About Multiband

is a public, NASDAQ-listed company (MBND). Multiband engages with a vast and growing array of technologies including renewable energy, wireless infrastructure, electrical power systems, digital signage, commercial audio/video solutions, hospitality IPTV, and VOD systems. Multiband maintains nearly 20% of all DIRECTV’s installations, maintenance and upgrades for residents of single-family homes. Multiband also supplies satellite Internet solutions for homes and businesses across the nation. As the largest nationwide DIRECTV master system operator in the Multiple Dwelling Unit (MDU) market and one of the largest full-service home service providers (HSPs), Multiband is a driven leader in a competitive industry. Additionally, Multiband is a leading provider of software and integrated billing services to MDUs on a single bill; including video, voice, data and other value-added local services, both directly and through strategic partnerships. Multiband focuses on providing world-class customer service and the highest level of performance for all of our partners and customers, from multinational corporations to individual families. Multiband is headquartered in Minneapolis, MN, and has offices strategically placed around the continental United States.

Business
Multiband Corporation (the Company), is a Minnesota-based corporation formed in September 1975. The Company’s founders were Sherman Bell, Marvin Frieman and Doug Sause. Steven Bell joined the company in 1978 and still serves as Chief Financial Officer and General Counsel. The Company has two operating segments: 1,,) Home Service Provider (HSP), which primarily installs and maintains video services for residents of single-family homes and 2) Multi-Dwelling Unit (MDU), which sells voice, data and video services to residents of Multiple-Dwelling Units. Both segments encompass a variety of different corporate entities.

The Company completed an initial public offering in June 1984. In November 1992, the Company became a non-reporting company under the Securities Exchange Act of 1934. In the fall of 1998, following the deaths of two of the company’s founders, James Mandel was hired as CEO, a position he holds currently. In July 2000, the Company regained its reporting company status. In December 2000, the Company stock began trading on the NASDAQ stock exchange under the symbol VICM.In July 2004, the symbol was changed to MBND, concurrent with the Company’s name change from Vicom, Incorporated to Multiband Corporation.

From its inception until December 31, 1998, the Company operated exclusively as a telephone interconnect company. It started out selling key telephone systems and graduated to selling networked PBX systems. Effective December 31, 1998, the Company acquired the assets of the Midwest region of Enstar Networking Corporation (ENC), a data cabling and networking company. In 1999, in the context of a forward triangular merger, the Company, to expand its range of computer products and related services, purchased the stock of Ekman,Inc. d/b/a Corporate Technologies and merged Ekman,Inc. into the newly-formed surviving corporation, Corporate Technologies USA,Inc. (MBS).MBS provided voice, data and video systems and services to businesses and government.The MBS business segment was sold effective April 1, 2005.The Company’s MDU segment (formally known as MCS) began in February 2000.MDU provides voice, data and video services to Multiple-Dwelling Units, including apartment buildings, condominiums and timeshare resorts. During 2004, the Company purchased video subscribers in a number of separate transactions, the largest one being Rainbow Satellite Group, LLC. During 2004, the Company also purchased the stock of Minnesota Digital Universe, Inc. (MNMDU), which made the Company the largest master service operator in MDUs for DIRECTV satellite television in the United States.During 2006 and 2007, the Company strategically sold certain assets at Multiple-Dwelling Properties where only video services were primarily deployed.The Company continues to operate properties where multiple services are deployed.

To remain competitive, the Company, in future periods intends to continue to own and operate properties at locations where multiple services can be deployed, and manage properties where one or more services are deployed.Consistent with that strategy, during 2006, 2007 and 2008 the Company expanded its servicing of third-party clients (other system operators) through its call center.As of March 15, 2010, the Company had approximately 120,000 owned and managed subscriptions, with an additional 50,000 subscriptions supported by its call center.

During 2008, the Company became involved in the business of installing video services in single-family homes by acquiring 51 percent of the outstanding stock of Multiband NC Incorporated (NC) (formerly Michigan Microtech, Incorporated (MMT), a former subsidiary of Directech Holding Company Inc. (DTHC)), a fulfillment agent for DIRECTV, which specializes in providing satellite TV to single-family homes. This acquisition was followed up by the acquisition of an 80 percent interest in a group of companies which were the former operating subsidiaries of DTHC, (Multiband NE Incorporated (NE), Multiband SC Incorporated (SC), Multiband EC Incorporated (EC), Multiband DV Incorporated (DV) and Multiband Security Incorporated (Security)). The Company also purchased an additional 29 percent ownership interest in Multiband NC Incorporated, of which it previously owned 51 percent, effective on January 2, 2009. The remaining 20 percent of those operating entities were purchased in December 2009.

The Company’s rationale for acquiring the aforementioned operating subsidiaries is as listed below.

  • The operating entities are potentially accretive to our business model as they have the:
    • Same line of business (DIRECTV).
    • Ability to leverage systems and management.
    • Ability to leverage core competencies in support center, software and engineering.
    • Ability to expand geographic presence with ample technician capacity.
    • Size, scale and scope of combined business enterprise more in line with growth necessary to support public entity.
    • Potential for accretive positive cash flow and capacity for net income.
  • Also, new business opportunities may be integrated into an existing installation process which touches over 5,000 homes per day. Multiband Enterprise Manager software application is capable of modification to support “bundled billing” attributes resulting from new sales opportunity.
  • Furthermore, the transaction produced a strong barrier of entry to other potential competitors which creates potential for longevity and exclusivity.
  • Other reasons for the acquisition included:
    • Strong financial performance by DIRECTV which provides security and continued growth potential for Multiband.
    • Strong DIRECTV balance sheet and liquidity which provides comfort for continued, successful operations.
    • Multiband’s public company reporting status provides an excellent platform to support and motivate new human resource assets.
    • Multiband’s management is, we believe, capable of “rightsizing” the operating expense structure of DTHC operating entities to provide increased cash flow and earning potential over a short period of time.
    • Opportunity for significant shareholder appreciation when comparing industry valuation metrics to pre-existing Multiband market values.

This purchase was a significant event for the Company. The purchase materially increased the size and scope of the Company’s operations. The Company has now expanded its operations into 16 states with 32 field offices. The Company now employs approximately 2,800 people. Multiband is now the second-largest independent DIRECTV field services provider in the United States.

Home Service Provider (HSP Segment)
The Company, through its HSP segment, receives net cash payments for the installation and service of DIRECTV video programming for residents of single-family homes.These video subscribers are billed by DIRECTV. The HSP segment functions as a fulfillment arm for DIRECTV.As a result, Multiband generally does not directly compete with other providers for DIRECTV’s business.Although DIRECTV competes with DISH, the other leading satellite television provider and incumbent providers of phone and telephone services for pay television customers, DIRECTV has its own marketing and competitive programs of which the Company is merely an indirect and passive recipient.

Multi-Dwelling Unit (MDU Segment)
Since 2004, the Company, through its MDU segment, has served as a master service operator for DIRECTV, a provider of satellite television service. DIRECTV is the largest provider of satellite television services in the United States, with approximately 18 million subscribers. DIRECTV competes with the leading cable companies and with DISH, America’s second-largest provider of satellite television. The master service operator arrangement allows the Company to offer satellite television services to residents of Multiple-Dwelling Units through a network of affiliated operators.

Since 2000, Multiband has also offered voice, data and video services directly to residents of the Multiple-Dwelling Unit (MDU) market. Our experience in this market suggests that property owners and managers are currently looking for a solution that will satisfy two market demands from customers. The first being to satisfy the residents who desire to bring satellite television service to the unit without being visually unattractive or a structural/maintenance problem; the second being to provide competitive access for local and long distance telephone, cable television and internet services. Our service offering addresses these demands and provides the consumer several benefits, including:

  • Lower cost per service.
  • Blended satellite and cable television package.
  • Multiple feature local phone services (features such as call waiting, call forwarding and three-way calling).
  • Better than industry average response times.
  • One number for billing and service needs.
  • One bill for local, long distance cable television and internet.
  • “Instant On” service availability.

In late 2005, the Company began to use its internal support center and billing platform to service third-party clients.

In late 2006, DIRECTV provided the Company with the right to bill services directly to end users. The Company is providing such billing services to a certain number of customers.

As we develop and market this package, we keep a marketing focus on two levels of customers for this product. The primary decision makers are the property owners/managers. Their concerns are focused on delivering their residents reliability, quality service, short response times, minimized disruptions on the property, minimized alterations to the property and value-added services. Each of these concerns is addressed in our contracts with the property owner, which includes annual reviews and 10-year terms as service providers on the property. The secondary customer is the end user. We provide the property with ongoing marketing support for their leasing agents to deliver clear, concise and timely information on our services. This will include simple signup options that should maximize our penetration of the property.

When taken as a whole, and based on Multiband’s interpretations of U.S. Census Bureau statistics, cable television, telephone and internet services currently generate over $170 billion of revenues annually in the U.S., with an estimated 26 million households living in MDUs. We believe these statistics indicate stable growing markets with demand that is likely to deliver significant value to businesses that can obtain a subscriber base of any meaningful size.

Multiband Consumer Industry Analysis and Strategy
MDU offers video, and in some cases data and voice to residents of Multiple-Dwelling Units, primarily throughout the Midwest and the Southeast. Our primary competition in this market comes from the local incumbent providers of telephone and cable television services. The leading competitors in these services are the former Bell System Companies such as Verizon Communications (Verizon) and Qwest Communications International, Inc. (Qwest), and national cable companies such as Comcast Corporation (Comcast) and Time Warner. These regional and national rivals have significant resources and are strong competitors. Nonetheless, we believe as a largely unregulated entity, we can be competitive on both price and service.

Regarding video services, we believe we have a significant consumer benefit in that we are establishing private rather than public television systems, which allows us to deliver a package not laden with local “public access” stations that clog the basic service package. In essence, we will be able to deliver a customized service offering to each property based upon pre-installation market research that we perform. The pricing of our service is also untariffed; allowing for flexible and competitive “bundling” of services.

Regarding data services, the general concern among consumers is the quality of the connection and the speed of the download. We believe our design provides the highest broadband connection speeds currently available. The approach we market is “blocks of service”. Essentially, we deliver the same high bit-rate service in small, medium and large packages, with an appropriate per-unit cost reduction for those customers that will commit to a higher monthly expenditure.

Market Description
We are currently marketing Multiband services to MDU properties primarily throughout the Midwest and Southeast. We will target properties that range from 50 to 150 units on a contiguous MDU property for television and internet access only. We will survey properties that exceed 150 units for the feasibility of local and long-distance telephone services.

We are initially concentrating on middle to high-end rental complexes. We are also pursuing resort-area condominiums. A recent U.S. Census Bureau table indicates there are more than 65,000 properties in the United States which fit this profile. Assuming an average of 100 units per complex, our focus is on a potential subscriber base of 6.5 million.

A recent Property Owners and Managers survey, published by the U.S. Census Bureau, shows rental properties are focusing on improving services and amenities available to their tenants. These improvements are being undertaken to reduce tenant turnover, relieve pricing pressures on rents and attract tenants from competing properties. We believe most of these owners or managers are not interested in being “in the technology business” and will use the services that we are offering. Various iterations of this package will allow the owners to share in the residual income stream from the subscriber base.

Number of Units/Customers
As of March 15, 2010, the Company had approximately 120,000 owned-and-managed subscriptions, with an additional 50,000 subscribers supported by its support center.

Employees
As of March 15, 2010, Multiband employed 71 full-time employees, including 9 management employees, 37 finance personnel, 19 information technology employees, 5 human resource employees and 1 employee in an administrative position. HSP employed 2,609 full-time employees, consisting of 85 management employees, 4 human resource employees, 72 administrative personnel, 251 customer service employees, 2,108 technicians and 89 warehouse employees. As of that same date, MDU had 169 full-time employees, consisting of 3 in sales and marketing, 3 in technical positions, 18 technicians, 141 in customer service and related support, 2 in management positions and 2 administrative personnel.

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