Publication: Electrical Review
New York, NY, United States
Western Union Share-Owners Indorse
the B. and O. Purchase
J. PIERPONT MORGAN TO ACT AS ARBITRATOR IN SETTLING MINOR DETAILS — PRESIDENT GREEN, "SPEAKING GENERALLY," DECLARES THAT RATES WILL STAND "ABOUT AS THEY NOW ARE" — EXPENSES TO BE RETRENCHED.
At the annual meeting of the stockholders of the Western Union Telegraph Company held last week, 586,000 shares were represented. The purchase of the Baltimore and Ohio lines was ratified. With the substitution of Charles Lanier, of Winslow, Lanier & Co., for Robert Lenox Kennedy, the old Board of Directors was re-elected, and Dr. Norvin Green submitted his annual report.
The contract ratified was to the effect that the Western Union pay $5,000,000 of its own stock for the Baltimore and Ohio system, $60,000 a year for the Baltimore and Ohio Railway Telegraph Company, and the railroad to retain control of an exclusive line of poles and wires between New York and Philadelphia, The Western Union did not pay the actual stock, but executed a note for the 50,000 shares, payable at the option of the company within sixty days from Oct. 5. The lease of the railroad lines at $60,000 annually is for fifty years. J. Pierpont Morgan is to act as arbitrator in case of any differences arising between the contracting parties in the settlement of details. The meeting authorized the issue of the $5,000,000 new stock to take up the note, thus increasing the capital stock of the company to $86,200,000. Samuel Sloan acted as chairman.
Dr. Green's report of the year's business showed that the aggregate revenues of the Western Union for the twelve months ending June 30, 1887, were over $17,000,000. The expenses were something more than $13,000,000. The profits, therefore, were above $4,000,000. A quarterly dividend of 1 per cent. was paid. The sinking fund appropriations amounted to $39,991. With these deductions there remained over $2,500,000 to be added to the surplus, which now aggregates $7,000,000. Of the $13,000,000 expenses, $9,000,000 went for operating expenses, nearly $2,000,000 for leased wires, and the remainder for maintenance, construction and equipment of offices. The report stated that the expenditures for reconstruction were on important trunk lines, which may now be maintained at a slight cost for years.
There has been an increase of 4,101,723 in the number of messages carried over the previous year. This is the largest increase recorded since 1881, after the acquisition of the American Union and Atlantic and Pacific companies. The average rate received per message was 30 1/4 cents, as against 30 9-10 the preceding year. The cost of handling was reduced from 24 cents to 23 1/4 cents. The report concludes by pointing out that on this basis of cost for handling, every message transmitted and delivered at 10 or 15 cents represents business at a loss, and that even city messages cannot be taken profitably at 15 cents for ten words. In calculating the number of messages transmitted, every thirty words of press service is taken as a message. Commercial messages average seventeen to twenty words.
In speaking of telegraph matters after the meeting Dr. Green talked freely. He said:
"Including the Baltimore and Ohio wires we have, or will have by the end of this year, about six hundred thousand miles of wire stretched through this country. That would go around the earth something like twenty-four times. The pole mileage is 162,000. The Western Union wires on July 1 were 524,641 miles. Since then we have built 10,000 miles. The Baltimore and Ohio wires make about 60,000 miles more. This brings up the wire mileage to 594,000. The 6,000 miles difference between that and 600,000 will be strung by Jan. 1, 1888."
"When will the consolidation of the two companies actually occur?"
"We shall go to work closing up offices as soon as possible Many of them are leased for the year, and we shall have, of course, to make arrangements to sublet, or to make some other disposition of them. All this takes time. But we will not delay cutting down expenses a moment more than is necessary. We shall get rid of all the expensive terminal properties in this city and in other large commercial centers, which means thousands of dollars of annual outlay for rent. I believe that we shall be able to do the business of the Baltimore and Ohio lines for about 40 per cent. of what it cost them. They claimed that their business was $2,000,000 a year. As far as we can learn it amounted to $1,500,000, and they expended about that much for operating expenses and construction. If we can do that business, as I say, for forty per cent , or $600,000, there is a margin of $900,000 profit at once."
"Will you advance rates at all?"
"Nothing of the kind has been discussed. Speaking generally, I may say that the rates will stand about as they are now. We won't do any 10-cent business, and there is some doubt about continuing the 15-cent rate to distant points. There is no money in it. If the communication is direct, as between a broker's office in New York and the Board of Trade in Chicago, where there is no messenger service required and where the message is delivered on the floor, the 15-cent rate might be passed, but to transmit and deliver at a house or an office, the expenditure for messengers, cuts away all possible profit."
"Will D. H. Bates, President of the Baltimore and Ohio Telegraph Company, be retained in the Western Union service?"
"That is a question I cannot answer."
Mr. Bates has a contract with the Baltimore and Ohio lines, at $15,000 a year, which does not expire until Jan. 1, 1889.