The Western Union History
Western Union is a household name thanks to its message-sending service that was invented more than a century ago. It also has a storied history in telecommunications, including pioneering the Telex machine and owning two international undersea cables. But the company’s relentless pursuit of new business and markets created a mountain of debt that threatened to bury the firm under its weight. As a result, the company was forced to seek protection from creditors under Chapter 11 of the U.S. bankruptcy code in 1984, a move that led to the company’s final transformation into an exclusively financial services firm.
The Western Union story begins with the establishment of a small telegraph line company in 1851. Originally known as the New York and Mississippi Valley Printing Telegraph Company, it became the Western Union Telegraph Company in 1856 as it expanded its territory to include the western United States. The company soon established a nationwide telegraph network by joining regional telegraph lines into one integrated system.
In the 1860s, the company completed its first transcontinental telegraph line, revolutionizing coast-to-coast communication. The line was not without its challenges, though. A party of Sioux warriors cut down a section of the line and used it for bracelets, but a medicine man convinced them that the spirit of the talking wire had avenged its desecration. The company also faced a challenge to its private monopoly from the Post Office, which wanted to nationalize the telegraph industry, but the telegraph remained a privately owned enterprise.
By the 1870s, Western Union was at its peak of power. Its many inventions included the first stock ticker, which allowed brokerage firms to receive real-time New York Stock Exchange quotes and made financial market operations much more efficient. In addition, the company introduced money transfer services and pioneered the first consumer charge card.
As a result of its success in telecommunications, Western Union was often able to expand into new areas, such as shipping goods and services. But the company’s inability to enter the telephone industry, which had already forged a near-monopoly by the early 1900s, ultimately doomed its future.
In the 1980s, a series of ill-advised acquisitions left Western Union with a massive balance sheet deficit. In 1984, the company’s overextension finally caught up with it and it was forced to file for Chapter 11 bankruptcy protection from its creditors. Under the Chapter 11 process, all of the company’s telecommunications businesses were sold off. During the reorganization, Western Union’s name was changed to Western Union Financial Services Corporation and it was divested of all its non-strategic communications assets, including its long-distance analog voice network, satellite business and undersea cable systems. Its telecommunications divisions were then combined with the money transmission business into a separate, publicly traded company. Amman’s strategy was to make the company a provider of consumer-based, financial services. This strategy was successful and the company remains a global leader in its industry today. It is also the world’s largest money transfer service.