Omaha daily bee., 1909-12-05

assistant superintendent. In 1915 he be-
came assistant general superintendent,
and in 1875 superintendent Of the railway
mail service, which he recognized and
brought to a state Of efficiency that it
had never before attained.
Almost everybody in Washington in
those days knew Vail. a h%ustling young
chap who was marked for bigger things.
1t was not strange. therefore, that Prof.
Bell and his associates should turn to
Vail when they needed an organizer for
the telephone business. Just as the mys-
Itery of the telegraph had drawn Vail from
medicine into that relatively unknown
field eight or nine years before. so the
mystery of the telephone attracted him
away from his comfortable berth I'm the
government service for a new experiment.
His choice was to mean much to the tele-
phone.
organizing the Company.
The New England Telephone company
has a capital Of $4,000, Of which $1,000 was
given to the telephone trust for the use Of
it's inventions and the balance sold for
$4,000 in cash to investors in the New Eng
land territory. The Bell Telephone COM
pany had a capital originally OF $3.50. 600, Of
which 100000 was paid to the old trust or
association and $4,000 expended for prop
erty acquired, while the remaining $780, 900
was sold for cash. The old trust repre-
scented an original investment Of $4,000 by
the four men who started lt-and mostly by
Saunders. 1t therefore received 800, 900 in
the securities of the New England Tele-
phone company and the Bell Telephone
company when those two branches first
came into existence Let us bear this m
mind as we consider some of the later de-
tails of telephone finance.
The headquarters OF the Bell Telephone
company were transferred to New York in
1873, Mr.. Hubbard being president until sue
ceeded by William II. Forbes; Mr.. Saunders
and later George l.. Bradley. treasurer; Mr..
Vail, general manager and one Devonshire,
accountant and auditor. In February, 1879,
the two original companies were CONSOLE
dated under the name of the National Bell
Telephone company, organized with a capl-
tai OF $3.50, O0O, of which $650,0O0 was given
share for share for the stock Of the two
constituent companies and $4,000 carried
in the treasury for the purposes of the
corporation. The possibilities of the tele-
phone were now dawning upon the country.
Accordingly, its securities began to attract
attention in the market and from an initial
quotation of $50 a share in May Of 1879,
telephone stock rose to 500 the same month;
$40 in June; S1S5 In July, and 1921 by Sep
TENDER.
The Western Union, meantime, had be-
come one OF the big corporations Of Wall
street. Having its original development
along the lines OF the railroad, it came
naturally within the Vanderbilt sphere OF
influence and in the later seventies was a
we'll established Vanderbilt corporation
urAnso dfranfnraRa u,oa COrnnnqaA of man No
less notable than those who managed the
affairs ow the great railroad systems. The
Bell Telephone people, seeking extension
and strong alliance, made a contract with
the Western Union whereby certain hold
ings OF the National Bell Telephone COM
pany were taken over by the Western
Union on a partnership basis.
1t should be explained here that from
the very beginning the Bell interests, UNI
der the advice and guidance of Mr.. Vail,
gave only short licenses for the use of
their patents, charging rental for the In
struments. The licenses uniformly ran for
a term OF five years, after which the Bell
company had the right reserved to go into
the field and take over the business itself,
I'VE believed said Mr.. Vail in telling
the writer about this policy a few days
ago, that the Bell interests were so va.u-
able tina we thought there was a partner
ship right in 1t which had value independ-
emily of the patent rights. In other words,
we believed hat a permanent business
could be established which would outlast
all patents and in that business we wanted
to be partners. Therefore, instead of SELL
ing the right to use our system for so
much money, or other. considerations we
would take a partnership in the business
as extended, represented by a certain stock
interest"
Basis of Relationship.
The Western Union people knew per-
fectly we'll that this was the basis on
which the telephone combination was ex-
tending its business and the basis on
which certain contract rights to use the
Bell system was transferred to the West
ern Union in 1879, along with a certain
stock interest in the National Bell Tele-
phone company. The renewal contracts
that were negotiated pursuant to the
original contract all recognize this as the
basis of the relationship. So matters con-
tinued until Jay Gould got the control OF
the Western Union i'm 1881 by bluffing
out the Vanderbilts I'm a bear campaign
on Western Union stock, which was as
famous in it's day as the great Keene
raid on Third avenue was to be twenty
years later.
Back in 1879, however, the making of
the Western Union contract jumped the
price of the shares OF the telephone COM
pany to 5000 a share. The company took
advantage Of this appreciation to sell out
it's treasury stock. The company realized
S4S0,OOO on the sale OF the 1000 shares and
in the open market some months later a
few shares were sold at a price as high
as 5000 each.
Then came the one stock-watering opera
ton thai stands in this telephone history.
Along in the eighties the American Bell
Telephone company was formed under a
special charter obtained In Massachusetts,,
and this new company bought the rights
and property OF the National Bell Tele-
phone company. paying therefor IS, 100000 in
terms of its stock which was exchanged
for the stock Of the old company on the
basis Of six shares for one. The exchange
might be held justifiable, even in these
latter days, inasmuch as the last treasury
stock sold by the National company
brought in $500 a share.
Profits of First stockholders.
II may be worth while now 20 stop a
minute and consider the rewards reaped
by the early hackers OF the telephone. II