WorldSpace Stumbles

NeuStar's basic business is providing the behind-the-scenes phone book that makes it possible for any phone in North America to link up with any other phone -- even if a Vonage customer is making a call over the Internet to someone using a Nextel walkie-talkie phone. NeuStar is also why you can switch phone companies and keep your number.

In the old days, routing phone calls was easy. The three-digit area code directed your call to a telephone office in the right region of the country. The next three numbers put the call through to your neighborhood exchange. The final four numbers routed it to your house.

These days, Babka said, the first six digits of a phone number mean nothing.

A phone with a 301 area code can be on the network of any of a dozen companies that offer mobile phones and land lines in suburban Maryland. In fact, area codes have nothing to do with geography anymore because -- thanks to NeuStar -- phone companies can assign any area code, anywhere, to anyone who wants it.

When you call a number, your phone company checks with NeuStar to see which phone company is using that number and then routes the call to the right place on the right network.

The computer-to-computer consultation takes milliseconds. Callers never know it happens, and have no reason to know that NeuStar exists -- except as an investment.

The Sterling-based company went public on June 28 at $22 a share. The stock closed Friday at $31.12.

Revenue rose 53 percent in the first half of this year to $120 million, though profit slipped to $28.5 million from $32.2 million. The company recently told analysts that it expects to grow about 25 percent a year.

Besides running the call-routing clearinghouse, NeuStar makes money every time someone changes his phone number, collecting fees for something like 14 million transactions a month.

Because it is the hub of the system, NeuStar also helps communications companies plan and adjust their networks. New technology also means new business. For example General Motors' OnStar assistance program uses phone numbers to track vehicles, and NeuStar handles that.

The phone industry created what is now NeuStar, an independent clearinghouse serving all phone companies, to get calls to the right place. Originally NeuStar was part of Lockheed Martin Corp. of Bethesda. Independence was crucial, Babka said, because the highly competitive phone companies didn't trust each other to handle the sensitive work.

The company was shed by Lockheed Martin after the defense contractor bought communications satellite operator ComSat Corp., compromising its independence in the view of some in the telecom industry. NeuStar was spun off in 1999 in a management buyout lead by Chairman Jeffrey E. Ganek and financed by Warburg Pincus LLC, a big New York investment firm.