Paging company headed for bankruptcy

Metrocall will file for bankruptcy protection at the end of the month, according to a regulatory filing and a company representative. It will also cut staff and close stores.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
2 min read
Metrocall, the nation's second-largest paging company, intends to file for bankruptcy protection at the end of the month, according to a regulatory filing and a company representative.

The company does not plan to interrupt service for its 5.5 million subscribers as it works out Chapter 11 bankruptcy protection and reorganization plans, the representative said. Chapter 11 provides protection for a company from its creditors while it reorganizes its finances.

Metrocall is just the latest paging company to suffer a financial setback. Arch Wireless, the nation's leading paging company with about 12 million customers, filed for bankruptcy protection in December. The Westborough, Mass.-based company continues to offer its paging services, however.

Business in Europe may be taking its toll on both companies, especially stemming from the growing number of people using cell phones to send wireless e-mails, analysts say. Most phones now come with that ability already built in.

Though the United States has been slow to adopt the practice--about 300 million e-mails are traded each month between cell phones--there are more than 30 billion messages traded every month in Europe.

Metrocall also said in its recent filing with the Securities and Exchange Commission that it lost about 900,000 customers last year. The paging industry lost about 1 percent of its customers in 2000 and overall revenue dropped from 5.25 billion in 1999 to $5.1 billion in 2000, according to Federal Communications Commission documents.

Joe Laszlo, an analyst with Jupiter Media Metrix, said although paging will remain a staple--given the recent successes of the BlackBerry paging device from Research In Motion--companies like Metrocall and Arch will need to find other things to do with the networks they have built to deliver their services.

"We won't see it go away, but it will have to find new niches," Laszlo said.

Some of these devices are already on the market, including Cybiko, a wireless pager that uses infrared rather than a regular paging network to communicate. The device is marketed mainly to teenagers, Laszlo said.

Metrocall, based in Alexandria, Va., also disclosed in SEC documents some of its future reorganization plans. It said it would lay off about 850 of its 2,976 employees and also intends to close some of its stores in the United States, according to the documents.

Even some of its "good" news was bad. The company told the SEC that subscribers to its higher-end paging services increased last year. But even with the expected increase in revenue, Metrocall does not "expect that the increase in subscriptions from the end of 2001 to the end of this year will be significant."

Last April, Metrocall hinted that it would be filing for bankruptcy when it announced a merger with rival WebLink Wireless. The move was supposed to reduce the companies' combined $1.2 billion in debt to about $300 million, executives said.

The Metrocall representative on Monday refused to comment further on any future merger plans.