Vanguard Cellular

~ the obituary ~

Vanguard Cellular sold mobile phone service in the places the famous carriers reached last. Its own description of itself is a geography lesson: 6,831,196 aggregate POPs at the end of 1998, spread across 26 markets running from the Mid-Atlantic up through New England, with over 664,000 subscribers on them. The clever part was the shape. Its Mid-Atlantic SuperSystem pressed up against New York and Philadelphia without being inside either, and its New England cluster sat just outside Boston, so roughly 80 percent of its operating POPs were adjacent to four of the seven largest metropolitan areas in the country. It sold to the commuter belt and the countryside rather than competing downtown.

The business worked. Revenue reached $421,706,000 in 1998 against $374,518,000 the year before, and net income was $74,247,000 after a $20,005,000 extraordinary loss on retiring debt. In 1997 the company had lost ten million dollars. It employed about 1,800 people, roughly 650 of them in a sales force selling to small and medium-sized companies, and it ran more than 145 retail locations. Customer service was handled out of Greensboro, North Carolina, open all day and all night, with regional call centers added so that a caller in Maine reached someone who knew what Maine was.

In May 1998 the board told management to explore a sale, an investment bank ran an auction, and AT&T won it. The merger agreement is dated 2 October 1998. Shareholders could take $23.00 in cash or AT&T stock, with the overall consideration split half and half, and Vanguard was merged into an AT&T subsidiary named Winston, Inc. The first Form 15 came on 8 April 1999 reporting one holder of record. The second came on 3 May 1999 reporting none.

~ the case file ~

~ three owners of a name ~

Vanguard's phones and bills said CellularONE, a brand the company did not control. The 10-K is unusually candid about the arrangement: Vanguard was one of three owners of the CellularONE name, holding a 2.5 percent interest in the partnership that owned it, with an option to increase that to one third for approximately $6.1 million. The brand itself was enormous, covering more than 12,000 cities and towns and over 115 million POPs, and none of that belonged to Vanguard either.

So the most recognizable thing about the company was borrowed, and the filing calls this an investment in brand identity without ever quite admitting the obvious risk. When AT&T bought the network it got the towers and the subscribers. The CellularONE name stayed behind with the partnership that had always held it.

~ the split adjustment ~

There is a small arithmetic ghost in this story that catches people who look it up. The October 1998 agreement priced the stock election at 0.3987 AT&T shares per Vanguard share. By the time the last 10-K was filed the number printed in it is 0.59805, and the filing explains why in a parenthesis: AT&T declared a three-for-two stock split on 17 March 1999, and the ratio was adjusted to match. Both numbers are correct and they describe the same deal on either side of a split. Multiply the first by one and a half and you get the second exactly.

~ the twenty six markets ~

By 1999 Turkey had been on GSM for five years. Turkcell and Telsim launched in 1994, the handsets were the same Nokias and Ericssons you saw in Europe, and a Turkish subscriber in 1999 had a digital network and a SIM card as a matter of course. Vanguard spent 1997 and 1998 converting its markets off analog, starting with Myrtle Beach and southern Pennsylvania, on TDMA rather than GSM, because that was the American road.

That gap explains why a company like this is unfamiliar here. Rural American cellular in the 1990s was a patchwork of independents with borrowed brands, carved up by county, consolidating hard as the decade closed. Turkey had two national operators and one standard. There was no Turkish Vanguard to remember, because the market never had room for one.

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