MasTec, Inc. History
Miami, Florida 33122-1205
Telephone: (305) 599-1800
Fax: (305) 599-1572
Founded:1929 as Burnup & Sims Inc.
Sales:$838.05 million (2002)
Stock Exchanges:New York
Ticker Symbol: MTZ
NAIC: 237130 Power and Communication Line and Related Structures Construction; 237110 Water and Sewer Line and Related Structures Construction; 237120 Oil and Gas Pipeline and Related Structures Construction
MasTec's clients appreciate our strong sense of identity, our culture of teamwork, our unwavering insistence on safety, and how our thousands of full-time employees work together to get the job done right. But what many of our clients view as our most important characteristic is our true understanding of the intricacy that defines infrastructure building. Over the course of our long history, we have perfected a four-pronged, end-to-end approach to projects. Summarized in four words--Design, Build, Install, Maintain--these principles have become the philosophy that guides everything we do.
- Burnup & Sims (B&S), earliest forerunner of MasTec, is founded.
- Church & Tower of Florida, Inc. (CTF) enters the infrastructure industry.
- Jorge L. Mas Canosa is hired to save failing CTF.
- In a reverse acquisition, CTF acquires 65 percent of B&S, which changes its name to MasTec, Inc.
- Telecommunications Act removes barriers to competition.
- MasTec goes public; its stock is traded on the New York Stock Exchange.
- MasTec revenue peaks at $1.33 billion.
- Economic downturn of telecom and cable markets heavily impacts MasTec and restructuring begins.
The largest Hispanic-owned company in Florida, MasTec, Inc. is a leading specialty contractor focusing on end-to-end infrastructure services for telecommunications, energy, broadband, and intelligent traffic systems for a broad range of clients in the United States, Canada, and Brazil. The company has nearly 1,000 clients, none making up more than 10 percent of revenues. Besides corporate clientele, MasTec is also heavily involved with municipal, state, and federal agencies dealing with transportation, information technology, energy, and intelligent traffic systems. Beginning in 2001, MasTec was refocusing its business plan onto maintenance-related businesses and, ultimately, on the needs of residential premises. The company's marketing strategy, summarized by the tagline "Design, Build, Install, Maintain," is to emphasize that it monitors its end-to-end infrastructure services in order to increase market share in the fragmented infrastructure industry, and remakes itself according to the requirements of a rapidly changing industry.
1929-93: The Forerunners
In 1929 two unemployed carpenters--Russell Burnup and Riley V. Sims--founded Burnup & Sims (B&S) to provide design, construction, and maintenance services to the telephone and utilities industries. During the years of the Great Depression, the two established an office in West Palm Beach, Florida, and by 1936 had a small fleet of trucks and staff. The company's first telecommunications projects were undertaken the following year at Cape Canaveral, where it was responsible for burying 85 miles of cable.
B&S contributed to national defense during World War II by building airfields and telephone systems. After the war, the company became involved in the laying of underwater cable from Florida to Puerto Rico, and from there to Barbados, for such companies as AT&T and General Telephone. Projects then took on a greater geographical scope, as B&S established underground telecommunications systems and built radio towers in Costa Rica, Barbados, Trinidad-Tobago, and Venezuela.
In 1968 B&S went public, and sales of shares helped to raise capital for new, more ambitious projects. The company constructed the first fiber-optic link between Chicago and Washington, D.C. and, according to historian George P. Oslin in The History of Telecommunications, was noted for doing "a large and very profitable business installing cables for Cable TV." The advent of fiber optics in 1980 "meant a complete overhaul of phone systems everywhere," Katrina Burger wrote in the November 1997 issue of Forbes magazine. The company also operated a number of telecommunications subsidiaries as well as Floyd Theaters, Inc., a movie picture chain; Lectro Products, Inc., a CATV power-protection company; and Southeastern Printing, Inc., a printing business.
By the end of the decade, however, a poor economy, changes in utility spending, and aggressive competition for contracts brought tough years for B&S. Moreover, budgetary constrictions led certain telecommunications companies to postpone payments and to cut expenditures for plant construction and maintenance. By the end of fiscal 1993, losses at B&S amounted to $9.31 million, and senior management sought a buyer for the company.
Church & Tower of Florida, Inc. (CTF), incorporated in 1968 to construct and service telephone networks in Puerto Rico and Miami, overextended itself in Puerto Rico and could not build the telephone-infrastructure networks needed in Miami. When Miami-based CTF experienced financial difficulties, the company's owner asked his friend, Cuban immigrant Jorge L. Mas Canosa, to help save the business. In exchange for half ownership of CTF, Mas Canosa began to manage the company in 1969.
Eager to improve the business, Mas Canosa climbed down into ditches, manholes, and trenches to observe workers' construction methods. He listened to advice from telephone-company and government inspectors; he studied books about the most efficient and newest construction methods. As a result of these learning experiences, he transformed CTF into a fast-track, cost-effective construction program that won recognition for consistent professionalism and commitment to excellence. BellSouth Telecommunications, Inc. awarded CTF a long-term contract for projects in the greater Miami and Fort Lauderdale areas. By 1971 Mas Canosa had turned the failing company around; he then borrowed $50,000 and bought the remaining shares of the firm.
Jorge Mas, Mas Canosa's eldest son, began working at CTF in 1980 and became company president in 1984. At this time the development of new technologies and the removal of legal and regulatory barriers were laying the foundation for corporate alliances among the nation's largest telephone, CATV, computer, entertainment, and publishing businesses. Telephone companies were planning to invest billions of dollars to install fiber-optic systems to bring the new technologies to homes and businesses. A rapid increase in Florida's population was placing the existing telecommunications infrastructure under tremendous strain.
In 1990 Jorge Mas established a new subsidiary, Church & Tower, Inc. (CT), to engage in selected construction projects in the public and private sectors. For some time the Mas family had been thinking about taking the company public, but 1992 Hurricane Andrew's passage over southern Florida delayed the plans. The CTF Group, owner of a long-term maintenance contract with BellSouth, was responsible for reconstructing the damaged telecommunication infrastructure of Miami. In the wake of the hurricane, the senior managements of B&S and of the CTF Group realized their mutual interests. Employees from both companies began talking to each other; top management met and struck a deal.
1994: Founding of MasTec
On March 11, 1994--in a reverse acquisition--the privately owned Church & Tower Group acquired 65 percent of the outstanding common stock of publicly traded Burnup & Sims, Inc. The name of Burnup & Sims was changed to MasTec, Inc., the Church & Tower Group became a wholly owned subsidiary, and the senior management of the CTF Group took over leadership of the new entity; Jorge L. Mas Canosa became MasTec's chairman, and Jorge Mas was named president and chief executive officer. Mastec was now a regarded as a "minority business enterprise," publicly traded on NASDAQ under the symbol MASX.
At this time MasTec was one of the nation's leading companies of its kind and the fifth-largest Hispanic-owned public company. To express their entrepreneurial spirit as concisely as possible, MasTec's management adopted the former Burnup & Sims slogan "Opening the Lines of Communication" and added their own vision of the future: "Throughout the World."
Following the acquisition, one of President Jorge Mas' first moves was to express the company's philosophy of leadership in word and deed. In an introduction to the company's 1994 annual report, he asserted that "MasTec's improving performance and future capabilities are in large part due to the commitment of its 2,400 employee-owners ... who work hard, work smart and complete their jobs on time and on budget." In April 1994 he had already set up this success-driven philosophy by distributing five shares of MasTec stock to each employee and encouraging all to invest in their company's benefits program.
Next, MasTec initiated a program for acquiring profitable, market-dominant companies in high-growth metropolitan areas nationwide. The first purchases were that of Designed Traffic Installation, Inc. (an installer of traffic control systems in southern Florida) and Buchanan Contracting Company, Inc. (the holder of two master contracts with BellSouth in Memphis, Tennessee, and Montgomery, Alabama.) Furthermore, BellSouth awarded MasTec contracts for telephone networks in Nashville and Franklin, Tennessee, as well as for networks in four of North Carolina's fastest-growing cities.
From the beginning and throughout MasTec's evolution as a provider of telecommunications services, long-term (master) contracts, such as those with BellSouth, and short-term contracts with alternate-access providers--such as MCI Telecommunications Corp. and US West Communications Services, Inc.--were the backbone of the company's business operations. The deregulation process had enabled alternate-access providers to enter the territory of the regional Bell operating companies, to build networks and sell services to high-volume users, such as those clustered in downtown office buildings and commerce parks. Several MasTec subsidiaries provided fast-track construction services to these competitive-access companies.
Another item on MasTec's business agenda for growth was to increase the Latin American presence it had acquired from the merger. By the mid-1990s many international telecommunication companies had been lured to South America by its improving economy and the privatization of telecommunications, including CATV services. These companies, however, had neither the personnel nor the in-country resources to implement system upgrades of the aging infrastructure for telecommunications. They needed the services of independent contractors who could apply cost-effective methods to the upgrade and construction of these infrastructures. According to its 1994 annual report, President Jorge Mas believed that MasTec had "the cultural ties, management expertise and existing regional operations to serve these needs."
Consequently, the company's international subsidiaries secured contracts for upgrading telephone networks in Guayaquil, Ecuador; for building 35,000 telephone lines in San Salvador, El Salvador; and for constructing fiber-optic facilities in Caracas, Venezuela. Furthermore, Video Cable Comunicacion, S.A. awarded a design-build contract to MasTec Argentina, S.A. for upgrading its CATV system in Buenos Aires from 30 channels to 100. This is believed to have been the first contract of its kind in Latin America. At year-end 1994 MasTec had met the challenges of establishing itself as a new company; it reported a net profit of $7.5 million on revenue of $111.29 million.
Mid-1990s Expansion and Reorganization
Management at MasTec decided to divest some B&S acquisitions not related to its core operations, specifically Floyd Theaters, Lectro Products, and Southeastern Printing. The proceeds were used to reduce debt and finance the acquisition of other companies related to MasTec's core business.
Among the acquisitions was Utility Line Maintenance, Inc., a company engaged in clearing right-of-ways for utilities in southeastern United States. Church & Tower Fiber Tel, Inc. then expanded its business to include installation of "smart highway" systems (electronic systems that control highway messaging and traffic signalization.) The acquisition of Tri-Duct Corporation brought two more BellSouth master contracts in Huntsville and Decatur, Alabama, thereby complementing existing contracts in Montgomery, as well as in Memphis. Consolidating administrative functions in these adjacent geographic areas reduced the company's operating expenses and enhanced service capability in the region. MasTec won new contracts to install telecommunications networks in the Dallas/Fort Worth area; to manage construction for Metro Dade Water & Sewer Authority's Pump Station Program; to install part of MediaOne, Inc.'s new CATV network in metropolitan Atlanta; and to develop and maintain infrastructure telephone services in eastern Colorado for US West.
In its pursuit of international expansion, MasTec had to compete with large international companies having significantly greater experience and resources. The company acquired a 36 percent equity interest in Supercanal, S.A., a CATV operator in Argentina, and equity interests ranging from 14 percent to 35 percent in four other companies. The company also won a contract from The Virgin Islands Telephone Co. to restore damaged telephone facilities on the island of St. Thomas; and a contract from Tomen Corp., a leading Japanese telecommunications company, for the construction of 35,000 telephone lines in Manila.
By the end of 1995 the company had combined the strengths of its subsidiaries and organized its operations into three principal business segments: telecommunications and related construction services, CATV infrastructure construction and maintenance, and general construction services. That year MasTec's revenues increased by some 57 percent, from $111.29 million in 1994 to $174.58 million in 1995.
As MasTec entered the second half of the 1990s, the telecommunications industry continued to undergo fundamental changes. The U.S. Telecommunications Act of 1996, agreements among countries in the European Union, and continuing privatization and regulatory initiatives in Latin America removed barriers to competition. Furthermore, growing customer demand for better voice, video, and data telecommunications emphasized the limited network bandwidth in sections of the country. The U.S. government auctioned off radio-frequency bandwidth for the creation of personal communications systems (PCS): pure digital networks superior to the traditional analog-cellular systems.
MasTec competed in the new markets created by these developments by concentrating on additional relevant acquisitions and on expansion of its core telecommunications services. In a major acquisition from Telefonica--the largest telecommunications infrastructure contractor in Spain--in 1996, MasTec bought Sistemas e Instalaciones de Telecomunicacion, S.A. ("Sintel"). This positioned MasTec to take advantage of the increased competition anticipated in Europe and the rapid upgrading of telecommunications services expected in Latin America. The purchase more than doubled the size of MasTec, and gave it access to Sintel's established operations in Spain and in Latin America.
Among other acquisitions during this time were the following: Harrison Wright Company, Inc., a telecommunications contractor with operations and BellSouth master contracts principally in Georgia and the Carolinas; Shanco Corporation and Kennedy Cable Construction, Inc., CATV contractors providing services to six southeastern states as well as to New Jersey and New York. MasTec's subsidiaries installed a 370-mile fiber loop for Telergy, Inc. in upstate New York and completed a fiber loop for MCI Metro in Raleigh, North Carolina.
The limitations of analog networks propelled the upgrade and installation of digital networks, which were more efficient. MasTec increased its penetration into this market by combining two subsidiaries--Carolina ComTec and Burnup & Sims Communications Services--to form a new company called MasTec ComTec, which brought single-project, turnkey, and maintenance solutions to the communications problems of Fortune 500 corporations, government agencies, colleges, universities, and medical institutions. MasTec ComTec installed both local area networks (LANs) and wide-area networks (WANs). The company was hired to fast-track construction of the enormous fiber-and-copper infrastructure of telecommunications equipment for the 1996 Olympic Village; to build LANs and WANs for the nationwide offices of a major stockbrokerage firm; and to install and maintain a bank holding company's consolidated voice, data, and video network.
Another subsidiary, MasTec Technologies Inc., was established in 1996 to provide management services of wireless networks. In little more than a year the company installed over 130 PCS tower-and-antenna sites for PCS companies, thereby establishing state-of-the-art wireless networks in southern Florida, Tampa, Orlando, and Phoenix. By year-end 1996 MasTec's revenues had increased 171 percent, from $174.58 million in 1995 to $472.8 million in 1996.
Late 1990s: Going Public and Meeting Demand
The Telecommunications Act unleashed a building boom in the telecommunications infrastructure industry--and MasTec prospered. In January 1997 the company announced a three-for-two stock split and on February 14 of that year began trading its common stock on the New York Stock Exchange. President Jorge Mas, in a company news bulletin released after the New York listing, declared that "MasTec's joining the world's premier exchange is a tribute to the dedication and hard work of its 7,000 employees worldwide. The fact that a company formed by Cuban exiles is able to trade among the Fortune 500 companies is living proof that the American dream is very much alive." MasTec celebrated by offering its employees a new stock-purchase program that enabled them to buy stock at a 15 percent discount.
Domestically, through its aggressive acquisition strategy, MasTec acted as a consolidator of thousands of mom-and-pop operators to create a national network of contractors that could provide service wherever it had clients. MasTec provided outside plant services to local exchange carriers--such as Bell South Telecommunications, Inc.; United Telephone of Florida, Inc.; and GTE Corp.--among others. By year-end 1997, MasTec had 20 multi-year master contracts with regional Bell operating companies and other local exchange carriers to meet all of their outside plant requirements according to stipulated costs per job and within a specific geographic areas.
MasTec Chairman Mas Canosa died in 1997; his son, Jorge, Jr., succeeded him. Newly acquired Sintel allowed MasTec to profit from the now deregulated Spanish market and establish itself in Latin America, primarily in the rapidly growing telecom markets of Argentina and Brazil. In July 1997 the company formed MasTec Inepar and held a 51 percent interest in the Brazilian company. By the end of the year, MasTec had acquired 16 domestic and three foreign companies. The following year, as part of a consolidation plan, MasTec sold 87 percent of Sintel and developed a company-wide marketing plan to emphasize the MasTec brand name.
A number of trends led to greater demand for MasTec's services in 1999. A need for greater bandwidth was prompted by increased reliance on personal computers; growth in telecommunications voice, video, and data traffic; electronic commerce; and transmission of high-quality information on the Internet. Furthermore, competition arose from consolidation and deregulation in the telecommunications industry, prompting the birth of new, integrated, geographically diverse companies that offered bundled services formerly available separately. In response, MasTec positioned itself to offer end-to-end solutions for the infrastructure needs of its clients. End-to-end projects started from a transmission point, such as the central office of a telephone company or cable television head-end and ran through aerial, underground cables or wireless transmission to the users' voice and data ports, computer terminals, cable outlets or cellular stations.
MasTec created a new service line that included voice and data network installations, power and gas distribution networks, telecommunications infrastructure projects, and intelligent transportation systems; the company was awarded millions of dollars in contracts for these lines. MasTec formed alliances with a number of companies; for example, it teamed up with Lucent Technologies to provide infrastructure solutions to the cable television industry, and also formed an alliance with Skanska U.S.A. to provide project management and telecommunications infrastructure services throughout North America. MasTec also acquired several external network service providers.
In 1999, Jorge, Jr., retired from day-to-day operations, remaining on-board as chairman. Joel-Tomas Citron was appointed president and CEO of MasTec. Although for a variety of reasons revenues slipped during this time, MasTec remained one of the fastest growing communication and energy infrastructure providers in the United States in 2000.
Contracts poured in. IBM chose MasTec to install and maintain services for its Rapid Network Deployment Program, a project that meant installing more than 1,200 medical kiosks in hospital emergency rooms. Comcast Cable Communications awarded MasTec a five-year contract to help build an advanced fiber-optic network in Comcast territories. The state of Florida chose MasTec to design and install an end-to-end fiber optic network along 2,200 miles of Florida's Turnpike and interstate highways. From the Texas Department of Transportation MasTec won a single contract totalling $740,000 to upgrade a lighting system along the main artery linking Galveston Island with the mainland. Acquisitions continued apace, and by 2000 MasTec reported record revenues of $1.33 billion, some $55.31 million of which came from Brazilian operations.
2001 and Beyond: Weathering a Downtown
MasTec derived a large amount of its revenue from telecommunications clients. However, as Rolf Boone observed in a 2002 article in the Wenatchee Business Journal, "a funny thing happened on the way to ever-expanding growth and revenue--the telecommunications bubble burst." In its 2001 annual report, MasTec management noted that "certain segments of the telecom industry suffered a severe downturn that resulted in a number of our clients filing for bankruptcy protection, or experiencing financial difficulties." Even clients not in financial difficulty began limiting capital expenditures for infrastructure projects.
MasTec began to consolidate its many subsidiaries into two major groups: MasTec North America, Inc. and MasTec Brazil, S.A. Still, for fiscal 2001 MasTec posted a loss of $92.35 million in revenue--due primarily to increases in bad debt expense of $182.2 million during the year. In August of that year, Citron resigned and was replaced as president and CEO by Austin J. Shanfelter. A new executive vice-president and CFO, Donald P. Weinstein, was named in January 2002.
Facing a market that had dried up, Shanfelter and Weinstein remained cautiously optimistic, reminding the public that MasTec had predicted the downtown and was making adjustments accordingly. The company's Project 2100 was introduced to streamline, downsize, and realize economies through strategic partnerships. Another key to the plan was in outsourcing much of the company's information technology functions. As a result, MasTec was refocused on telecom, broadband, intelligent traffic systems, and energy.
Financial results for 2002 were disappointing, with the company posting a net loss of $128.8 million on revenues of $838.1. While revenues were reportedly better than management had expected, the cost streamlining process had yet to produce satisfactory results. While analysts concurred that the industry was obviously weak, some also faulted MasTec for its financial results. Standard & Poor's downgraded the company's corporate bonds to junk-bond status. Other industry analysts, however, expected Project 2100 to bear fruit in the coming year and remained optimistic about the company's recovery. MasTec management was similarly hopeful, even confident, that the company was well-prepared to increase profits and cash flow.
Principal Subsidiaries: MasTec North America, Inc.; MasTec Brazil S.A.
Principal Competitors: Betchel Group, Inc.; Dycom Industries, Inc.; Level 3 Communications, Inc.; MYR Group, Inc.; SBA Communications Corporation.
- Boone, Rolf, "MasTec Focusing on New Options for Cable News," Wenatchee Business Journal, October 2002, p. S4.
- Burger, Katrina, "Somebody's Gotta do the Dirty Work," Forbes, November 17, 1997, p. 140.
- Bussey, Jane, "Mas," Miami Herald, September 2, 1996, pp. 17, 21.
- ------, "Miami-Based Telecommunications-Infrastructure Builder Has Loss for Second Year," Miami Herald, March 11, 2003.
- ------, "S&P Downgrades MasTec Bonds," Miami Herald, March 18, 2003.
- "CEO Interview: Donald Weinstein," Wall Street Transcript Digest, September 16, 2002.
- Lunan, Charles, "MasTec Buys Firm in Spain," Sun-Sentinel, April 2, 1996, p. D2.
- Oslin, George P., The Story of Telecommunications, Macon, Ga.: Mercer University Press, 1992, 507 pp.
- "S&P Cuts MasTec Inc. [Bonds] to Junk Status," Standard & Poor's Ratings Services, March 18, 2003.
- "Success in the Trenches: Utilities Share Costs and Benefits of Underground Joint Use," Transmission & Distribution World, December 1, p. 58.
- Tubb, Maretta, "HydroExcavation Is Ideal for Texas Utility Job," Underground Construction, July 2002, pp. 44-46.
Source: International Directory of Company Histories, Vol. 55. St. James Press, 2003.