Mobile Telecommunications Technologies Corp.

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Mobile Telecommunications Technologies Corp.

200 South Lamar Street
Mtel Center, South Building
Jackson, Mississippi 39201
U.S.A.
(601) 944-1300
Fax: (601) 944-7194

Public Company
Incorporated: 1988 as Mobile Telecommunications Technologies Corp.
Employees: 2,650
Sales: $245.9 million (1995)
Stock Exchanges: NASDAQ
SICs: 4812 Radiotelephone Communications

A pioneer in wireless communications, Mobile Telecommunications Technologies Corp. offers paging and messaging services to U.S. and international customers. Known to pager customers in the United States through its SkyTel subsidiary, Mobile Telecommunications (MTel) served customers in more than 19 countries during the mid-1990s through its SkyTel system, which transmitted messages to more than one million pagers in North America, Latin America, and the Pacific Rim. During the first half of the 1990s, the company recorded robust financial growth, more than doubling its annual revenue volume, and increasing the number of paging units in service nearly tenfold. On September 19, 1995, Mtel made wireless communications history by launching the world’s first two-way narrowband wireless messaging service dubbed “SkyTel 2-Way,” enabling customers to respond to messages from their two-way messaging units. Already a flourishing enterprise before the introduction of SkyTel 2-Way, Mtel was expected to record more prolific growth during the late 1990s after its two-way messaging service began contributing to the company’s revenue volume.

Mtel’s Predecessor and Its Founder

Acquaintances of John N. Palmer described the founder of MTel as gracious, aggressive, cosmopolitan, and deeply tied to his home state of Mississippi. They might have added a strong pioneering spirit to Palmer’s list of personality traits, particularly when explaining the six-foot, five-inch Mississippian’s role in bringing paging and cellular technology to the masses. Palmer’s aggressiveness and ability to foresee the monetary benefits of emerging technologies served him well in the business world, enabling him to establish two well-respected companies and to point to himself as one of the instrumental driving forces behind the explosive growth of pager and cellular service in the United States. MTel was Palmer’s second creation, but its formation was closely linked to the establishment of his first technology-based company, Mobile Communications Corporation of America, with one giving birth to the other. In the development of both of these businesses, Palmer demonstrated a foresightedness that distinguished him from rivals. When this innovative prescience was combined with his aggressiveness, the result was the flourishing business describing MTel during the 1990s.

By the time Palmer started MTel, the legacy of Palmers in Mississippi stretched back seven generations, charting a family tree that included his great-great-grandfather John D. Palmer, who once sold a small railroad to author William Faulkner’s father. Decades after the Palmer family name became part of an obscure footnote in the Faulkner family’s history, John N. Palmer embarked on a professional career that wedded his name to the history of commercial wireless communications in the United States. After graduating with undergraduate and M.B.A. degrees from the University of Mississippi in 1960, Palmer established a one-man accounting firm in a hotel in Jackson, Mississippi. Twenty-five years old at the time, Palmer occupied modest quarters on the hotel’s fourth floor, paying for his small office space by auditing the hotel’s books. Five years later, he made his pivotal first move. In 1965, Palmer purchased a local telephone answering service that served 300 customers and gave him a Federal Communications Commission (FCC) license to operate a primitive radio paging service. Palmer had a good feeling about his first FCC license, the first of many to come. “I said,” Palmer reflected to a Forbes reporter years later, “‘You know, that license is probably going to be valuable one day.’” The decades ahead validated Palmer’s intuition.

By 1973, Palmer had acquired nine more paging companies and won FCC licenses to operate paging services within and surrounding a three-state territory comprising Mississippi, Alabama, and Louisiana. These properties were then merged with a regional paging firm in western New York State, creating a company Palmer christened Mobile Communications Corporation of America. By the time Palmer took Mobile Communications public in 1981, he was keenly aware of the value of telecommunications licenses. In the decade ahead, he began displaying the aggressiveness that would earn him distinction in the wireless communication industry by pursuing FCC licenses in earnest.

When the first independent cellular telephone licenses were offered, Palmer was there, eager to gain a foothold in what he believed would be a lucrative business. In 1983 and 1984, Palmer accomplished his objective, winning licenses to operate cellular telephone systems in five U.S. cities, including the coveted Houston and Los Angeles markets. At roughly the same time he was bidding for cellular telephone licenses, Palmer’s efforts in another area were finally paying dividends, creating what would prove to be MTel’s foundation. In 1978, Palmer began lobbying the FCC to set aside frequencies for nationwide paging networks, pleading his case at a time when local paging services were still in their infancy. Six years later, when Palmer was swooping up the first of his five cellular telephone licenses, the FCC did what Palmer had hoped for by offering the opportunity to obtain nationwide paging licenses. Not surprisingly, Palmer seized the opportunity, forming a Mobile Communications-led joint venture to obtain one of the first three national paging licenses issued in 1984. Three years later, Mobile Communication’s national paging license manifested itself as National Satellite Paging, a subsidiary company that later was renamed SkyTel Corp., the heart of MTel’s business during its fledgling years and into the 1990s.

Mtel Is Formed

As efforts were underway to get Mobile Communication’s national paging service up and running, Palmer turned his attention to his recently acquired cellular telephone properties. In 1985, he sold 50 percent interest in Mobile Communication’s cellular properties to BellSouth, marking the beginning of a business relationship that three years later engendered the formation of MTel. Palmer received $67 million from BellSouth for the 50 percent stake, as well as a guarantee from BellSouth that the telecommunications giant would finance the acquisition of additional cellular properties and absorb 99 percent of the losses incurred by the BellSouth-Mobile Communications partnership. Three years after this deal was struck, however, Palmer decided cellular properties had become overpriced, prompting him to make a move that paved the way for MTel’s debut as an independent corporate entity.

In February 1988, Palmer agreed to merge Mobile Communications into BellSouth in exchange for stock worth $710 million. As part of the transaction, Palmer walked away with 1.2 million shares of a new company called Mobile Telecommunications Technologies Corp, or MTel, as the company would become known. Essentially the offspring of Mobile Communications, MTel comprised a collection of telecommunications-related businesses and investments that BellSouth either chose not to absorb or was precluded from acquiring under the terms of the Bell system breakup, but Palmer’s new company was more than just the dregs of Mobile Communications. Despite the company’s 1988 pro forma operating losses of $12 million on $21 million in revenue, MTel was drawing the attention of industry observers who were attracted by the company’s 90 percent stake in National Satellite Paging, which had been operating for a year. The first national paging service in the United States, National Satellite Paging was MTel’s primary asset, a paging network with 178 transmitters in 100 metropolitan areas that enabled MTel to provide service to 85 percent of the nation’s population. It was with this paging network that Palmer would build his second business and create one of the pioneering forces in the paging industry.

In 1989, Palmer endeavored to expand MTel’s customers’ ability to reach one another, not only nationally but internationally as well. A joint venture agreement was reached with Telesat Canada, extending National Paging’s presence in Canada. A joint venture with Singapore Telecom was formed to develop satellite paging for the Pacific Rim. As the company prepared to enter the 1990s, all hopes were pinned on SkyTel, the former National Satellite Paging, to invigorate MTel’s profitability. Toward this end, Mtel’s executives were not alone in expecting robust growth in the paging industry. Industry analysts were projecting at the end of the 1980s that the nationwide paging industry would grow from the 100,000 subscribers signed on in 1989 to 1.5 million by 1995, with nationwide revenues approaching $1 billion. On the international front, where MTel was already establishing a presence, encouraging growth was being recorded as well. In 1988, when MTel was spun off from the Mobile Communications-BellSouth combination, there were 18,000 subscribers; by 1990, as MTel moved toward years of prolific growth, the number of worldwide subscribers had grown to 75,000.

Company Perspectives:

Mtel has always believed that its growth comes from the combined strengths of advanced technology and superior customer service. We manage our growth by staying agile and responsive in our core businesses while making strategic investments in the future—listening to our customers and delivering what they need.

Early 1990s Genesis of SkyTel 2-Way

To a large extent, the expectations of the late 1980s were realized during the early 1990s. The number of SkyTel’s subscribers swelled from 30,000 in 1989 to 220,000 by 1993, Mtel’s market value tripled during the period, reaching $860 million, and annual sales marched steadily upward from $37 million to $133 million by 1992. On the heels of this promising growth, however, even greater rewards were in the offing as Palmer steered MTel in a new direction that once again made the man and the company pioneers in the paging industry. In July 1992, the FCC awarded MTel a nationwide license to operate a two-way, wireless messaging system, granting it “pioneer preference,” the first time the FCC awarded the preference to a commercial project. Receiving the unprecedented nod from the FCC represented a windfall, virtually guaranteeing that MTel would receive an operating license as soon as the FCC cleared a frequency in 1994 and assuring that the company would be well on its way toward building a national network while competitors were stepping over each other in pursuit of licenses.

Realizing the opportunity that lay before him, Palmer set aside $100 million to be spent in 1993 to get his two-way, wireless messaging network up and running, aiming to establish the service in 300 major U.S. markets by mid-1995. Palmer also began actively searching for partners to provide financial and technological assistance in developing the new business, which was initially named Nationwide Wireless Network but eventually became known as SkyTel 2-Way. Confident that the new subsidiary could be turned into a lucrative facet of MTel’s business, Jai Bhagat, executive vice-president of MTel and the president of the nascent two-way messaging venture, noted to a reporter from PC Week, “We’re a small company, but nobody thought we could make SkyTel work, and look what happened. We’re confident we can repeat history.”

If history was going to repeat itself, then MTel executives could look forward to animated growth from its two-way messaging service because SkyTel had proven to be remarkably successful. While work was underway to launch two-way messaging service by mid-1995, SkyTel was growing by leaps and bounds, controlling 75 percent of the national market. Ranked as the largest paging service in the United States, SkyTel had benefitted from the exponential growth of pagers during the first half of the 1990s, enriched by the swarms of new subscribers to paging services. The projections made in 1989 for industry-wide revenues to approach $1 billion by 1995 had been eclipsed dramatically. By 1994, paging revenues were up to $3 billion and expected to grow vigorously for the remainder of the decade, validating the prudence of Palmer’s business decisions for the previous two decades. Although some industry pundits had disparaged Palmer for divesting his cellular telephone properties during the 1980s, Palmer’s commitment to investing in the paging business tempered any regrets stemming from the decision to exit the cellular business. Pagers were smaller than cellular telephones, their batteries lasted longer, and pager service was substantially cheaper than cellular service, with the monthly cost for local pager service averaging $10 compared to $67 for cellular service.

The introduction of two-way pager service was expected to increase the advantages of pagers over cellular telephones to particular customers, enabling pager carriers to return acknowledgment messages and allowing senders and receivers to transmit electronic mail and full text back and forth without using a telephone line. Palmer’s search for a partner to help with the development of SkyTel 2-Way netted Microsoft Corp., which initially committed $30 million to the project on top of MTel’s $100 million. After a $300 million investment on Mtel’s part, the long-awaited launch date of the two-way service arrived on September 19, 1995, marking the debut of a service that was expected to generate roughly 25 percent of MTel’s total sales by 1997.

The establishment of SkyTel 2-Way represented a milestone in the history of wireless communications, a historic achievement that Palmer hoped would lead to a lucrative future for Mtel. As corporate executives celebrated the launch date of SkyTel 2-Way, however, there were justifiable reasons to celebrate the progress of the company’s mainstay SkyTel business. In 1995, Mtel placed more pager units in service than it had during the previous seven years combined, more than doubling its customer base during the year from 450,000 to more than one million subscribers. Revenues increased significantly as well, jumping from 1994’s $163 million to $246 million in 1995, fueling confidence that the addition of the SkyTel 2-Way business would provide a dramatic boost to the company’s business during the late 1990s. As the company headed toward the late 1990s, its legacy of pioneering work in wireless communications held it in good stead, convincing many that Mtel’s future would be as successful as its past.

Principal Subsidiaries

MTel International, Inc.; MTel Latin America, Inc.; MTel Puerto Rico, Inc.; Mtel Paging, Inc.; United States Paging Corporation; Destineer Corporation; Mobilecomm Europe Inc.; MTel Space Technologies Corporation; MTel Technologies, Inc.; MTel Maine, Inc.; Com/Nav Realty Corp.; Intelligent Investment Partners, Inc.