The Democratic banner. (Mt. Vernon, Ohio) 1898-192?, 1913-12-26
HOW WIRE DEAL
CAME TO Be MADE
SidelightS on Absorption Of
the Western Union.
ITS STOCK WAS AT Low EBB

bination Received.
In 1909 just after the American Tele-
phone and Telegraph company absorb
ed the Western Union Telegraph COM
pany, from which alliance it now Of
fers to divorce itself, President Vail of
the latter company said:
There is much to gain by the joint
construction and maintenance Of plant
and by its common use to the greatest
possible extent. But the greatest ad-
vantage would follow the placing of
millions of telephone subscribers In
close and reliable connection with the
receiving and dispatching of the tele-
graph Offices"
The vigorous fight of the Postal Tele-
graph company on this very connection
of the telephone and the telegraph
service of the American company and
blow at the combination of the two.
The telephone company instructed its
operators, 1t was alleged, to switch all
subscribers wishing to send a telegram
on to the wires and offices of the West
ern Union.
Then the Postal alleged discrimina-
tlon against the telephone company
and brought complaints In several
states.
Its complaint in New York was sus-
tained by the public service commits
sion, and the telephone company dis
continued the use of the code word and
instructed its operators to make sub
scribers state their preference Of tele-
graph companies.
History of the American Company.
The American company dates from
1885, incorporated In New York, and
until 1900 owning and operating only
the long distance lines of the American
Bell Telephone company. In that year
the local lines owned by local compa-
MES Of the American Bell, which were
scattered throughout the United States
and Canada, but did not comprise all
the local companies, were taken over
by the American Telephone and Tele
graph. ft
One of the points of attack by the
Postal company was ovcrcapitallzation
by which higher rates for service were
necessitated
The system of telephone companies
thus comprised grew by the organiza.
ton of new companies and the alb
sorption of others until the central
company now owns, either in whole
or in part local and state companies
In every state of the Union and some
in Canada. The central company per
forms central administration for all
the companies and furnishes tele-
phones, for which 1t receives from the
subsidiaries Az per cent OF their gross
yearly receipts.
The territory of the United States Is
divided into eight parts-the New Eng
land, eastern, southern, central, north
western, southwestern, mountain and
Pacific. The total wire exchange and
toll service is 14,610S13 miles. The
number of exchange stations is $780,
600 and the stations of independents
connected with the system 2,620,000.
The number of independents connected
with the system is 25O00.
The company, besides its telephone
and telegraph subsidiaries, owns the
Western Electric company, which is
practically the manufacturing plant for
the system.
The control OF the Western Union
was gained IN the purchase of about
S20,000,0O0 to $25,000,000 par value
of the 500 .7S7,0O0 stock of the Western
Union. In 1911 the American Tele-
phones ownership of Western Union
stock amounted to $20G57, 200. This
about $50 Il share.
The property had been run down
sadly, and its earnings in the seven
years preceding its purchase had
| steadily declined until they approach
ed Il deficit at the time the company
was taken into the telephone system.
Scrip Instead OF cash was being paid
in dividends In 1908.
Western Union Earnings Increased.
The purchase by the American Tele-
phone company was II distinct advan-
tage to 1t and its earnings have stead
| lly Increased from gross OF NoU,OOO,-
900 in 1908 to $41,000,000 In 1912,
with large surpluses yearly, though
dividends have been reduced from
to 3 per cent.
The attitude of the department of
justice toward the telephone company
was first actually revealed In the fil-
Ing of suit last July at Portland
Ore, aimed ut the company operating
In Oregon, Washington, Montana and
Idaho. 1t was an antitrust suit and
alleged that the subsidiary companies
had been Illegally acquired
All financial experts who have eX
Nmined the American properties say
khat the $4,000 stockholders, OF whom
majority are women, have nothing
to fear financially In the voluntary
dissolution.
The movement of the stock since Il
became so much focus Of govern
ment attention, both for prospective
dissolution and for government own
ership, has been nervous. The highes
the stock has been in recent years wai
lS0 In 1902