Facing an uncertain future, SkyTel strives for efficiency

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Published: August 8,2005

Clinton — When New York-based Verizon (NYSE: VZ) agreed earlier this year to buy troubled long-distance carrier MCI (NASDAQ: MCIP) of Ashburn, Va., the $6.75-billion deal also included SkyTel Communications, a subsidiary that had been on and off the market for years.

As soon as the deal was made public, Verizon, which bested Qwest Communications to acquire MCI, immediately announced plans to cut roughly 7,000 jobs.

Approximately 740 of 1,700 employees remain employed with MCI and SkyTel in the metro Jackson area. In the latest round of layoffs, some 90 workers in Clinton were affected.

“The layoffs were a result of actions that needed to be taken to manage the SkyTel business unit to meet our objectives going forward,” said SkyTel president Bruce Deer. “We also made operational changes to allow us to be more efficient. It was an independent, business-driven need, regardless of what was going on outside SkyTel.”

Deer couldn’t say if more layoffs were in the works. “That’s a question that’s always difficult to address,” he said. “There’s nothing we’re planning today, but on the other hand, you have to see how business conditions evolve.”

In 2003, after 1,300 WorldCom employees were transferred or laid off, SkyTel moved its offices from downtown Jackson to Clinton. Roughly 100 MCI employees work at the gated corporate campus in Clinton, which was built in 1998 to accommodate up to 3,000 employees.

There’s no word on what will happen to the sprawling development. Clinton Mayor Rosemary Aultman has said that several companies have inquired about leasing office space there, but no deals have been inked.

The Verizon/MCI deal came on the heels of an industry shakeup. Cingular Wireless had recently closed a $41-billion deal for AT&T Wireless Services, making it the nation’s largest wireless services provider, and Sprint had announced plans to acquire Nextel Communications for $35 billion.

(Former WorldCom CEO Bernie Ebbers had been criticized for nixing a deal May 6, 1999 to buy Nextel, a wireless phone company that telecom experts believed was a key ingredient to WorldCom’s business mix.)

Meeting objectives

For now, Verizon and MCI are operating independently with no merger integration program in the works. The deal should be completed by year-end, said a company spokesperson. When asked if another company was considering the purchase of SkyTel after the merger with Verizon is complete, or if SkyTel might be spun off as a separate entity, she said, “We’re not in a position to answer that.”

“I can tell you that, from a business unit standpoint, we’re meeting the objectives our corporate office has set forth for us,” said Deer.

MCI WorldCom acquired SkyTel Communications in 1999 for $1.2 billion ($2 billion including debt), giving the long-distance carrier a foothold in the wireless communications business and allowing the corporation to diversify its product lines. SkyTel was the first company to offer nationwide paging services and two-way messaging services over pagers.

Moving products

“Obviously, the paging industry has seen some decline,” said Deer. “However, we’ve been offering new products and services on those networks to stem that decline and we’re working through moving products to the marketplace.”

Those products include SkyTel’s FleetHawk fleet management commercial product, which uses a global positioning system and the Internet to pinpoint a vehicle’s location, and SkyGuard, a consumer product for helping parents keep track of teenage drivers.

Two-way messaging products include the H200 from Hunetec, a personal digital assistant that features two-way messaging; the AT100 from ATCOM Wireless, a device that replaces the Motorola T900; and the ST900 from Sun Telecom. The ST900 features secured encryption of two-way messaging that is being marketed to government and healthcare entities. The company also has wireless telemetry products that control assets remotely.

“Our biggest challenge today is getting our new products into the marketplace,” said Deer. “The SkyTel unit is a very valuable asset to MCI, and I don’t see that being any different as we go forward. We have a good product portfolio.”

WorldCom filed the nation’s largest bankruptcy in July 2002, following the revelation of an $11-billion accounting fraud, and emerged from bankruptcy last April under the name MCI.

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

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