Dial US sells assets to McLeod

by Paul Flemming

SBJ Staff

Springfield's Dial US officials announced April 30 it will sell its assets to McLeodUSA Inc. for an undisclosed amount.

McLeod "will probably offer local switched services before we would have been able to," said Jim Hedges, president and owner of Dial US. "This will have a big impact on, first, southwest Missouri, and then all of Missouri, possibly."

Dial US has about 4,800 local-access lines and about 7,800 long-distance customers. It was the first company in Missouri to sign a competitive interconnection agreement with Southwestern Bell Telephone in June 1996. It began offering local service, reselling the services of Southwestern Bell, in February 1997.

Hedges will remain as a senior manager with the company for at least two years.

McLeod positions itself as a super-regional competitive exchange carrier.

Information from company releases and regulatory filings show McLeod has operations in 14 states, with 283,000 local lines, almost 5,000 miles of fiber lines and directory distribution of 15 million.

The company had 1997 revenues of $268 million, with an $80 million loss for the year.

The company in 1997 merged with Consolidated Communications Inc., which represented its only Missouri presence, in St. Louis.

"This acquisition will help speed our entry into local service in Missouri markets and will help leverage our current sales organization in St. Louis," said Steve Gray, president and chief operating officer of McLeodUSA, in a release.

The deal may bring competitive local switched telephone service, as opposed to resale, to Springfield sooner than it would have otherwise, officials with both companies said.

Immediately, customers of the local and long-distance telephone service company will not notice much change. McLeod officials said the Dial US name will probably remain for about another year.

"There's going to be some changes, but I think they'll be gradual, and it will

probably be a year before anyone notices any change," Hedges said.

Then the company will begin introducing the McLeod name to the area with its telephone directory.

McLeod in March announced its Mc- LeodUSA Publishing division had purchased Bi-Rite Directories in Springfield.

The two purchases fit with McLeod's business and marketing strategies elsewhere.

"Our branding strategy rather than spend an enormous amount on advertising is to buy directories or start up new ones" and establish the company's name with those books, said David Boatner, president of McLeod's business services division.

"Beginning mid-1999, the (Bi-Rite) directories will carry our distinctive black cover and gold star, now appearing on nearly 15 million directories in 21 states," Gray said in a release.

"We anticipate that our McLeodUSA directory will help strengthen the recognition of the McLeodUSA name in southwestern Missouri," he added.

"What has been a very interesting, rewarding and exciting time is changed to something different," Hedges said. "I'm pleased for what we've been able to accomplish on our own. There are some regrets, but it appeared to be the right thing for me and for the company."

Hedges and McLeod officials said the 40 Dial US employees in Springfield would remain, and the office would probably expand.

"It's very agreeable to me to hopefully play a part to get to see local switched service," Hedges said. "I'm looking forward to the expansion of this office. I want to stay around for a couple years and see that, especially the part our employees will play in it."

"First and foremost, we like to think of ourselves as a hometown telephone company," Boatner said. "And that's what we saw Dial US as."

Financial performance by Dial US and expansion into Missouri were also cited as reasons the acquisition was attractive. Hedges said negotiations for the sale began in November.

"The basic tenet of our company is to be in second- and third-tier markets like Springfield, like Cedar Rapids, like Champagne, Ill.," Boatner said.

Finalization of the deal hinges on regulatory approval of McLeod applications pending before Missouri's Public Service Commission. Boatner said the PSC's approval is expected within 30 to 60 days.

Dial US began business in 1983, selling long-distance service. Following federal legislation in 1996 that opened local service to competition, Dial US entered that market, signing interconnection agreements with Missouri's three largest incumbent local-service providers to resell their services.

Cedar Rapids, Iowa-based McLeod is a publicly traded on the NASDAQ market under the symbol MCLD.

Its stock closed April 29 at $46.63, up 75 cents.

INSET CAPTION:

'... we like to think

of ourselves as a hometown telephone company. And that's what we saw Dial US as.'

David Boatner

McLeodUSA[[In-content Ad]]