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Industry growth drives telecom firm to merger

Rochester Business Journal
January 11, 2013

Gartner Inc., a global information technology research firm, has estimated the telecommunications expense management industry will grow by 20 percent and be a $1.4 billion market in 2013. To keep up with that growth, Cellution Inc. has merged with a larger firm based in North Carolina.
Cellution manages corporations' cellular use and expenses. Its clients have included Rochester businesses such as Lewis Tree Service Inc. and B&L Wholesale Supply Inc., along with national companies such as Samsung Corp. and Viacom Corp.
Cellution merged with privately held Ovation Wireless Management in October. Chuck Serapilio, founder and CEO of Cellution, said the move was made to develop technology further and serve clients better.
Neither company would disclose the financial terms of the deal. As part of the merger, Serapilio has become senior vice president of business development for Ovation. All 12 of Cellution's employees in Rochester were retained by Ovation. Serapilio said all the employees telecommute.
Serapilio founded Cellution as Total Wireless Now Inc. in 2001. The company originally had its headquarters in the Medical Arts Building on Alexander Street. Total Wireless became Cellution in 2004.
Serapilio said business began to surge in 2007, the same year Apple Inc. released the first iPhone. Revenues increased 200 percent from 2006 to 2007.
Cellution even opened an office in Manhattan to serve several large clients based in New York City. The Manhattan office has since closed as the number of New York City clients has dropped, he said.
Still, by 2009, Cellution's revenue had exceeded $750,000. At the start of 2012, revenue had surpassed $1 million, Serapilio said.
"For most organizations, 70 percent or more of the mobile devices used by employees are smartphone devices," he said. "Companies will pay a lot of money every single month, but what they don't understand is whether or not they're getting a return on that investment. That's where a company like Cellution comes in.
"If you looked at some of our customers, you would see a phone company and ask, 'Can't they manage their own bill?' Well, they can't. They have to come to us. Mobile is one of the fastest-growing industries on record, and there is no end in sight."
As the industry has continued to grow, so has the competition in expense management. Larger companies such as IBM Corp., Dell Inc. and Xerox Corp. have entered the market.
Facing stiffer competition in a marketplace that now includes tablets and cloud services, Serapilio said, he had to make a decision.
"We needed to make some changes," he said. "We had to figure out a way to develop new technology and get more traction. In this industry, which is consolidating, we could either look to get new investment or find a strategic partner."
In looking at companies to merge with, Serapilio said, a big consideration was the well-being of his employees. Several companies he met with were interested in acquiring Cellution's customers but not keeping the employees.
In the end it was Ovation that saw the most value in keeping together Cellution's team of engineers and salespeople. Ovation also had the resources to develop new technology. The company's revenues have exceeded $3 million annually since 2010, and it manages more than 150,000 devices each month for clients.
"When it came to keeping Cellution's employees, we felt that these are the people that know those customers the best," Ovation CEO Randall Light said. "At the end of the day, you have to keep the customers you have invested in you. That is part of our whole goal, to develop a base that will be with us for years and years to come. This isn't a short-term industry. It's only to continue to grow in terms of complexity, intensity and confusion."
Customers were also a major consideration for Serapilio. Without the merger, Cellution may have been forced to increase its rates and might lose long-term clients, he said.
"We wanted to bring some fresh new ideas to our clients in the most efficient way possible without asking them to pay us twice as much as they have been," Serapilio said. "In this industry you have to keep building on the technology. The cost of doing that on our own outweighed the benefit. With Ovation, we found a partner with the access to the capital to keep growing and servicing customers."

1/11/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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