MCI WorldCom, SkyTel deal on track, executives say
by Lynne W. Jeter
Published: August 2,1999
Merger progress with MCI WorldCom’s acquisition of SkyTel is right on track, say spokesmen from both Jackson-based companies.
In May, MCI WorldCom announced its intention to buy SkyTel in a deal worth approximately $1.8 billion in stock and debt.
SkyTel recently announced that the U.S. Department of Justice has cleared the proposed merger. The Federal Communication Commission has taken steps to allow SkyTel’s application for license transfer to MCI WorldCom to be commented on by the public, said Scott Hamilton, investment relations manager for SkyTel.
“SkyTel plans to mail merger proxies to its stockholders in mid-August and hold a special stockholder meeting to vote on the proposed MCI WorldCom merger on Sept. 22,” said Hamilton. “The FCC has essentially determined that they are not going to review our proxy statements, so we’re all set to mail them out and we should close the transaction shortly after the shareholders’ meeting or whenever we get FCC approval.”
But Barbara Gibson, spokesperson for MCI WorldCom, said the merger might take place early next year.
“The merger is still on track for the end of the year or first quarter closing,” Gibson said. “We don’t see any problems at all.”
Hamilton said that, “as with any merger, all jobs (at SkyTel) will be affected.”
“At this point, we don’t expect any jobs to be eliminated,” Hamilton said.
For the second quarter of 1999, SkyTel (NASDAQ: SKYT) reported improved subscriber growth with strong cash results and net income. Consolidated revenue was $140.9 million, an 11.7% increase from the year-ago period. Consolidated operating cash flow was $40.2 million, an increase of 44.9% over the same period last year, representing an operating cash flow margin of 28.6%.
In the second quarter of 1998, SkyTel posted a consolidated net loss of $9.7 million. The same quarter this year, SkyTel posted an increase — a consolidated net income of $6.7 million.
Increased revenues were the result of record growth in several divisions, Hamilton said.
SkyTel’s traditional one-way paging business posted $31.2 million in operating cash flow based on revenue of $83.3 million. Compared to the same quarter last year, the advanced messaging revenue increased about 57%, based on $50.5 million in revenue. SkyTel added 40,300 advanced messaging customers for the quarter, including a record 36,900 two-way messaging customers.
“The sale of services with reply capability and the success of our nickel-a-message pricing plan are bolstering our confidence that interactive message will see accelerating adoption,” said John T. Stupka, SkyTel president and CEO.
Skytel has more than 1.7 million units in service around the globe, an increase of 17% from the second quarter of 1998.
“I am particularly pleased with our subscriber growth in light of the potential distraction from our merger announced,” said Stupka. “In addition, we were able to maintain our focus while instituting a major sales leadership restructuring to better position SkyTel to deliver a broader set of wireless data services in the near future.”
Strong financial results enabled SkyTel to fund its $14 million June interest payment and pay down $17 million in debt, said SkyTel CFO Robert Kaiser.
“Our outstanding debt balance is now down to $55.5 million from $115.5 million a year ago,” Kaiser said.
SkyTel’s market development activities for the quarter included fixed location monitoring and control services, wireless eBay auction notification services, Office Depot distribution expansion, SkyTel Message Center development and SkyTel eLink integration with American Mobile, said Hamilton.
Last month, MCI WorldCom Inc. announced plans to acquire another Jackson-based business: Wireless One, the largest wireless cable operator in the Southeast. The company sought bankruptcy protection in February.
When approved by bankruptcy courts and the Federal Communications Commission, Wireless One (NASDAQ: WIRL) will become a wholly-owned subsidiary of MCI WorldCom (NASDAQ: WCOM).
In addition to other acquisitions and partnerships, MCI WorldCom, the 14th largest company in the world, recently announced an expansion and upgrade of its Asian network facilities and service operations center in Hong Kong.
Contact MBJ contributing writer Lynne Wilbanks Jeter at email@example.com or firstname.lastname@example.org.
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