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The Department of Justice is investigating whether Arch Wireless Inc.’s $330 million acquisition of Metrocall Holdings Inc. would harm competition for paging services sold to doctors and others who are unable to switch to wireless phones. A Justice Department spokeswoman had no immediate comment, but antitrust sources said the government is worried that the merger of the two leading pager providers would raise prices and hurt customer service. The companies disclosed late Wednesday that the Department of Justice had issued a second request for more details of the March 29 transaction. “Metrocall and Arch are in the process of gathering information to respond to the second request and are working cooperatively with the DOJ as it reviews the merger,” they said in a statement. For most consumers, pagers are obsolete. Most wireless phones come equipped with Internet access and e-mail, offering both the text advantages of a pager and the voice communications of a cell phone. Yet sources said antitrust enforcers are worried that select groups still need pagers, which are able to receive signals in areas where wireless phones do not work, such as inside large buildings. Chief among these groups are doctors, who receive pages both inside hospitals and when they travel. Given the potential urgency of such messages, doctors are unlikely to give up their pagers in response to price increases, sources said. Yankee Group analyst Roger Entner said pagers also are used by people who work with volatile chemicals and gases because, unlike some cell phones, they do not produce any sparks when activated. “If you are working in a refinery, you don’t want too many sparks,” he quipped. Arch spokeswoman Patricia Gray said Thursday that the government’s second request was a broad demand that extends beyond information about specific niches of customers. She also said the company fights for business against other kinds of companies besides paging providers. “We compete in the broader wireless industry,” she said. “Competition goes beyond paging.” The Justice Department’s investigation does not mean it will block the merger. Arch and Metrocall both have recently emerged from bankruptcy as they struggle to adapt to a rapidly shrinking market. Metrocall has said the number of pager subscribers in the U.S. has dropped from 40 million in 1999 to 12 million in 2003. That suggests there may be a need for consolidation. Entner said the pager market is now so insignificant that no one even collects market share data on the industry. Such data, by contrast, is readily available for the wireless phone market. The merger would combine the two largest independent public paging companies, creating an entity with about $900 million in annual revenue. Other competitors include SkyTel Communications Inc. and the paging division of Verizon Wireless. The Justice Department may have decided to issue a second request because Metrocall in November completed its acquisition of WebLink Wireless Inc., a deal that when announced was supposed to creating the leading paging company. The companies appear likely to argue that the merger’s efficiencies outweigh any competitive risks. In the conference call unveiling the deal, Arch board member Bill Redmond cited the “tremendous opportunities for synergies” as a prime rationale for the deal. Such synergies would likely come from eliminating duplicative jobs and better utilizing existing systems. For instance, billing could be consolidated into a single system. A Metrocall spokesman declined to comment. Entner expects the merger will secure antitrust clearance because paging services are no longer important to the economy. “Who cares?” he said. “It is like a tree falling in the Amazon. No one will hear it.” Copyright �2004 TDD, LLC. All rights reserved.

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