MasTec, Inc.

views updated Jun 27 2018

MasTec, Inc.

3155 Northwest 77th Avenue
Suite 110
Miami, Florida 33122–1205
U.S.A.
(305) 599–1800
Fax: (305) 406–1908
Web site: http://www.mastec.com

Public Company
Incorporated: 1994 as MasTec, Inc.
Employees: 7,000
Sales: $472.8 million (1996)
Stock Exchanges: New York
SICs: 1623 Water, Sewer and Utility Lines; 8741 Construction Management; 8742 Telecommunications Engineering Consulting Services

MasTec, Inc., a diversified holding company, is one of the world’s leading independent contractors specializing in the construction of telecommunications infrastructure. The company was founded in 1994 by the merger of publicly traded Burnup & Sims, Inc. and the privately owned Church and Tower Group, two established names in the U.S. telecommunications-construction services industry based in Florida. The principal business of the company and its family of subsidiaries consists of the design, installation, and maintenance of the outside physical plants for telephone and cable television (CATV) communications systems, public utilities, and the traffic-control and highway-safety industry. Additionally, MasTec builds coaxial fiberoptic cable networks and wireless-antenna networks. Inside buildings, the company installs and maintains telecommunications equipment and communications networks. MasTec’s customers include operators of telecommunications, CATV and wireless-communication companies, as well as banks, brokerage firms, institutions of higher learning, medical facilities, multiple-product industries, and government agencies. From 1994 to 1996 MasTec revenues increased 325 percent, growing from $111.29 million to $472.8 million. A substantial part of the company’s domestic revenues derives from services to BellSouth Communications and international revenues come primarily from Telefonica de España.

The Forerunners: 1929–1994

In 1929 two unemployed carpenters—Russell Burnup and Riley V. Sims—founded Burnup & Sims to provide design, construction, and maintenance services to the telephone and utilities industries. During the years of the Great Depression, the two industrious men established an office in West Palm Beach, Florida, and by 1936 had a small fleet of trucks and staff. Burnup & Sims’ first telecommunications projects occurred the following year at Cape Canaveral, where it was responsible for burying 85 miles of cable.

The company contributed to national defense during World War II by building airfields and telephone systems. After the war, Burnup & Sims became involved in the laying of underwater cable from Florida to Puerto Rico, and from there to Barbados, for such companies as AT&T and General Telephone. Projects then took on a greater geographical scope, as Burnup & Sims established underground telecommunications systems and built radio towers in Costa Rica, Barbados, Trinidad-Tobago, and Venezuela.

In 1968 Burnup & Sims went public, and the shares sold helped raised capital for new, more ambitious projects. The company is remembered for constructing the first fiber-optic link between Chicago and Washington, D.C. and, according to historian George P. Oslin in The History of Telecommunications, for doing “a large and very profitable business installing cables for Cable TV.” In fact, by 1982, Burnup & Sims “had installed a fifth of the 500,000 miles of TV cables in use.” The company also operated a number of telecommunications subsidiaries as well as Floyd Theaters, Inc., a movie picture chain; Lectro Products, Inc., a CATV power-protection company; and Southeastern Printing, Inc., a printing business.

By the end of the decade, however, unsettled economic conditions, changes in utility spending, and aggressive competition for contracts brought tough years for Burnup & Sims. Moreover, budgetary constrictions led certain telecommunications companies to postpone payments and to cut expenditures for plant construction and maintenance. By the end of fiscal 1993 Burnup & Sims’ losses amounted to $9.31 million, and senior management was seeking a buyer for the company.

Church & Tower of Florida, Inc. (CTF) was incorporated in 1968 as a privately owned company to construct and service telephone networks in Puerto Rico and Miami. However, the company had quickly overextended itself in Puerto Rico and could not build the telephone-infrastructure networks needed in Miami. When Miami-based CTF experienced financial difficulties, the company’s owner asked his friend, Cuban immigrant Jorge L. Mas Canosa, to help save the business. In exchange for half ownership of CTF, Mas Canosa began to manage the company in 1969.

Seeking to improve the business, Mas Canosa himself climbed down into ditches, manholes, and trenches to observe the workers’ construction methods. He sought advice from telephone company and government inspectors and studied books about the most efficient and newest construction methods. As a result, he led the company into a fast-track, cost-effective construction program that won recognition for consistent professionalism, commitment to excellence, and cost-effective methods. BellSouth Telecommunications, Inc. awarded CTF a long-term contract for projects in the greater Miami and Fort Lauder-dale areas. By 1971 Mas Canosa had turned the failing company around, borrowed $50,000, and bought the remaining shares of the firm.

Jorge Mas, Mas Canosa’s eldest son, began working at CTF in 1980 and became company president in 1984. At this time the development of new technologies and the removal of legal and regulatory barriers were laying the foundation for corporate alliances among the nation’s largest telephone, CATV, computer, entertainment, and publishing businesses. Telephone companies were planning to invest billions of dollars to install fiber-optic systems to bring the new technologies to homes and businesses. A rapid increase in Florida’s population was placing the existing telecommunications infrastructure under tremendous strain.

In 1990 Jorge Mas established a new subsidiary, Church & Tower, Inc. (CT), to engage in selected construction projects in the public and private sectors. For some time the Mas family had been thinking about taking the company public, but 1992 Hurricane Andrew’s passage over southern Florida delayed the plans. The CTF Group, owner of a long-term maintenance contract with BellSouth, was responsible for reconstructing the damaged telecommunication infrastructure of Miami. In the wake of the hurricane, the senior managements of Burnup & Sims and of the CTF Group realized their mutual interests. Employees from both companies began talking to each other; top management met and struck a deal.

The Defining Year: Founding of MasTec, Inc.

On March 11, 1994—in a reverse acquisition—the privately owned Church & Tower Group acquired 65 percent of the outstanding common stock of publicly traded Burnup & Sims, Inc. The name of Burnup & Sims was changed to MasTec, Inc., the Church & Tower Group became a wholly owned subsidiary, and the senior management of the CTF Group took over leadership of the new entity; Jorge L. Mas Canosa became MasTec’s chairman and Jorge Mas was named president and chief executive officer. Mastec was now a regarded as a “minority business enterprise,” publicly traded on NASDAQ under the symbol MASX.

At this time MasTec was one of the nation’s leading companies of its kind and the fifth-largest Hispanic-owned public company. To express their entrepreneurial spirit as concisely as possible, MasTec’s management adopted the former Burnup & Sims slogan “Opening the Lines of Communication” and added their own vision of the future: “Throughout the World.”

Following the acquisition, one of President Jorge Mas’ first moves was to express the company’s philosophy of leadership in word and deed. In an introduction to the company’s 1994 annual report, he asserted that “MasTec’s improving performance and future capabilities are in large part due to the commitment of its 2,400 employee-owners … who work hard, work smart and complete their jobs on time and on budget.” In April 1994 he had already set up this success-driven philosophy by distributing five shares of MasTec stock to each employee and encouraging all to invest in their company’s benefits program.

Realizing that the telecommunications industry was fragmented and operated mainly by family-owned businesses, Mas-Tec initiated a program for acquiring profitable, market-dominant companies in high-growth metropolitan areas nationwide. MasTec launched this acquisition program with the purchase of Designed Traffic Installation, Inc., an installer of traffic control systems in southern Florida; and Buchanan Contracting Company, Inc. the holder of two master contracts with BellSouth in Memphis, Tennessee, and Montgomery, Alabama. Furthermore, BellSouth awarded MasTec contracts for telephone networks in Nashville and Franklin, Tennessee, as well as for networks in four of North Carolina’s fastest-growing cities.

Company Perspectives:

“MasTec was created from the combination of two telecommunications construction and service companies with similar entrepreneurial spirits—Burnup & Sims and Church & Tower…. The similar entrepreneurial histories, blended cultures, experienced operators and powerful strengths of Burnup & Sims and Church & Tower, now MasTec, fuel the growing momentum that will drive MasTec into the next century.”

From the beginning and throughout MasTec’s evolution as a provider of telecommunications services, long-term (master) contracts, such as those with BellSouth, and short-term contracts with alternate-access providers—such as MCI Telecommunications Corp. and US West Communications Services, Inc.—were the backbone of the company’s business operations. The deregulation process had enabled alternate-access providers to enter the territory of the regional Bell operating companies, to build networks and sell services to high-volume users, such as those clustered in downtown office buildings and commerce parks. Several MasTec subsidiaries provided fast-track construction services to these competitive-access companies.

Another item on MasTec’s business agenda for growth was to increase the Latin American presence it had acquired from the merger. By the mid-1990s many international telecommunication companies had been lured to South America by its improving economy and the privatization of telecommunications, including CATV services. These companies, however, had neither the personnel nor the in-country resources to implement system upgrades of the aging infrastructure for telecommunications. They needed the services of independent contractors who could apply cost-effective methods to the upgrade and construction of these infrastructures. According to its 1994 annual report, President Jorge Mas believed that MasTec had “the cultural ties, management expertise and existing regional operations to serve these needs.”

Consequently, the company’s international subsidiaries secured contracts for upgrading telephone networks in Guayaquil, Ecuador; for building 35,000 telephone lines in San Salvador, El Salvador; and for constructing fiber-optic facilities in Caracas, Venezuela. Furthermore, Video Cable Comunicación, S.A. awarded a design-build contract to MasTec Argentina, S.A. for upgrading its CATV system in Buenos Aires from 30 channels to 100. This is believed to have been the first contract of its kind in Latin America. At year-end 1994 MasTec had met the challenges of establishing itself as a new company; it reported a net profit of $7.5 million on revenue of $111.29 million.

1995 Consolidation: Divestitures and Acquisitions

Ready to seize opportunities created by unprecedented changes occurring in the telecommunications industry, MasTec decided to divest itself of some subsidiaries—part of the Burnup & Sims acquisition—that were not related to its core operations: Floyd Theaters, Inc., Lectro Products, and Southeastern Printing, Inc. The proceeds from the sale of these operations was used to reduce debt and finance the acquisition of other companies related to MasTec’s core business.

MasTec then acquired Utility Line Maintenance, Inc., a company engaged in clearing right-of-ways for utilities in southeastern United States. Church & Tower Fiber Tel, Inc. expanded its business to include installation of “smart highway” systems, that is, electronic systems that control highway messaging and traffic signalization. The acquisition of Tri-Duct Corporation brought two more BellSouth master contracts in Huntsville and Decatur, Alabama, thereby complementing existing contracts in Montgomery, as well as in Memphis. Consolidating administrative functions in these adjacent geographic areas reduced the company’s operating expenses and enhanced service capability in the region. MasTec won new contracts to install telecommunications networks in the Dallas/Fort Worth area; to manage construction for Metro Dade Water & Sewer Authority’s Pump Station Program; to install part of MediaOne, Inc.’s new CATV network in metropolitan Atlanta; and to develop and maintain infrastructure telephone services in eastern Colorado for US West.

To continue expanding into foreign countries, MasTec had to compete with large international companies having significantly greater experience and resources. The company acquired a 36 percent equity interest in Supercanal, S.A., a CATV operator in Argentina, and equity interests ranging from 14 percent to 35 percent in four other companies. The company also won a contract from The Virgin Islands Telephone Co. to restore damaged telephone facilities on the island of St. Thomas, U.S. Virgin Islands; and a contract from Tomen Corp., a leading Japanese telecommunications company, for the construction of 35,000 telephone lines in Manila.

By the end of 1995 the company had combined the strengths of its subsidiaries and organized its operations into three principal business segments: telecommunications and related construction services, CATV infrastructure construction and maintenance, and general construction services. Due primarily to acquisitions made in 1994 and expansion into new contract areas, in 1995 MasTec’s total revenues increased by approximately $63 million, or 57 percent, from $111.29 million in 1994 to $174.58 million in 1995. Providing telecommunication-construction services to regional Bell operating companies, especially to BellSouth, accounted for a majority of the company’s growth.

Toward the 21st Century

As MasTec entered the second half of the 1990s, the telecommunications industry continued to undergo fundamental changes. The U.S. Telecommunications Act of 1996, agreements among countries in the European Union and continuing privatization and regulatory initiatives in Latin America were removing barriers to competition. Furthermore, the U.S. government auctioned off radio-frequency bandwidth for the creation of personal communications systems (PCS), which are pure digital networks superior to the traditional analog-cellular systems. Customers’ growing demand for enhanced, integrated voice, video and data telecommunications emphasized the limitations of traditional networks and increased the need for the installation of PCS networks.

MasTec competed in the new markets created by these worldwide developments by concentrating on additional relevant acquisitions and expansion of its core telecommunications services through contracts for: 1. upgrading existing networks to broadband technology, such as fiber optic cable; 2. becoming a major infrastructure-construction provider to large telecommunications companies who needed to reduce construction costs by outsourcing their outside-plant work to independent contractors; 3. constructing infrastructures for new service providers entering previously monopolistic markets; and 4. performing inside-wiring services to install intra-company communications networks having the greater bandwidth capacity required for the powerful multimedia computers being brought into businesses.

In a major acquisition, MasTec bought Sintel, S.A., the engineering and installation unit of Telefonica de España, S.A., Spain’s national telephone company. Sintel was the leading builder of telecommunications infrastructures in Spain and had operations in Argentina, Chile, Peru, and Venezuela. Although Sintel’s revenues, like those of the former Burnup & Sims, were spiraling downward at the time of its acquisition, the purchase actually merged the strengths of both the American and the Spanish company: it more than doubled the size of MasTec, gave it access to Sintel’s established operations in Spain, opened the door to competitive opportunities in other European countries and created the possibility of Sintel’s expanding in, and beyond, its existing markets in Latin America.

Among other acquisitions that reinforced MasTec’s internal growth and geographic diversification were the following: the purchase of Harrison Wright Company, Inc., a telecommunications contractor with operations and BellSouth master contracts principally in Georgia and the Carolinas; and the acquisition of Shanco Corporation and Kennedy Cable Construction, Inc., CATV contractors providing services to six southeastern states as well as to New Jersey and New York. MasTec’s subsidiaries installed a 370-mile fiber loop for Telergy, Inc. in upstate New York and completed a fiber loop for MCI Metro in Raleigh, North Carolina.

The limitations of analog networks were propelling the upgrading and installation of the more efficient digital networks. For instance, in a report titled North American Premises Wiring System Markets, the market-research firm of Frost & Sullivan Inc. noted that revenue for the premise-wiring industry in 1996 totalled $23 billion and could reach $4.38 billion by the year 2003. MasTec increased its penetration into this premise-wiring market (the installation of coaxial and optical-fiber cables inside offices) by combining two of its subsidiaries, Carolina Corn-Tec and Burnup & Sims Communications Services, to form a new company: MasTec ComTec. This subsidiary brought single-project, turn-key and maintenance solutions to the communications problems of Fortune 500 corporations, government agencies, colleges, universities, and medical institutions. As a certified installer of wiring systems for most of the major manufacturers of network components, MasTec ComTec installed both local-area networks (LANs) and wide-area networks (WANs). The company was hired to fast-track construction of the enormous fiber-and-copper infrastructure of telecommunications equipment for the 1996 Olympic Village; to build LANs and WANs for the nationwide offices of a major stock-brokerage firm; and to install and maintain a bank holding company’s consolidated voice, data, and video network.

Another subsidiary, MasTec Technologies, Inc. was established in 1996 to provide fast-track, turn-key construction management services of wireless networks. In little more than a year the company installed over 130 PCS tower-and-antenna sites for PCS companies, thereby establishing state-of-the-art wireless networks in southern Florida, Tampa, Orlando, and Phoenix.

By year-end 1996 MasTec’s revenue had increased 171 percent, from $174.58 million in 1995 to $472.8 million in 1996. Earnings per share had increased from $0.50 in 1995 to $1.20 in 1996. In January 1997 MasTec announced a three-for-two stock split and on February 14 of that year began trading its common stock on the New York Stock Exchange. President Jorge Mas, in a company news bulletin released after the New York listing, declared that “MasTec’s joining the world’s premier exchange is a tribute to the dedication and hard work of its 7,000 employees worldwide. The fact that a company formed by Cuban exiles is able to trade among the Fortune 500 companies is living proof that the American dream is very much alive.” MasTec celebrated by offering its employees a new stock-purchase program that enabled them to buy stock at a 15 percent discount.

As the 21st Century drew near, MasTec was the nation’s leading telecommunications company for infrastructure construction and a major supplier of premise-wiring services to Fortune 500 companies. In short, MasTec was a world leader for the design, construction, and maintenance of leading-edge telecommunications networks and hoped to remain in that position as by “Opening the Lines of Communication Throughout the World.”

Principal Subsidiaries

B&D Contractors of Shelby, Inc.; Burnup & Sims of Texas, Inc.; Burnup & Sims Telcom of Florida, Inc.; Church & Tower, Inc.; Church & Tower Fiber Tel, Inc.; Church & Tower of TN, Inc.; Designed Traffic Installation, Inc.; Harrison-Wright Company, Inc.; Kennedy Cable Construction Co., Inc.; MasTec ComTec of the Carolinas, Inc.; MasTec ComTec of California, Inc.; MasTec International, Inc.; MasTec Technologies, Inc.; R.D. Moody & Associates, Inc.; R.D. Moody & Associates, Inc. of Virginia; Shanco Corporation, Inc.; Sintel, S.A. (Spain); Utility Line Maintenance, Inc.

MasTec, Inc.

views updated May 09 2018

MasTec, Inc.

3155 Northwest 77th Avenue
Suite 110
Miami, Florida 33122-1205
U.S.A.
Telephone: (305) 599-1800
Fax: (305) 599-1572
Web site: http://www.mastec.com

Public Company
Founded: 1929 as Burnup & Sims Inc.
Employees: 8,500
Sales: $838.05 million (2002)
Stock Exchanges: New York
Ticker Symbol: MTZ
NAIC: 237130 Power and Communication Line and Related Structures Construction; 237110 Water and Sewer Line and Related Structures Construction; 237120 Oil and Gas Pipeline and Related Structures Construction

The largest Hispanic-owned company in Florida, MasTec, Inc. is a leading specialty contractor focusing on end-to-end infrastructure services for telecommunications, energy, broadband, and intelligent traffic systems for a broad range of clients in the United States, Canada, and Brazil. The company has nearly 1,000 clients, none making up more than 10 percent of revenues. Besides corporate clientele, MasTec is also heavily involved with municipal, state, and federal agencies dealing with transportation, information technology, energy, and intelligent traffic systems. Beginning in 2001, MasTec was refocusing its business plan onto maintenance-related businesses and, ultimately, on the needs of residential premises. The company’s marketing strategy, summarized by the tagline “Design, Build, Install, Maintain,” is to emphasize that it monitors its end-to-end infrastructure services in order to increase market share in the fragmented infrastructure industry, and remakes itself according to the requirements of a rapidly changing industry.

1929–93: The Forerunners

In 1929 two unemployed carpenters—Russell Burnup and Riley V. Sims—founded Burnup & Sims (B&S) to provide design, construction, and maintenance services to the telephone and utilities industries. During the years of the Great Depression, the two established an office in West Palm Beach, Florida, and by 1936 had a small fleet of trucks and staff. The company’s first telecommunications projects were undertaken the following year at Cape Canaveral, where it was responsible for burying 85 miles of cable.

B&S contributed to national defense during World War II by building airfields and telephone systems. After the war, the company became involved in the laying of underwater cable from Florida to Puerto Rico, and from there to Barbados, for such companies as AT&T and General Telephone. Projects then took on a greater geographical scope, as B&S established underground telecommunications systems and built radio towers in Costa Rica, Barbados, Trinidad-Tobago, and Venezuela.

In 1968 B&S went public, and sales of shares helped to raise capital for new, more ambitious projects. The company constructed the first fiber-optic link between Chicago and Washington, D.C. and, according to historian George P. Oslin in The History of Telecommunications, was noted for doing “a large and very profitable business installing cables for Cable TV.” The advent of fiber optics in 1980 “meant a complete overhaul of phone systems everywhere,” Katrina Burger wrote in the November 1997 issue of Forbes magazine. The company also operated a number of telecommunications subsidiaries as well as Floyd Theaters, Inc., a movie picture chain; Lectro Products, Inc., a CATV power-protection company; and Southeastern Printing, Inc., a printing business.

By the end of the decade, however, a poor economy, changes in utility spending, and aggressive competition for contracts brought tough years for B&S. Moreover, budgetary constrictions led certain telecommunications companies to postpone payments and to cut expenditures for plant construction and maintenance. By the end of fiscal 1993, losses at B&S amounted to $9.31 million, and senior management sought a buyer for the company.

Church & Tower of Florida, Inc. (CTF), incorporated in 1968 to construct and service telephone networks in Puerto Rico and Miami, overextended itself in Puerto Rico and could not build the telephone-infrastructure networks needed in Miami. When Miami-based CTF experienced financial difficulties, the company’s owner asked his friend, Cuban immigrant Jorge L. Mas Canosa, to help save the business. In exchange for half ownership of CTF, Mas Canosa began to manage the company in 1969.

Eager to improve the business, Mas Canosa climbed down into ditches, manholes, and trenches to observe workers’ construction methods. He listened to advice from telephone-company and government inspectors; he studied books about the most efficient and newest construction methods. As a result of these learning experiences, he transformed CTF into a fast-track, cost-effective construction program that won recognition for consistent professionalism and commitment to excellence. BellSouth Telecommunications, Inc. awarded CTF a long-term contract for projects in the greater Miami and Fort Lauderdale areas. By 1971 Mas Canosa had turned the failing company around; he then borrowed $50,000 and bought the remaining shares of the firm.

In 1990 Jorge Mas established a new subsidiary, Church & Tower, Inc. (CT), to engage in selected construction projects in the public and private sectors. For some time the Mas family had been thinking about taking the company public, but 1992 Hurricane Andrew’s passage over southern Florida delayed the plans. The CTF Group, owner of a long-term maintenance contract with BellSouth, was responsible for reconstructing the damaged telecommunication infrastructure of Miami. In the wake of the hurricane, the senior managements of B&S and of the CTF Group realized their mutual interests. Employees from both companies began talking to each other; top management met and struck a deal.

1994: Founding of MasTec

On March 11, 1994—in a reverse acquisition—the privately owned Church & Tower Group acquired 65 percent of the outstanding common stock of publicly traded Burnup & Sims, Inc. The name of Burnup & Sims was changed to MasTec, Inc., the Church & Tower Group became a wholly owned subsidiary, and the senior management of the CTF Group took over leadership of the new entity; Jorge L. Mas Canosa became MasTec’s chairman, and Jorge Mas was named president and chief executive officer. Mastec was now a regarded as a “minority business enterprise,” publicly traded on NASDAQ under the symbol MASX.

Following the acquisition, one of President Jorge Mas’ first moves was to express the company’s philosophy of leadership in word and deed. In an introduction to the company’s 1994 annual report, he asserted that “MasTec’s improving performance and future capabilities are in large part due to the commitment of its 2,400 employee-owners... who work hard, work smart and complete their jobs on time and on budget.” In April 1994 he had already set up this success-driven philosophy by distributing five shares of MasTec stock to each employee and encouraging all to invest in their company’s benefits program.

Next, MasTec initiated a program for acquiring profitable, market-dominant companies in high-growth metropolitan areas nationwide. The first purchases were that of Designed Traffic Installation, Inc. (an installer of traffic control systems in southern Florida) and Buchanan Contracting Company, Inc. (the holder of two master contracts with BellSouth in Memphis, Tennessee, and Montgomery, Alabama.) Furthermore, BellSouth awarded MasTec contracts for telephone networks in Nashville and Franklin, Tennessee, as well as for networks in four of North Carolina’s fastest-growing cities.

Company Perspectives:

MasTec’s clients appreciate our strong sense of identity, our culture of teamwork, our unwavering insistence on safety, and how our thousands of full-time employees work together to get the job done right. But what many of our clients view as our most important characteristic is our true understanding of the intricacy that defines infrastructure building. Over the course of our long history, we have perfected a four-pronged, end-to-end approach to projects. Summarized in four words—Design, Build, Install, Maintain—these principles have become the philosophy that guides everything we do.

Consequently, the company’s international subsidiaries secured contracts for upgrading telephone networks in Guayaquil, Ecuador; for building 35,000 telephone lines in San Salvador, El Salvador; and for constructing fiber-optic facilities in Caracas, Venezuela. Furthermore, Video Cable Comunicacion, S.A. awarded a design-build contract to MasTec Argentina, S.A. for upgrading its CATV system in Buenos Aires from 30 channels to 100. This is believed to have been the first contract of its kind in Latin America. At year-end 1994 MasTec had met the challenges of establishing itself as a new company; it reported a net profit of $7.5 million on revenue of $111.29 million.

Mid-1990s Expansion and Reorganization

Management at MasTec decided to divest some B&S acquisitions not related to its core operations, specifically Floyd Theaters, Lectro Products, and Southeastern Printing. The proceeds were used to reduce debt and finance the acquisition of other companies related to MasTec’s core business.

Among the acquisitions was Utility Line Maintenance, Inc., a company engaged in clearing right-of-ways for utilities in southeastern United States. Church & Tower Fiber Tel, Inc. then expanded its business to include installation of “smart highway” systems (electronic systems that control highway messaging and traffic signalization.) The acquisition of Tri-Duct Corporation brought two more BellSouth master contracts in Huntsville and Decatur, Alabama, thereby complementing existing contracts in Montgomery, as well as in Memphis. Consolidating administrative functions in these adjacent geographic areas reduced the company’s operating expenses and enhanced service capability in the region. MasTec won new contracts to install telecommunications networks in the Dallas/Fort Worth area; to manage construction for Metro Dade Water & Sewer Authority’s Pump Station Program; to install part of MediaOne, Inc.’s new CATV network in metropolitan Atlanta; and to develop and maintain infrastructure telephone services in eastern Colorado for US West.

In its pursuit of international expansion, MasTec had to compete with large international companies having significantly greater experience and resources. The company acquired a 36 percent equity interest in Supercanal, S.A., a CATV operator in Argentina, and equity interests ranging from 14 percent to 35 percent in four other companies. The company also won a contract from The Virgin Islands Telephone Co. to restore damaged telephone facilities on the island of St. Thomas; and a contract from Tomen Corp., a leading Japanese telecommunications company, for the construction of 35,000 telephone lines in Manila.

As MasTec entered the second half of the 1990s, the telecommunications industry continued to undergo fundamental changes. The U.S. Telecommunications Act of 1996, agreements among countries in the European Union, and continuing privatization and regulatory initiatives in Latin America removed barriers to competition. Furthermore, growing customer demand for better voice, video, and data telecommunications emphasized the limited network bandwidth in sections of the country. The U.S. government auctioned off radio-frequency bandwidth for the creation of personal communications systems (PCS): pure digital networks superior to the traditional analog-cellular systems.

MasTec competed in the new markets created by these developments by concentrating on additional relevant acquisitions and on expansion of its core telecommunications services. In a major acquisition from Telefonica—the largest telecommunications infrastructure contractor in Spain—in 1996, MasTec bought Sistemas e Instalaciones de Telecomunicacion, S.A. (“Sintel”). This positioned MasTec to take advantage of the increased competition anticipated in Europe and the rapid upgrading of telecommunications services expected in Latin America. The purchase more than doubled the size of MasTec, and gave it access to Sintel’s established operations in Spain and in Latin America.

Among other acquisitions during this time were the following: Harrison Wright Company, Inc., a telecommunications contractor with operations and BellSouth master contracts principally in Georgia and the Carolinas; Shanco Corporation and Kennedy Cable Construction, Inc., CATV contractors providing services to six southeastern states as well as to New Jersey and New York. MasTec’s subsidiaries installed a 370-mile fiber loop for Telergy, Inc. in upstate New York and completed a fiber loop for MCI Metro in Raleigh, North Carolina.

Key Dates:

1929:: Burnup & Sims (B&S), earliest forerunner of Mas-Tec, is founded.
1968:: Church & Tower of Florida, Inc. (CTF) enters the infrastructure industry.
1969:: Jorge L. Mas Canosa is hired to save failing CTF.
1994:: In a reverse acquisition, CTF acquires 65 percent of B&S, which changes its name to MasTec, Inc.
1996:: Telecommunications Act removes barriers to competition.
1997:: MasTec goes public; its stock is traded on the New York Stock Exchange.
2000:: MasTec revenue peaks at $1.33 billion.
2001:: Economic downturn of telecom and cable markets heavily impacts MasTec and restructuring begins.

The limitations of analog networks propelled the upgrade and installation of digital networks, which were more efficient. MasTec increased its penetration into this market by combining two subsidiaries—Carolina ComTec and Burnup & Sims Communications Services—to form a new company called MasTec ComTec, which brought single-project, turnkey, and maintenance solutions to the communications problems of Fortune 500 corporations, government agencies, colleges, universities, and medical institutions. MasTec ComTec installed both local area networks (LANs) and wide-area networks (WANs). The company was hired to fast-track construction of the enormous fiber-and-copper infrastructure of telecommunications equipment for the 1996 Olympic Village; to build LANs and WANs for the nationwide offices of a major stockbrokerage firm; and to install and maintain a bank holding company’s consolidated voice, data, and video network.

Another subsidiary, MasTec Technologies Inc., was established in 1996 to provide management services of wireless networks. In little more than a year the company installed over 130 PCS tower-and-antenna sites for PCS companies, thereby establishing state-of-the-art wireless networks in southern Florida, Tampa, Orlando, and Phoenix. By year-end 1996 MasTec’s revenues had increased 171 percent, from $174.58 million in 1995 to $472.8 million in 1996.

Late 1990s: Going Public and Meeting Demand

The Telecommunications Act unleashed a building boom in the telecommunications infrastructure industry—and MasTec prospered. In January 1997 the company announced a three-for-two stock split and on February 14 of that year began trading its common stock on the New York Stock Exchange. President Jorge Mas, in a company news bulletin released after the New York listing, declared that “MasTec’s joining the world’s premier exchange is a tribute to the dedication and hard work of its 7,000 employees worldwide. The fact that a company formed by Cuban exiles is able to trade among the Fortune 500 companies is living proof that the American dream is very much alive.” MasTec celebrated by offering its employees a new stock-purchase program that enabled them to buy stock at a 15 percent discount.

Domestically, through its aggressive acquisition strategy, MasTec acted as a consolidator of thousands of mom-and-pop operators to create a national network of contractors that could provide service wherever it had clients. MasTec provided outside plant services to local exchange carriers—such as Bell South Telecommunications, Inc.; United Telephone of Florida, Inc.; and GTE Corp.—among others. By year-end 1997, Mas-Tec had 20 multi-year master contracts with regional Bell operating companies and other local exchange carriers to meet all of their outside plant requirements according to stipulated costs per job and within a specific geographic areas.

MasTec Chairman Mas Canosa died in 1997; his son, Jorge, Jr., succeeded him. Newly acquired Sintel allowed MasTec to profit from the now deregulated Spanish market and establish itself in Latin America, primarily in the rapidly growing telecom markets of Argentina and Brazil. In July 1997 the company formed MasTec Inepar and held a 51 percent interest in the Brazilian company. By the end of the year, MasTec had acquired 16 domestic and three foreign companies. The following year, as part of a consolidation plan, MasTec sold 87 percent of Sintel and developed a company-wide marketing plan to emphasize the MasTec brand name.

A number of trends led to greater demand for MasTec’s services in 1999. A need for greater bandwidth was prompted by increased reliance on personal computers; growth in telecommunications voice, video, and data traffic; electronic commerce; and transmission of high-quality information on the Internet. Furthermore, competition arose from consolidation and deregulation in the telecommunications industry, prompting the birth of new, integrated, geographically diverse companies that offered bundled services formerly available separately. In response, MasTec positioned itself to offer end-to-end solutions for the infrastructure needs of its clients. End-to-end projects started from a transmission point, such as the central office of a telephone company or cable television head-end and ran through aerial, underground cables or wireless transmission to the users’ voice and data ports, computer terminals, cable outlets or cellular stations.

MasTec created a new service line that included voice and data network installations, power and gas distribution networks, telecommunications infrastructure projects, and intelligent transportation systems; the company was awarded millions of dollars in contracts for these lines. MasTec formed alliances with a number of companies; for example, it teamed up with Lucent Technologies to provide infrastructure solutions to the cable television industry, and also formed an alliance with Skanska U.S.A. to provide project management and telecommunications infrastructure services throughout North America. MasTec also acquired several external network service providers.

In 1999, Jorge, Jr., retired from day-to-day operations, remaining on-board as chairman. Joel-Tomas Citron was appointed president and CEO of MasTec. Although for a variety of reasons revenues slipped during this time, MasTec remained one of the fastest growing communication and energy infrastructure providers in the United States in 2000.

Contracts poured in. IBM chose MasTec to install and maintain services for its Rapid Network Deployment Program, a project that meant installing more than 1,200 medical kiosks in hospital emergency rooms. Comcast Cable Communications awarded MasTec a five-year contract to help build an advanced fiber-optic network in Comcast territories. The state of Florida chose MasTec to design and install an end-to-end fiber optic network along 2,200 miles of Florida’s Turnpike and interstate highways. From the Texas Department of Transportation Mas-Tec won a single contract totalling $740,000 to upgrade a lighting system along the main artery linking Galveston Island with the mainland. Acquisitions continued apace, and by 2000 MasTec reported record revenues of $1.33 billion, some $55.31 million of which came from Brazilian operations.

2001 and Beyond: Weathering a Downtown

MasTec derived a large amount of its revenue from telecommunications clients. However, as Rolf Boone observed in a 2002 article in the Wenatchee Business Journal, “a funny thing happened on the way to ever-expanding growth and revenue—the telecommunications bubble burst.” In its 2001 annual report, MasTec management noted that “certain segments of the telecom industry suffered a severe downturn that resulted in a number of our clients filing for bankruptcy protection, or experiencing financial difficulties.” Even clients not in financial difficulty began limiting capital expenditures for infrastructure projects.

MasTec began to consolidate its many subsidiaries into two major groups: MasTec North America, Inc. and MasTec Brazil, S.A. Still, for fiscal 2001 MasTec posted a loss of $92.35 million in revenue—due primarily to increases in bad debt expense of $182.2 million during the year. In August of that year, Citron resigned and was replaced as president and CEO by Austin J. Shanfelter. A new executive vice-president and CFO, Donald P. Weinstein, was named in January 2002.

Facing a market that had dried up, Shanfelter and Weinstein remained cautiously optimistic, reminding the public that Mas-Tec had predicted the downtown and was making adjustments accordingly. The company’s Project 2100 was introduced to streamline, downsize, and realize economies through strategic partnerships. Another key to the plan was in outsourcing much of the company’s information technology functions. As a result, MasTec was refocused on telecom, broadband, intelligent traffic systems, and energy.

Financial results for 2002 were disappointing, with the company posting a net loss of $128.8 million on revenues of $838.1. While revenues were reportedly better than management had expected, the cost streamlining process had yet to produce satisfactory results. While analysts concurred that the industry was obviously weak, some also faulted MasTec for its financial results. Standard & Poor’s downgraded the company’s corporate bonds to junk-bond status. Other industry analysts, however, expected Project 2100 to bear fruit in the coming year and remained optimistic about the company’s recovery. MasTec management was similarly hopeful, even confident, that the company was well-prepared to increase profits and cash flow.