Paging company’s stock shows value

Shares of USA Mobility Inc. have performed solidly since the Alexandria pager company was formed in November, although the number of subscribers is shrinking.

Its stock climbed to a high of $39.59 Wednesday on the Nasdaq Stock Market, from $37.05 in November, when the nation’s largest paging-services company was created from the merger of Arch Wireless Inc. and Metrocall Holdings Inc.

For the fourth quarter ended Dec. 31, the company announced a loss of $1.2 million (2 cents a share) compared with a pro-forma loss of $1.4 million (7 cents a share) a year earlier. Pro-forma data show what the company’s financial status would have been if established a year earlier.

The company’s fourth-quarter revenue rose 4.7 percent to $141.3 million.

However, the company reported during its Thursday conference call with investors that its subscriber base is shrinking: The company lost 314,000 messaging units in the fourth quarter and had 6.2 million units in service as of Dec. 31.

Its stock slipped after the call and dropped an additional 48 cents to $33.22 yesterday.

“There was a lack of clarity in pro-forma numbers, and [around] synergy between Arch and Metrocall … there was no definite strategy for returning cash to shareholders, and no forward guidance,” said Eric Green, director of research at Penn Capital Management in New Jersey.

The paging industry in general is shrinking, analysts said.

“Paging is kind of a dying industry,” said Roberta Wiggins, an analyst with Boston consulting firm Yankee Group. “Because of the advent of cellular technology, and the mass market adoption of cellular technology … it is losing ground.”

The heyday of paging was in the late-1990s, when the industry peaked at 45 million customers, said Kenneth Hardman, counsel to the American Association of Paging Carriers, which does not represent USA Mobility Inc.

“The industry was swelled by paging customers … that segment of the market has now shifted,” Mr. Hardman said. “The paging industry has returned to its core customers: medical personnel, safety, fire personnel, first responders.”

“One reason … cellular technology took such a long time to take off was because youth had pagers,” Mrs. Wiggins said.

The company, despite losing subscribers, is still attractive to investors.

“It is generating so much in free cash flow,” Mr. Green said. “Even at this rate they can pay back their market capitalization in four years … it was one of the best-performing stocks in the market till that point.”

One example: The company borrowed $125 million in November to merge Arch and Metrocall; it currently owes $40 million, and “will be debt free in a few months” and will “start paying dividend,” Mr. Green said.

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