To Our Shareholders -
In 2006 we had to make a change in course - and we did. The landscape in our industry has changed drastically over the past two years, but we are focused on remaining a viable player in the Enhanced Directory Assistance industry.
Metro One is one of two significant independent directory assistance providers serving the $8 billion dollar directory assistance (DA) industry. The Company today services approximately 3% of the total DA call volume in the United States. The remaining market share is held by a few other providers that are owned by major telephone carriers who are competitors to many of our customers. In 2006, there were approximately 6.5 billion DA calls made in the United States.
Metro One provides its DA services to wireless carriers, competitive local exchange carriers, voice over internet protocol providers (VoIP), free directory assistance advertising services companies and directly to large business customers. Although our available customer base continues to consolidate, the DA and related data services market overall continues to expand. For instance, several companies are now offering voice (both landline and wireless telephone service) as well as video and high-speed internet to their customers, providing new segments of customers for Metro One to address and market its services.
Historically, there have been significant cost differences between overseas and US telecommunications operator services companies, including among directory assistance providers. We are, however, beginning to see some convergence of pricing and the increasing use of automation has helped to minimize the cost variances between overseas and US operators.
We continue to win new business. Over the last twelve months, we have had success in landing a number of small and mid-sized carriers, such as One Communications, Hawaiian Telcom, and Jingle Networks. Moreover, we are working diligently to once again win business from the larger carriers who generate large volumes of DA calls.
We are protecting our proprietary position in the information services business by continuing to add to our patent portfolio. In 2006 we were awarded 11 new patents. Our intellectual property assets now total 50 US patents, two Canadian patents and approximately 70 pending applications on various aspects of the information services business. We believe that our intellectual property assets will add value to the Company while protecting our methods and technology.
In order to remain viable in this highly competitive industry, Metro One continues to make significant operating changes and cost reductions. We believe that these changes will make us competitive and more nimble. The restructuring process has been guided by the strategic decision to return the Company to its original focus of business-to-business directory assistance and data services.
The actions implemented to date have created potential for expansion that attracted additional investment in the Company. These efforts will continue through 2007. We are continuing to push forward with business improvements listed below and have started to see good initial results from our efforts:
- Signed multiple new contracts for wholesale directory assistance and data services with a broad variety of customers
- Renewed all existing DA agreements with current customers as contracts reached expiration
- Worked to reestablish ourselves as the premier provider of enhanced directory assistance services
- Reduced overall operator labor rates by 20% over the last 12 months
- Reduced SG&A expenses by 23%
- Drove down our direct cost of services by 35%
- Continued to examine other uses for our inbound call centers to maximize utilization and profitability
- Continued to develop strategic relationships that will enhance our ability to sell services
Now that the bulk of the restructuring is complete, rebuilding our revenue base is our number one priority. Metro One is working to accomplish this goal by dramatically increasing its sales to directory assistance and data services customers.
With our proprietary technology, call center management expertise and our innovative approach to data services, we have the means to respond to clients with unmatched flexibility and speed within a very competitive environment.
Our key competitive advantages that differentiate US include:
- A broad spectrum of directory assistance services from automated to fully enhanced live operator services;
- US based call centers that operate at competitive costs;
- An excellent reputation for quality of service;
- A management team with many years of experience;
- A data services business based on the most complete and up-to-date data in the industry. By combining multiple data sources into one highly complete and accurate database, we have a unique and competitive advantage in both the directory assistance and data business, further distinguishing ourselves from our competitors.
Metro One's Board of Directors and Management team are encouraged by the Company's progress in 2006, continuing into 2007. We are increasing our customer base and are convinced that the best value for our shareholders will come by leveraging our unique set of competitive advantages to add more directory assistance calls and provide more data services.
We are poised to grow as we reestablish a stable and diversified Company. With new funding, a broader customer base, new technologies lowering our operating costs and consolidation among our primary competitors, our future prospects can be bright. On behalf of the Board of Directors and Management of the Company, we thank you for your continued support during our difficult restructuring and planned return to profitability.
Now let us turn to our hundreds of employees and thank them for maintaining their commitment to the Company as we implemented our restructuring. They are the heart of the Company and by their day-to-day interactions with thousands of callers, they make it possible for us to grow and prosper.
Gary E. Henry
President and Chief Executive Officer
Kenneth D. Peterson, Jr.
Chairman of the Board