Australian wholesale aggregator of telecommunications services Inabox Group posted a profit of AUD 1.2 million for the year ended 30 June. Inabox listed on the ASX in July this year and on the same day completed the acquisition of VoIP provider iVox, which produced a profit of around AUD 570,000. The combined entity reported pro forma profits of AUD 1.77 million. Combined revenues were AUD 45.06 million and EBITDA totalled AUD 3.13 million.
Opinion: Telstra brings Kogan Mobile down with ispONE. There was no more telling statement during last week’s legal trial between mobile virtual network operator (MVNO) ispONE and its supplier Telstra, than when ispONE’s counsel said: “The problem is that Telstra is charging ispONE substantially more than what ispONE is charging its customers.” ispONE this week succumbed to financial pressure and called in the administrators before it could have its final day in court with Telstra. It had alleged Telstra engaged in unconscionable conduct when it promised to match Optus pricing and then charged significantly more.
Opinion: Telstra brings Kogan Mobile down with ispONE.
There was no more telling statement during last week’s legal trial between mobile virtual network operator (MVNO) ispONE and its supplier Telstra, than when ispONE’s counsel said: “The problem is that Telstra is charging ispONE substantially more than what ispONE is charging its customers.”
ispONE this week succumbed to financial pressure and called in the administrators before it could have its final day in court with Telstra. It had alleged Telstra engaged in unconscionable conduct when it promised to match Optus pricing and then charged significantly more.ispONE is not new to the MVNO game. It’s had a relationship with Telstra for years, as it has with Optus. But when Optus decided to move away from wholesaling prepaid mobile products, Telstra stepped in to fill the void.
Telstra Wholesale sales director Paul Zahra secured the deal with ispONE, and emails discussed during last week's trial between Zahra and ispONE director Zac Swindells showed the issues he faced in negotiating a competitive deal from the mothership.
In one email Zahra said "it was a battle to get the pricing per minute and per SMS you wanted," and that "data is a very sensitive subject internally", so they would need to revisit data pricing at a later stage.
Now out of pocket millions of dollars, Telstra has washed its hands of one of ispONE's clients, Kogan Mobile, but has moved to form a direct relationship with another, Aldi. It’s a clear sign of which retail brand Telstra thinks can deliver profitable customers.
In the razor-thin margin market of mobile virtual network operators, it’s hard to understand why ispONE ever signed agreements that saw it charge Kogan Mobile a per-user rate, while it was to pay Telstra for minutes and megabytes.
During the trial between ispONE and Telstra, Justice Pagone was careful to establish if the so-called Optus pricing was included anywhere in the agreement between the two parties. It was not.
ispONE bore all the risk, and Kogan Mobile seemed oblivious to the potential final outcome when it sued ispONE for damages after already winning its case against the wholesaler for booting customers off the network for overuse.
Where to from here?
Damian Kay, who runs virtual telco and ASX-listed Inabox Group, said no carrier wants to be subject to the situation Telstra found itself in.
He predicted carriers would increasingly want to deal directly with mass-market players, as Telstra has moved to do with Aldi.
“The MVNE [mobile virtual network enabler] will still play a role in the ‘enablement’ but not the commercial supply of the service. From a risk perspective to the MVNO this is not all together bad,” Kay said.
That enablement piece could help determine who survives in the MVNE business.
Connecting to Telstra’s platforms is no mean feat. When ispONE first did so, Swindells was only too happy to boast of the new systems built in conjunction with Ericsson in less than 16 weeks to make the prepaid product possible.
It emerged during last week’s court session that the prepaid platform hadn’t quite lived up to expectations, with problems experienced from late December until February this year.
Kay's Inabox Group mirrors all its agreements back to back with the carriers and the MVNOs. “In other words we sell it the way we buy it.”
For small MVNOs unwilling to manage their own billing and carrier integration, the business case just got a whole lot more difficult.
Kogan Mobile said it has been “muscled out of the mobile industry against our will by a force much bigger and much stronger than us”.
Telstra hasn't commented on why it chose to work directly with Aldi and shut Kogan out, but it’s clear who holds the ultimate power, and how quickly a carrier can freeze out a potential threat.
In the carnage, Optus customers may also be affected. Despite an eleventh hour restructure from ispONE, an Optus spokesperson said the company is currently monitoring the situation and will talk with the administrator regarding the next steps of the business "to ensure limited disruption to customers using the Optus network".
And undoubtedly, retail brands considering MVNOs will be looking much more closely at the fine print.
Inabox Group (ASX: IAB) is one of the best performing IPO's in the past year, with the telecommunications focused company trading at $1.61 intra-day today, which is a 34% premium to the $1.20 offer price.
Inabox's business model is that it is an aggregator of telecommunications products, with its customer base hundreds of retail service providers in Australia.
An important factor for this model is that revenue is 90% recurring, with Inabox leveraging scale to buy telecommunications products wholesale from major Carriers including Telstra, Optus and AAPT.
These products are then on-sold to end users under their own brand and they manage the relationship with their customers.
The company was founded over a decade ago, and following the listing will generate over $40 million in revenue, and employ around 75 full time staff.
Damian Kay, Inabox managing director, discusses why his company chose to list on the Australian Stock Exchange. Click on link below for video.
Former Smart50 finalist Inabox has finally listed on the Australian Securities Exchange this morning, after months of preparation. The milestone follows an announcement from telecommunications giant M2 earlier this month, which pledged $2 million for a minority stake in the company. Earlier this year, Inabox also changed its name from “Telcoinabox” and announced its intention to go public.
The shares have performed well this morning, listing at $1.20 and rising to $1.31 by 11.10 AEST.
The biggest benefactors from the listing have been institutional investors and M2, while the largest individual shareholder, general manager Michael Clarke, now holds a stake worth over $1 million.
Founder and managing director Damian Kay told SmartCompany this morning he’s feeling good about the move, but says the business is entering a difficult period of heightened attention – which will take some time to get used to.
“Any mistake we make now is visible, and that definitely fills me with a little bit of anxiety,” he says.
“But we’re very confident about what we do, and we’ve been doing this for 10 years now.”
By all accounts, the IPO has been a success for the business, with its initial offer oversubscribed – the business raised $3.5 million, the maximum under its offer.
Kay founded the business in 2003, financed by credit cards. The company’s first strategy was to offer franchised telecommunications businesses, sold to ‘mum and dad’ investors who could come up with their own pricing models.
However, the business has since grown. It acquired wholesale aggregator and VoIP provider iVox earlier this year, with the company now operating mainly as a wholesale aggregation service for voice, mobile data and other telecommunications services.
The company’s financials are strong, too – revenue was $22.6 million for the first half of the 2013 year, with profits expected to top $1 million this year.
For now, though, Kay says the biggest priority is just making sure the business performs well on a consistent basis – especially now it is in the public eye.
“This isn’t about worrying about the share price. It’s about driving earnings through a good balanced strategy. We’re very confident.”
WHOLESALE telco aggregator Inabox will list on the Australian Securities Exchange today after being forced to delay its sharemarket debut last month because of ongoing volatility as it battled to raise $3.5 million.
Inabox initially was due to list on June 26 but had to delay its listing while it sought enough investors from which to raise funds. It was not until fast-growing telco M2 Telecommunications invested $2m that Inabox was able to attract new investors and close out its initial public offering.
"It's been quite a journey through this tumultuous market and getting an IPO in this environment has been quite a challenge," Inabox chief Damian Kay said.
"M2 did act as a trigger for us and I would be naive if I (thought) we got over the line without their help. It was definitely a vote of confidence from them and I think that helped other investors take notice."The company confirmed yesterday that its IPO was oversubscribed and had achieved the maximum raising of $3.5m.
Inabox, which competes with other wholesalers such as MyNetPhone and ispONE, was originally seeking to raise $2.9m through the issue of about 2.4 million shares at $1.20 a share. It means the nano-cap stock will list today with a market cap of about $16m.
Inabox, which buys broadband capacity from Telstra, Optus and AAPT and sells it to more than 200 retailers via its Telcoinabox business, plans on using the funds raised from its IPO on small-scale acquisitions in the cloud computing space.
The company was founded a decade ago and generates more than $40m in revenue a year. It employs about 75 full-time staff.
Inabox Group (ASX: IAB) is set to become Australia's newest public company after being Admitted to the ASX yesterday, and will hit the boards on Friday 12th July at 11:00am AEST. The telecommunications focused company will have around 13.9 million quoted securities, after raising $3.4 million in an IPO with the issue of 2.8 million shares at $1.20.
The business model is that Inabox is an aggregator with the customer base hundreds of retail service providers in Australia, with the company providing telecommunications products including fixed line, mobile and data services.
These products are then on-sold to end users under their own brand and they manage the relationship with their customers.
An important factor for the business model is that revenue is 90% recurring, with Inabox leveraging scale to buy telecommunications products wholesale from major Carriers including Telstra, Optus and AAPT.
Inabox will look to increase revenue through selling more products through its existing customer channels, after launching more products this year.
High priority products include; call termination services, NBN access services, virtual private networks and cloud based services such as remote back-up and storage.
“Virtual telco” Inabox Group could release new shares onto the market soon after listing as it prepares to grow through acquisitions. The company, which is set to list on the Australian Securities Exchange on Friday morning, buys telecommunications capacity from Telstra and other larger companies before on-selling it to more than 200 smaller players. It also white-labels billing and support systems to a range of clients.
Inabox Group chief executive Damian Kay said the company planned to use its newly raised funds to buy out smaller rivals that can’t gain scale on their own.
“We’ve got a number of complimentary opportunities that we’re looking at,” he said. “Buying some of those smaller guys will help us continue to assert our dominance in this part of the market.
“But they’ll all be in Australia because I have no interests overseas.”
Mr Kay acknowledged the company, which will list with the stock code IAB, would be tightly held with the top 10 shareholders collectively owning 87 per cent of the company.
The initial public offering was oversubscribed and raised $3.5 million, of which $2 million came from M2 Telecommunications in exchange for a 12 per cent stake in the newly launched company.
While the IPO will put just 18 per cent of the company onto the ASX, Mr Kay said he wouldn’t rule out releasing more shares to boost the company’s cash levels as required.
But he also noted the three founders of the company each own 20 per cent of Inabox and are escrowed for 18 months, which means they cannot sell any of their shares during that period.
“We have a number of great opportunities in the pipeline that will cost us a little bit of money to roll out,” he said. “It’s about making sure we have the balance sheet to afford them [and] it’s important we build up the liquidity in the business.”
Call Us Now
1300 7 TELCO
1300 7 83526 enquire about becoming a telco
Discover an opportunity just perfect for you! discover more
"We understood the size and potential of the telecommunications industry from our experience. Telcoinabox appealed more than any other franchise. There was nothing else as cost-effective or lucrative."
- Andrew Branson at IF Telecom