Less than a year ago, Dobson Communications ( DCEL) was starting to seem as lifeless as a pocket of dead air.

The wireless telephone company had long shed the premium it enjoyed as a strong rural provider with even stronger partners. The company had, in fact, lost its Nasdaq listing altogether and was trading for pocket change on the loosely regulated over-the-counter bulletin board. By last October, Dobson was fetching only 16 cents a share and appeared to be headed for bankruptcy.

But the stock -- then as faint as a dying cell phone signal -- suddenly began to strengthen. Today, relisted and trading for more than $4, it clearly has roared back from the abyss. And investors' rediscovered love for growth-promising tech plays isn't all that's changed for the Oklahoma City company.

"They've turned the corner on profitability," explains Loop Capital's Greg Gorbatenko, the only analyst who still provides equity coverage of the company. "It's a good comeback story."

The Abyss

These days, Dobson talks easily about "profitable growth" and its upbeat view of the future. And investors no longer need to tune out the clang of persistent warning bells when they tune in to the company's comments. Their biggest fear, after all, has already passed without event.

The bank didn't snatch the keys to the company.

"At the end of the day, the bank had to decide whether it wanted to own Dobson or become its partner," explained Bob Rader, senior vice president of Capital West Securities in Oklahoma City. "This way, the bank has a shot at getting its money back."


Ringing Endorsement
Dobson rebounds


On the surface, Dobson's situation sounds almost familiar. Huge debt loads, coupled with a telecom industry meltdown, have left many wireless players withering near extinction. But Dobson managed to jump in hotter water than some. The company's largest shareholder -- a partnership owned by the Dobson family -- put the entire company at risk by pledging its majority stake in Dobson as collateral for a huge personal loan.

Short-sellers pounced upon discovering the loan in late 2001. And their attack, while brief, came at the worst time.

"They basically came in and left in three days," recalls Warren Henry, the company's vice president of investor relations. "But they jumped in right before Sept. 11. And after that, the entire sector got trashed."

The Beatings

The mysterious family loan only added to Dobson's punishment during the industry meltdown. Originally, with Dobson still trading in the high teens on the Nasdaq, the bank had felt safe enough accepting the family's 65% stake in Dobson as security for a $290 million loan. But less than a year later, the stock tumbled below $10 into default territory. And from there, it began a free-fall all the way to the bulletin board.

In the background, the Dobson family scrambled to maintain control of a solid telephone company steered by three different generations before it finally hit the Nasdaq. But the current Dobson leadership frightened some with its silence on the loan. It offered only brief and sporadic updates, usually to announce a new waiver extension, and never offered a reason for the loan at all.

Investors and analysts fell away. The stock quietly slipped off the Nasdaq last October at 35 cents a share. But the worst had already passed. By then, the stock had already doubled off the record low it set two weeks earlier and was on its way back up.

In mid-November, the stock zipped past the $1 mark on news of a surprisingly strong third quarter. It jumped back on the Nasdaq at more than $2 early this year. And it has gone on to nearly triple in price since that time.

Pulling off a couple of profitable quarters -- and a huge loan agreement -- has made all the difference in the world.

On May 19, following months of intense negotiations, the Dobson family announced that it had inked a formal deal with Bank of America. The bank agreed to write off all but $60 million of the family loan in exchange for a majority stake in Dobson. But it allowed the family to retain its voting control -- and leadership -- of the company.

Now, the bank has to step back and hope for the best.

"If Dobson makes it," Rader says simply, "then the bank makes its money back."

By no means is that success guaranteed. While otherwise strong, last quarter brought a disappointing slump in sales. And some positive trends -- in both cost-cutting and roaming business -- are considered unsustainable.

The company also faces some outside threats. In May, Lone Star Phones sued Dobson, seeking at least $27 million in damages -- or nearly double last quarter's profits -- for alleged breach of contract. Meanwhile, the wireless industry continues to be fiercely competitive.

The Future

But Dobson isn't particularly worried. The company says the Lone Star suit is without merit, and that business remains generally strong. The company is particularly excited about its expansion in Alaska, where it now ranks as the largest wireless carrier, and its ability to maintain steady market share in other key states during the economic downturn.

"We have no major concerns," Henry said. "We like our markets. And aside from the economy -- which we're dealing with -- business is going very well."

Gorbatenko shares some of that optimism. The analyst says Dobson is far better positioned than most of the 25 wireless companies in his coverage universe. Because it is a rural carrier, he says, Dobson probably won't be hurt by an upcoming "local number portability" act that's expected to expand churn rates for wireless carriers in the nation's top 100 cities. More important, however, Dobson is already profitable.

"A lot of companies haven't turned that corner yet," Gorbatenko says. "They haven't done nearly as well as Dobson."
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Rader is hopeful that Dobson will emerge as one of the "handful of survivors at the end of the day." And he's quick to point out that the company has already pulled off a stock market miracle.

"We've seen a lot of companies -- especially in tech and telecom -- go into the tank and get delisted," Rader said. "But to get relisted and come back? Now that's a rarity."

For Dobson employees once nagged by bankruptcy fears, the recovery has been particularly sweet. Those who threw their faith behind the company -- buying discount stock at less than 30 cents a share -- have scored fast and big. Rather than tumbling into bankruptcy, as many delisted companies do, Dobson jumped back onto the Nasdaq after just a three-month exile to the bulletin board. And the stock, up more than 100% for the year, still seems to have more good days than bad.

Even Dobson itself expresses surprise at its rapid-fire recovery.

"I've never heard of anybody rebounding so fast," Henry said. "That was unbelievable."