Touch 1 merges with Z-Tel
By By Ryan Carter
For Touch 1, Monday was a day to celebrate.
Company president Jim Corman announced Monday afternoon that he had signed a letter of intent to sell Touch 1 Communications, Inc., to Z-Tel Technologies, Inc., a local telephone company in the Tampa, Fla. area. Corman said that although the deal is not final, he anticipates consummating the merger by the end of March.
Z-Tel Technologies provides consumers with bundled local and long distance telephone services, combined with enhanced, internet-based communications features which enable them to manage all of their voice communications needs. Z-Tel currently sells this bundle as the Z-Line Home Edition in New York and Texas and has over 50,000 Z-Line Home Edition subscribers.
The company plans to offer its product in California, Massachusetts, Pennsylvania, Georgia and Florida in the coming months with plans to grow Z-Tel into a national company.
"We've been selling Z-Tel products and providing order fulfillment since the end of November," Corman said. "It has been a good opportunity for the two companies to see if they like each other."
Corman called the pending acquisition of Touch 1 "a marriage made in heaven."
According to Corman, the merger calls for no layoffs and no negative impact on current salaries. Although it doesn't mean a dramatic increase in the number of employees at Touch 1, Corman does expect to add employees as its business through Z-Tel increases.
"We did 7,000 hours for Z-Tel in November and that has increased to a request of 30,000 hours in February," Corman said. "Our expectation is that if we realize this kind of growth we will see a very steady increase of employment."
Corman said the current Touch 1 management structure would remain the same after the merger, with Corman assuming the position of president of Z-Tel Consumer Services in Atmore.
"There is no reason to change our organizational structure because it isn't broken," Corman said. "I told our employees that after the merger is final everyone will have the same boss except for me." Corman will answer directly to Greg Davis, chairman, president and chief executive officer of Z-Tel.
"We're excited about the merger for several reasons," Corman said. "We determined that if we were to be successful after Chapter 11, we needed a long-term strategic partner, and Z-Tel needed someone who could provide sales and customer support."
According to Corman, the two companies compliment each other very well. Z-Tel is a two-year-old company and much of that time has been spent developing a cost-effective way to deliver a "bundle" of telecommunications services.
"Their goal has been to develop a way to bundle all of the services together, render one bill and do so in a way that it saves the consumer money," Corman said. "The recent court decision to allow the Bell companies into the market of selling long distance has given companies like ours access to local loops making it possible for us to provide these bundled services."
Corman said if Touch 1 is to compete, it must be able to provide local service, and Z-Tel provides that capability.
"The advantage for Touch 1 is there is no need to develop these services internally," he said. "This was our plan during Chapter 11 and we have canceled those efforts."
Corman said the infrastructure at Touch 1, including buildings and computers are still in place.
"We knew if we could find a partner to bring dollars to the table it would put us in a position to expand," he said. "Z-Tel recently went public and raised approximately $100 million in equity."
Although Touch 1 plans to continue to serve its current 320,000 customers nationwide from the Atmore office, its main focus will be on selling Z-Tel products from the Touch 1 sales centers in North Dakota while continuing to work their current sales contracts.
Corman said he is excited about the opportunities the merger provides Touch 1.
"I told my wife I never thought I would be this at peace with losing control of Touch 1," he said. "This is obviously providential in the way the Lord has blessed Touch 1. There is no way Touch 1 could stay independent and survive."
Davis said Z-Tel is fortunate to find someone like Touch 1 who can provide customer acquisition, provisioning, fulfillment, billing and support.
"When consummated, we believe the addition of Touch 1's front and back office capabilities will significantly enhance Z-Tel's growth potential by substantially expanding our ability to market our Z-Line Home Edition services, provision new customer orders and provide quality customer support," Davis said.