A New Page In Beeper Business
For years, a paging service mostly consisted of one user sending a phone number to another user, who in turn found the nearest phone and called the sender's line. But that's changing.
Under pressure at one end from more glamorous wireless competitors such as cellular, and at the other end from small, cheap, no-frills paging operators, the top industry players are reinventing themselves.
To revive flagging growth, paging operators are building advanced wireless networks, sloughing off low-revenue subscribers, and planning to offer more high-profit services such as two-way messaging, text-based messaging, email, and, eventually, voice mail.
"The main focus is on advanced services," said Janine Oburchay of Bear Stearns.
In the future, the most successful companies will be those that utilize the advanced networks and find new, lucrative uses for their pagers. At the head of the class, analysts agree, is SkyTel Communications (SKYT).In an industry in which profits are scarce, Jackson, Miss.-based SkyTel said last week that it expects to make a profit in the fourth quarter, and that it will make its first full-year profit in 1999. Analysts surveyed by First Call Corp. are projecting a gain of 64 cents a share next year, but the company said it might beat that estimate.
SkyTel, which has 1.5 million users, was the first operator to start rolling out a national network based on superior "Reflex" family technology. Though the company endured some painful early moments, analysts say it has about a two-year head start on its competitors. It's also struck a prominent deal with Bloomberg Business News to transmit its data over SkyTel pagers.
"SkyTel has really been leading the way," said Chris Larson of Prudential Securities.
Not surprisingly, investors have thrown their weight behind SkyTel. Its stock, now at about $22 a share, towers above most of its competitors and is only slightly off its 52-week high.
Its main rivals, by contrast, have suffered at the hands of investors. Paging Network, (PAGE), the largest pager company with 1 million customers, is off 75 percent from its 52-week high to 3 15 1/6. The company announced Tuesday that problems with its restructuring would crimp results through the first half of 1999.
Similarly, PageMart Wireless (PMWI) is about 50 percent off its 52-week high. Metrocall (MCLL), the second largest U.S. pager with more than 5.5 million subscribers, is down about 45 percent. And Arch Communications (APGR), the third largest carrier with 4 million subscribers, is down nearly 80 percent.
Echoing SkyTel, PageMart is initiating service of a more limited version of advanced services, starting with "guaranteed messaging." Yet analysts expect that it will take awhile to work out the kinks -- a potential turnoff to customers.
MetroCall will avoid building its own advanced network, at least for now, by piggybacking on PageMart's network. PageNet, meanwhile, plans to offer services on its advanced network by the middle of next year.
Other companies to watch are BellSouth Wireless Data, a unit of BellSouth (BLS), AirTouch Paging, a unit of AirTouch Communications (ATI), and TSR Wireless LLC, the 7th largest carrier but the biggest private paging company.
Yet "the market probably can't support more than five or six advanced carriers," cautioned Darryl Sterling, a wireless communications analyst at The Yankee Group, a Boston-based research firm. He expects to see more industry consolidation, particularly among the hundreds of smaller, no-frills carriers.
In any event, it'll be several years before the leading paging carriers are providing full-blown advanced services. At the end of 1997, there were more than 40 million paging users, but fewer than half a million subscribed to advanced services. "But that's changing rapidly," Prudential's Larson said.
Still, analysts say the industry has great leadership, the technology is cheaper than other forms of wireless and there are sundry future applications, especially involving the Internet and "telemetry," that is, using pagers to communicate with machines such as alarms and appliances.
"Paging is going to be less associated with the actual device and more with the ability to provide an advanced platform for communications," Sterling said.