.ill AT&T 7:41 AM 100% Case 5.pdf Cost of Capital TELECOMMUNICATIONS SERVICES, INC. Telecommunications Services. Inc. was founded in Dallas, Texas, in 1981 by Judi Estes, Gayle Daniels, and Jill Hays. Its purpose was to provide an "address and phone number" for small com- panies which did not have a full-time office staff, yet needed to respond rapidly to their customers inquiries. For example, self-employod financial consultants could arrange to have their mail and tele- s Services. Then, they could pick up mail at their conve- nience or have it forwarded to their homes. Also, they could have telephone calls routed to a mobile phone. or they could bebeeped" with a message to return a call. Telecommunications Services soon began to lease cellular phones and pagers, and it expanded into other eastern, southern, and mid phone calls go to Tele western cities Since its inception, the company has enjoyed enormous success. Even its founders were sur- prised at the demand for its services, and its founding coincided nicely with developments in both the and personal computer (PC) industries, which made certain types of services fea- sible (for example, paging and mobile-phone services) The founders were relatively wealthy individuals when they started the company, and they had enough confidence in the business to commit most of their own funds to the new venture. Still, the capital requirements brought on by extremely rapid growth soon exhausted their personal funds. Thus they were forced to borrow heavily, and, eventually, to float an issue of common stock. Currently. the stock trades in the over-the-counter market, and it has been selling at about $50 per share. Telecomounications Services is widely recognized as the leader in an emerging growth indus- try, and it won an award in 1992 for being one of the 100 best-managed companies in the United States. The company is organized into two divisions:(1) the Mail and Message Services Division and (2) the Cellular Phone and Pager Leasing Division. Although the two divisions are housed in the same buildings, the equipment they use and their personnel are quite different. Indeed, the only synergies lie in the marketing area, but since marketing is of overwbelming importance in the per- sonal service industry, no thought has been given to breaking up the company. However. Telecom- munications Services' management regards the Cellular Phone and Pager Leasing Division as being subject to the greatest threat from potential competition. The founders are still active in the business, but they no longer work 70-hour weeks. Increas ingly, they are enjoying the fruits of their past labors, and they have let professional managers take over day-to-day operations. They are all on the board of directors, though, and Judi Estes is chairman. Although its growth has been phenomenal, it has been more random than planned. The founders would simply decide on a location for a new facility, run an ad in a local newspaper for employees, send in an experienced manager from one of the established offices, and begin to make 5 Open With Print