MCI gets wireless gig

MCI WorldCom's announced merger with two-way paging company SkyTel gives the company its first network-based entry into wireless.

Under the terms of the deal, SkyTel shareholders will receive between 0.25 and 0.277 shares of MCI WorldCom stock for each SkyTel share, depending on prices three trading days before the merger.

MCI WorldCom officials declined comment.

Though relatively small in the grand wireless scheme, the merger is important for a company that has been trying to pick up its own wireless network for some time. "They wanted to get into wireless, and they apparently decided to get into paging as a first step," said Naqi Jaffery, mobile communications analyst at Dataquest.

"What MCI WorldCom is fearing is a reduction of calling card and 1-800 revenues," said Andrew Cole, principle analyst with Renaissance Worldwide.

The announcement comes weeks after negotiations to buy independent wireless service provider Nextel failed. And the purchase of a paging company likely won't stop MCI WorldCom from searching for additional wireless properties.

Although in need of a wireless voice network, the company was not willing to pay top dollar for it, and getting into the less-expensive paging arena was a smart move, said Cole. "We think this is a really shrewd move on their part."

There is money to be made on the expected growth of two-way paging, said Jaffery. By 2002, Dataquest predicts that there will be 5.2 million subscribers with estimated revenues of $1.2 billion.

Although picking up a paging company may be a decent first step, it does not change the company's desire or need to have its own wireless voice network. "One thing you may see is MCI WorldCom pick up some weaker wireless provider," Cole said.