increase its bank line of credit to $150 million. Keeping costs low was the key to Arch's strong financial performance.
In mid-1994 Arch launched Arch Nationwide, which relied on a consortium of paging companies to deliver messages. The system was slower than that of Arch's competitors and was priced around $19.95 a month. In August 1994 Arch lost out to PageNet in a Federal Communications Commission (FCC) auction of new nationwide frequencies, in which PageNet paid $200 million for three licenses.
By 1997 Arch had grown to more than four million subscribers, and the company relocated its national services division from Dallas to Tempe, Arizona. Its national services division provided turnkey paging services to companies such as US West Communications, which in turn sold paging services to consumers.
Becoming Second Largest U.S. Paging Company: 1998
In mid-1998 Arch announced that it would acquire MobileMedia Corp., the fifth largest paging company in the United States, for $649 million. Based in Fort Lee, New Jersey, and operating under the name MobileComm, MobileMedia was in bankruptcy. The acquisition gave Arch an additional three million customers for a total of more than seven million customers, making it the second largest paging company in the United States behind PageNet. Also in 1998 Arch sold off its broadcast tower and site management business to OmniAmerica Inc. for $38 million. The sale involved broadcast towers at 134 sites in 22 states.
Arch's growth had come from more than 30 mergers and acquisitions it had made since its inception in 1986. To consolidate its infrastructure, the company created a new customer-care system based on a Java application server and object-relational mapping technology from Novera Software Inc. and Informix databases.
During 1998 the company undertook a major reorganization, reducing the number of its geographically based divisions from seven to four, which were headquartered in Boston; Charlotte, North Carolina; Columbus, Ohio; and Phoenix. It also split its former national services division into separate national sales and services units. Arch's new organizational structure was expected to be fully implemented by mid-2000.
For 1998 the company reported total revenue of $414 million, up from $397 million in 1997. Net revenue--service and product revenue less the cost of product sales--increased four percent to $384 million from $368 million in 1997. Although the company's net loss increased from $181.9 million in 1997 to $206.1 million in 1998, its EBITDA (earnings before interest, taxes, depreciation, and amortization) grew from $130.3 million in 1997 to $141.6 million in 1998. Net revenue and EBITDA were two standard measures of performance in the paging industry.
In its annual report for 1998, Arch noted that 'the tremendous growth of one-way numeric paging since the early 1990s slowed while consumer demand for today's exciting new advanced messaging services began to take hold.' Traditional numeric display paging over conventional networks continued to account for more than 80 percent of the units in service. The coming transition from traditional paging to advanced messaging was marked by the entrance of two paging carriers offering services on NPCS (national personal communications services) networks.
In October 1998 Arch launched an electronic distribution channel called the Arch Paging Online Store. The service gave customers the opportunity to purchase pagers and Arch paging services over the Internet and was available at the company's web site.
Adding Wireless Data Services: 1999-2000
By 1999 Arch and other paging companies, facing a decline in the traditional paging business, were betting on executing their wireless data strategies. Wireless data was at the heart of the two-way messaging revolution. Eventually, consumers would decide whether they preferred to receive wireless data over their pagers, personal digital assistants (PDAs), or cell phones. Mobile phone carriers such as Verizon Wireless and Sprint PCS began to offer wireless data access to e-mail and other information over cell phones. Arch offered wireless data service on a pager-like device made by Motorola Inc. and a snap-on messaging module for the Handspring Visor.
In November 1999 Arch announced that it would acquire its larger rival PageNet, or Paging Network Inc., of Dallas, Texas, for $1.36 billion in stock. The acquisition reflected the declining state of the paging business as more than 70 million Americans now owned wireless phones. At the time PageNet was facing a possible Chapter 11 bankruptcy filing; its latest filing with the Securities and Exchange Commission (SEC) raised questions about the company's ability to service its long-term debt. A key component of the complex deal involved PageNet bondholders, who would become stockholders and own 44.5 percent of the combined company, or more than $500 million worth of stock. PageNet had $1.2 billion of debt outstanding in senior notes and $804 million in bank debt. The combined company's outstanding debt would be reduced to $1.8 billion, 46 percent less than before the merger. In addition, PageNet would spin off its Vast Solutions business unit as a separate company providing wireless services. PageNet stock and bond holders would own about 80 percent of Vast Solutions, with Arch shareholders owning the remaining 20 percent. As of November 1999, Arch had seven million subscribers, and PageNet had 9.7 million. PageNet had not shown a profit since going public in 1991. Its assets included valuable licenses to provide paging services and a comprehensive two-way paging network suitable for carrying e-mail and other types of information.
Also in November Arch and Juno Online Services, Inc. announced a strategic alliance whereby they would market co-branded pagers and an integrated messaging service to Juno's more than 7.6 million subscribers. The messaging service would provide users with pager notification when they received a message in their Juno mailbox. Arch, in turn, gained direct access to millions of potential wireless messaging customers.
For 1999 Arch reported total revenue of $642 million, net revenue of $607 million, and EBITDA of $209 million. In spite of an overall net loss of $285.6 million, the company was pleased with its financial performance and expected to be able to fund future growth through operations rather than from borrowing. Its operating margins were among the best in the industry.
Arch continued to form strategic alliances during 2000. In January the company announced that it would gain access to thousands of small and mid-sized business through an alliance with BizBuyer.com, a leading on-line business-to-business marketplace. In February Arch and employeesavings.com, a leading provider of Employee Sponsored Value Plans (ESVPs) to Fortune 1000 companies, announced a marketing venture that gave Arch access to more than one million corporate employees and family members. As part of the venture Arch would provide special offers on its services to the employees and their families served by employeesavings.com.
In March 2000 Arch was selected by America Online Inc. (AOL) to provide two-way messaging capabilities for AOL's new Mobile Messenger service. The service offered AOL's e-mail and Instant Messenger service to customers using Arch wireless devices. Under the three-year contract AOL would purchase wholesale access to Arch's paging network. As a result, Arch would be able to offer AOL services to its paging service customers. Arch's network had enough existing capacity that no initial investment was needed to support new sales to AOL. BellSouth Corp. would provide the network for AOL's wireless messaging service, which also would be available through Sprint PCS handsets and handheld devices made by Nokia Inc.
In August Arch reached an agreement with Movil@ccess, Mexico's first personal interactive communications (PIC) provider, that would allow Arch subscribers to roam within major metropolitan areas in Mexico. Under the agreement Movil@ccess customers would be able to roam throughout the United States.
An agreement with OracleMobile, a subsidiary of Oracle Corp., gave Arch users access to Internet content from their devices without requiring a Web browser through a service called Ask@OracleMobile. Among the Ask@OracleMobile services Arch customers could receive were news, eBay, movie guide, package tracking, stock quotes, traffic, flight status, driving directions, horoscope, lottery, dictionary, translations, and weather. Customers also could receive 'Instant Alerts' triggered by specific events.
Before Arch was able to close its acquisition of PageNet, a rival bid was submitted by Metrocall Inc., the third largest U.S. paging company, for $1.57 billion. Meanwhile, PageNet was forced to file an involuntary Chapter 11 bankruptcy petition, as the result of actions by creditors holding $3.5 million worth of PageNet bonds that were in default. PageNet responded to Metrocall's offer by filing a voluntary Chapter 11 bankruptcy petition and rejecting Metrocall's bid. Subsequent litigation revived Metrocall's offer, but with PageNet's board of directors favoring Arch, Arch completed its acquisition of Paging Network Inc. in November 2000. With the acquisition Arch gained 5,000 employees and a nationwide two-way network over which it could sell wireless data services. Prior to the acquisition Arch's network covered only 25 percent of the United States, forcing it to lease portions of WebLink Wireless Inc.'s network.
To reflect its transition from a traditional paging company to one that provided two-way Internet messaging and mobile information services, the company changed its name in September 2000 to Arch Wireless, Inc. Its ticker symbol was changed from APGR to ARCH and the corporate tagline became Net@Hand. The company successfully introduced its new two-way messaging services under the Arch Webster brand name in August 2000. The first product was the Arch Webster 100, a two-way interactive messaging service that enabled users to communicate via e-mail using a Motorola T900 interactive messaging device. Other developments included the debut of the Arch Message Center service, which allowed customers to consolidate office and Internet e-mail accounts, address books, schedules, and online files and access them from a Web-connected desktop or through an Arch Wireless messaging device.
With nearly 17 million subscribers, Arch was in a strong position to participate in the growth of interactive messaging and wireless mobile data--an industry projected to grow by 30 percent or more annually over the next five years, from a $6 billion industry to a $25 billion industry. Target markets included corporate accounts, which Arch serviced through its 1,700-member sales force. Two-way messaging was used by corporate field sales personnel, on-site repair workers, and mobile professionals in general, among others. Arch also marketed its services to consumers through numerous retail partners, including home improvement retailer Lowe's, Service Merchandise, and many others. The company also was developing industry-specific services, and in July 2000 Arch reached an agreement with Preferred Healthcare Staffing, Inc. to provide two-way wireless messaging to the company's national staff of healthcare professionals.
Arch claimed that its ReFlex 25 network offered more reliability and was less costly to operate than national PCS networks. ReFlex 25 covered more than 90 percent of the U.S. population and operated nationwide on a standard digital protocol, whereas PCS networks were designed primarily to carry voice signals and operated over a patchwork of digital protocols. Arch also was moving into providing Internet-based wireless information through strategic alliances with companies such as America Online, MyWay.com, OracleMobile, GoAmerica, Inc., and Juno Online Services, Inc.
Principal Competitors: WebLink Wireless Inc.; Skytel; Metrocall Inc.; Verizon Wireless; Sprint PCS; Vodaphone AirTouch plc; BellSouth Mobility.
Further Reading:
'Arch Acquires MobileMedia,' HFN: The Weekly Newspaper for the Home Furnishing Network, August 31, 1998, p. 59.
Collins, Jonathan, 'Once You Get 'Em, How Do You Keep 'Em?,' Tele.com, March 20, 2000, p. 17.
Files, Jennifer, 'Addison, Texas-Based Paging Company to Merge with Communications Firm,' Knight-Ridder/Tribune Business News, November 8, 2000.
------, 'Debts Land Addison, Texas-Based Paging Network in Bankruptcy,' Knight-Ridder/Tribune Business News, July 18, 2000.
------, 'Paging Giant Challenges Rival's Bid for Troubled Addison, Texas, Firm,' Knight-Ridder/Tribune Business News, July 20, 2000.
Freeman, Michael, 'Towers as Cash Magnets,' Mediaweek, April 20, 1998, p. 14.
Howe, Peter J., 'America Online Picks Westborough, Mass., Paging Firm for New Service,' Knight-Ridder/Tribune Business News, February 29, 2000.
------, 'Westborough, Mass.-Based Paging Company to Acquire Rival,' Knight-Ridder/Tribune Business News, November 8, 1999.
Levin, Rich, 'Paging Company to Create Java Customer-Care System,' InformationWeek, August 24, 1998, p. 26.
'Pager, Pager, Who's Got the Pager?,' Business Week, September 4, 2000, p. 54.
'Paging Company to Provide Tempe with 300 Positions,' Business Journal, July 4, 1997, p. 4.
Rosenberg, Ronald, 'Massachusetts' Arch Communications Defies Predictions for Pager Industry,' Knight-Ridder/Tribune Business News, September 20, 1994.
Source: International Directory of Company Histories, Vol. 39. St. James Press, 2001.
