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USA Mobility Reports First Quarter Operating Results

ALEXANDRIA, Va., May 10 /PRNewswire-FirstCall/ -- USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging services, today announced operating results for the quarter ended March 31, 2005. The results represent the first full quarter of combined operations for USA Mobility, formed on November 16, 2004 by the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc.

Reported revenue for the first quarter of 2005 increased 34% to $166 million, compared to $124 million in the first quarter of 2004, with the increase due entirely to the inclusion of Metrocall revenue for three-month period. Reported net income for the first quarter of 2005 was $1.3 million, or $0.05 per fully diluted share, compared to net income of $4.9 million, or $0.24 per fully diluted share, in the year-earlier quarter. Included in the first quarter 2005 operating expense were severance and retention related costs of $5.0 million, including $4.3 million to settle the arbitration case with three former Arch executives. USA Mobility's historical financials are those of Arch Wireless, the accounting acquirer in the merger.

USA Mobility reported a net decline of 344,000 messaging units in service during the first quarter of 2005, comprised of 316,000 one-way messaging units and 28,000 two-way messaging units. Messaging units in service totaled 5,858,000 at March 31, 2005, with 4,790,000 direct units in service and 1,068,000 indirect units in service. One-way units in service at March 31, 2005 totaled 5,357,000 while two-way units in service totaled 501,000. For the quarter, average revenue per unit was $9.72 for direct units in service and $4.06 per indirect unit in service.

"We continued to make substantial progress during the quarter toward our merger integration objectives," said Vincent D. Kelly, president and chief executive officer. "Our unit in service reduction of 344,000 represents an improvement over our pro forma fourth quarter 2004 loss of 384,000 and our pro forma first quarter 2004 loss of 499,000. Although our industry remains challenging, we continue to believe the merger-related benefits of lower expenses and operational synergies will allow us to become more efficient over time."

Kelly said merger integration activities during the first quarter included ongoing consolidation of numerous back-office and administrative functions, including the process of combining five customer service operations and three distribution centers and converting to a single customer service and billing platform. "In addition," Kelly said, "we've begun the process to deconstruct one of our two-way networks and consolidate our one-way networks. Rationalization of our technical infrastructure and network operations will be an ongoing process as we look to match our network capacity to the requirements of our customers."

Kelly said the company continued to strengthen its financial position during the first quarter through the repayment of debt incurred at the time of the merger. The company has repaid $98.5 million of its $140 million credit facility as of May 1, 2005, including $53.5 million since January 1, 2005, leaving a balance of $41.5 million as of May 1, 2005. He also noted that cash on hand at March 31, 2005 and May 1, 2005 totaled approximately $37 million and $38 million, respectively.

USA Mobility plans to host a conference call for investors on its first quarter results at 11:00 a.m. Eastern Time on Wednesday, May 11, 2005. The call-in number is 800-211-3767 (toll-free) or 312-461-9296 (toll). The pass code for the call is 8126403 (followed by the # sign). A replay of the call will be available from 2:30 p.m. ET on May 11 until 11:59 p.m. on Friday, May 27. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 8126403 (followed by the # sign).

About USA Mobility

USA Mobility, Inc., headquartered in Alexandria, Virginia, is a leading provider of paging products and other wireless services to the business, government and healthcare sectors. USA Mobility offers traditional one-way and advanced two-way paging via its nationwide networks covering more than 90% of the U.S. population and with roaming partners in Canada and Mexico. In addition, the company offers mobile voice and data services through Nextel and Cingular/AT&T Wireless, including BlackBerry and GPS location applications. The company's product offerings include wireless connectivity systems for medical, business, government and other campus environments. USA Mobility focuses on the business-to-business marketplace and supplies mobile connectivity solutions to over two-thirds of the Fortune 1000 companies. For further information visit http://www.usamobility.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding USA Mobility's expectations for future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause USA Mobility's actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, the ability to continue to reduce operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, government regulation, reliance upon third-party providers for certain equipment and services, the timely and efficient integration of the operations and facilities of Metrocall and Arch as well as other risks described from time to time in periodic reports and registration statements filed with the Securities and Exchange Commission. Although USA Mobility believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. USA Mobility disclaims any intent or obligation to update any forward-looking statements.

    Contact:
     Bob Lougee
     (703) 721-3080

                               Tables to Follow


                              USA MOBILITY, INC
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                         (unaudited and in thousands)


                                               December 31,         March 31,
                                                    2004              2005


                             ASSETS

    Current assets:
        Cash and cash equivalents                   $46,995           $37,111
        Accounts receivable, net                     37,750            33,976
        Prepaid rent, expenses and other             15,460            20,321
        Deferred income taxes                        26,906            26,626
         Total current assets                       127,111           118,034
    Property and equipment, net                     216,508           187,608
    Goodwill                                        151,791           151,791
    Intangible assets, net                           67,129            59,037
    Deferred income tax                             225,253           224,662
    Other assets                                      5,517             5,486
                                                   $793,309          $746,618

     LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
        Current maturities of long-term
         debt                                       $47,558           $32,318
        Accounts payable and accrued
         expenses                                    76,420            70,041
        Customer deposits                             4,316             3,971
        Deferred revenue                             23,623            22,475
      Total current liabilities                     151,917           128,805
    Long-term debt, less current
     maturities                                      47,500             24,214
    Other long-term liabilities                      10,555              7,559
          Total liabilities                         209,972            160,578
    Stockholders' equity:
        Preferred stock                                  --                 --
        Common stock                                      3                  3
        Additional paid-in capital                  554,946            556,357
        Retained earnings                            28,388             29,680
      Total stockholders' equity                    583,337            586,040
                                                   $793,309           $746,618



                              USA MOBILITY, INC
                   CONDENSED CONSOLIDATED INCOME STATEMENTS
           (unaudited and in thousands, except share and per share
                                   amounts)



                                                       Three Months Ended
                                                           March 31,
                                                   2004              2005
    Revenues:
      Services, rental and maintenance,
       net                                        $119,546          $159,150
      Product sales                                  4,113             6,527
                Total revenues                     123,659           165,677

    Operating expenses:
      Cost of products sold                            938             1,279
      Service, rental, and maintenance              39,362            56,973
      Selling and marketing                          9,120            10,470
      General and administrative                    32,941            53,140
      Depreciation and amortization                 26,309            38,535
      Stock based compensation                         688             1,411
      Restructuring charges                          3,018                --
                Total operating expenses           112,376           161,808

    Operating income                                11,283             3,869
    Interest expense                                (3,400)           (1,411)
    Interest income                                     71               197
    Loss on extinguishment of debt                      --              (594)
    Other income                                       168               293
    Income before income tax expense                 8,122             2,354
    Income tax expense                              (3,265)           (1,062)
    Net income                                      $4,857            $1,292


    Basic net income per common share                $0.24             $0.05
    Diluted net income per common share              $0.24             $0.05
    Basic weighted average common shares
     outstanding                                20,000,000        27,108,034
    Diluted weighted average common
     shares outstanding                         20,078,213        27,317,407



                              USA MOBILITY, INC.
               CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                         (unaudited and in thousands)


                                                       Three Months Ended
                                                           March 31,
                                                      2004              2005
    Cash flows from operating activities:
       Net income                                   $4,857            $1,292
       Adjustments to reconcile net
        income to net cash
         provided by operating
          activities:
          Depreciation and amortization             26,309            38,535
          Amortization of deferred
           financing costs                              --               505
          Amortization of stock
           compensation                                688             1,411
          Deferred income tax provision              3,265               871
          Loss on extinguishment of debt                --               594
          Gain on disposals of property
           and equipment                              (109)              (26)
          Provisions for doubtful
           accounts, service adjustments
           and other                                 2,280             7,005
       Changes in assets and liabilities:
          Accounts receivable                        3,353            (3,333)
          Prepaid expenses and other                (2,017)           (4,861)
          Intangibles and other long-term
           assets                                       --               (46)
          Accounts payable and accrued
           expenses                                (13,860)           (6,379)
          Customer deposits and deferred
           revenue                                  (1,866)           (1,493)
          Other long-term liabilities                1,620            (2,996)
    Net cash provided by operating
     activities                                     24,520            31,079

    Cash flows from investing activities:
       Purchases of property and
        equipment                                   (5,701)           (2,564)
       Proceeds from disposals of
        property and equipment                         750                25
       Receipts from note receivable                    56               102
    Net cash used for investing
     activities                                     (4,895)           (2,437)

    Cash flows from financing activities:
       Repayment of long-term debt                 (20,000)          (38,526)
    Net cash provided by/ (used for)
     financing activities                          (20,000)          (38,526)

    Net (decrease) in cash and cash
     equivalents                                      (375)           (9,884)
    Cash and cash equivalents, beginning
     of period                                      34,582            46,995
    Cash and cash equivalents, end of
     period                                        $34,207           $37,111

    Supplemental disclosures:
       Interest paid                                $1,903            $1,367
       Income taxes paid                               $--               $--



                              USA MOBILITY, INC.
                          UNITS IN SERVICE ACTIVITY
                                 (unaudited)


                                      Three Months Ended
                  March         June      September    December      March
                   2004          2004        2004        2004        2005

    Direct     One-Way:
     Beginning
      units in
      service   3,393,000    3,247,000    3,122,000   2,997,000   4,557,000
     Unit in
      service
      acquired                                        1,757,000
    Unit in
     service
     growth
     (decline)   (146,000)    (125,000)    (125,000)   (197,000)   (188,000)
    Ending units
     in service 3,247,000    3,122,000    2,997,000   4,557,000   4,369,000

    Service,
     rental and
     maintenance
     revenues
     (000s)       $89,705      $83,584      $79,079     $97,465    $113,300
    Average
     revenue
     per unit       $9.00        $8.77        $8.62       $8.60      $ 8.46

    Two-Way:
     Beginning
      units in
      service     281,000      269,000      258,000     250,000     446,000
    Unit in
     service
     acquired                                           211,000
    Unit in
     service
     growth
     (decline)    (12,000)     (11,000)      (8,000)    (15,000)    (25,000)
    Ending
     units in
     service      269,000      258,000      250,000     446,000     421,000

    Service,
     rental and
     maintenance
     revenues
     (000s)       $21,950      $20,739      $19,561     $24,961     $29,481
    Average
     revenue
     per unit      $26.66       $26.28       $25.74      $23.76      $22.67

    Total Direct
     Average
     revenue
     per unit      $10.35       $10.09        $9.92       $9.89      $ 9.72

    Indirect     One-Way:
     Beginning
      units in
      service     754,000      654,000      577,000     511,000   1,116,000
    Unit in
     service
     acquired                                           690,000
    Unit in
     service
     growth
     (decline)   (100,000)     (77,000)     (66,000)    (85,000)   (128,000)
    Ending
     units in
     service      654,000      577,000      511,000   1,116,000     988,000

    Service,
     rental and
     maintenance
     revenues
     (000s)        $7,359       $6,369       $5,713      $8,942     $11,261
    Average
     revenue
     per unit       $3.49        $3.47        $3.53       $3.67      $ 3.57

    Two-Way:
     Beginning
      units in
      service       9,000        8,000       12,000      14,000      83,000
     Unit in
      service
      acquired                                           86,000
    Unit in
     service
     growth
     (decline)     (1,000)       4,000        2,000     (17,000)     (3,000)
    Ending units
     in service     8,000       12,000       14,000      83,000      80,000

    Service,
     rental and
     maintenance
     revenues
     (000s)         $ 532        $ 482        $ 432      $1,783      $2,545
    Average revenue
     per unit      $21.06       $14.92       $10.37      $10.92      $10.40

    Total Indirect
     Average
     revenue per
     unit           $3.69        $3.65        $3.68       $4.15      $ 4.06

    Totals
     Beginning
      units in
      service   4,437,000    4,178,000    3,969,000   3,772,000   6,202,000
     Unit in
      service
      acquired         --           --           --   2,744,000          --
     Unit in
      service
      growth
      (decline)  (259,000)    (209,000)    (197,000)   (314,000)   (344,000)

     Ending
      units in
      service   4,178,000    3,969,000    3,772,000   6,202,000   5,858,000

    Service,
     rental and
     maintenance
     revenues
     (000s)     $ 119,546    $ 111,174    $ 104,785   $ 133,151    $156,588
    Average
     revenue
     per unit       $9.25        $9.12        $9.04       $8.90      $ 8.66

    Note:  Amounts have been been adjusted for rounding.



                              USA MOBILITY, INC.
                   PRO FORMA UNITS IN SERVICE ACTIVITY (a)
                                 (unaudited)


                                        Three Months Ended

                       March        June   September    December       March
                        2004        2004        2004        2004        2005
    Direct    One-Way:
     Beginning units
      in service   5,407,000   5,181,000   4,994,000   4,779,000   4,557,000
     Gross
      placements     229,000     185,000     186,000     170,000     144,000
    Disconnects     (455,000)   (372,000)   (401,000)   (392,000)   (332,000)
    Ending units
     in service    5,181,000   4,994,000   4,779,000   4,557,000   4,369,000



              Two-Way:
     Beginning units
      in service     530,000     507,000     486,000    473,000      446,000
      Gross
       placements     40,000      32,000      35,000      29,000      22,000
      Disconnects    (63,000)    (53,000)    (48,000)    (56,000)    (47,000)
      Ending units
       in service    507,000     486,000     473,000     446,000     421,000



    Indirect  One-Way:
     Beginning units
      in service   1,845,000   1,603,000  1,382,000    1,230,000   1,116,000
     Gross
      placements     157,000    145,000     160,000      143,000     107,000
     Disconnects    (399,000)  (366,000)   (312,000)    (257,000)   (235,000)
     Ending units
      in service   1,603,000  1,382,000   1,230,000    1,116,000     988,000



              Two-Way:
    Beginning units
     in service      120,000    112,000    110,000       104,000      83,000
    Gross
     placements       20,000     16,000     20,000         7,000       7,000
    Disconnects      (28,000)   (18,000)   (26,000)      (28,000)    (10,000)
    Ending units
     in service      112,000    110,000    104,000        83,000      80,000


    Total
    Beginning units
     in service    7,902,000  7,403,000  6,972,000     6,586,000    6,202,000
    Gross
     placements      446,000    378,000    401,000       350,000      281,000
    Disconnects     (945,000)  (809,000)  (787,000)     (734,000)    (625,000)
    Ending units in
     service       7,403,000  6,972,000  6,586,000     6,202,000    5,858,000

    (a)  Assumes Arch and Metrocall combined as of January 1, 2004

SOURCE USA Mobility, Inc. -0- 05/10/2005 /CONTACT: Bob Lougee of USA Mobility, Inc., +1-703-721-3080/ /Web site: http://www.usamobility.com/ (USMO)