IDT Shuffles Around Management Team

IDT announced yesterday a whole bunch of internal executive changes in the company. Does not look like they are infusing any new blood into the mix but rather just shuffling around a whole bunch of executives! Brace yourself as I am now going to try and describe the changes.

• Yonah Katz - Former CEO if IDT Telecom is now COO of IDT Telecom
• Motti Lichtenstein - Former COO of IDT Corporation is now CEO of IDT Telecom, a postion he held once before.
• Mikhail Leibov - Former head of Corbina (Russian IDT Venture) will step into the newly created position as President of IDT Telecom
• Marcelo Fischer - Former IDT Corporation CFO is now the CFO of Telecom
• Ely Tendler - Former General Counsel for IDT Corporation now goes back to being Chief General Counsel of IDT Telecom, a position he held once before
• Steve Brown - Former CFO of IDT Corporation is now COO of IDT Corporation

I might have missed someone but for the most part it looks as if IDT is making a play to solidify it's Telecom division as more of an independent entity so they can better position it on the market as an independent asset that can be leveraged or maybe even sold on the open market. Hey I would never put these two things past Mr. Jonas based on his past success with flipping companies.

They also announced that executive compensations were being more closely tied to better performance, which I guess means they are all getting a pay cut until the company does better. I guess it's only fair considering they have been laying off people like flies in recent years.

Quick View on US Prepaid Wireless and VOIP Markets

I received many questions from my recent article "Where Have All of the Prepaid Phone Card Customers Gone? " asking if I had statistics on the prepaid wireless market and the VOIP market so I thought I would take a moment to answer:

US Prepaid Mobile Market:
The Prepaid Wireless market had roughly around 12 million or so subscribers back in 2002 and has more than tripled since then to around 40 million subscribers this year. The largest growth came in 2004 with almost a 50% growth over the year before. The forecasts also show this markets growth slowing over the next few years reaching an estimated 45 million by 2010.

US VOIP Market:
VOIP is the newest kid on the market making it's first noticeable numbers in 2003 with 150,000 subscribers and growing at a consistent pace surpassing the 10 million mark in 2006 and envisioned to continue it's current pace reaching 20 million plus by 2010.

Expanding Beyond Phone Cards to Get More Business

In this article, the second article in a long series of articles on the prepaid industry, we will be covering some alternative products that can be added to the traditional phone card business model. While most of these apply to the distribution business, some can also be applied to service provider model as well.

Prepaid Wireless:

Many traditional prepaid phone card providers like IDT, STI and Oblio have already entered into this market with the expectation that their existing distribution networks will take to the product the same way that they did with calling cards. At the beginning many of the phone card distributors all jumped on board and all signs pointed to big success. But unfortunately the consumer demand for prepaid mobile services in the US had yet to materialize making for some painfully slow sales. Add this to the fact that the distributors had to invest in expensive handsets upfront and were making far smaller margins than they were with calling cards, and you saw a quick decline in the distribution channels willingness to push this side of their business.

The good news is that market demand is finally rising, mostly due to the strong acceptance among the Latin American markets and a greater overall acceptance of prepaid services. There are also far less players today than in years past (no more ESPN mobile, AMP'd mobile and Disney Mobile) making for a less crowded and more profitable industry.

If you are willing to make a little bit of an upfront investment than this can be a lucrative product to add to your mix.

POSA:

Long time touted as the next big thing in prepaid, POSA has generated far more press than it ever generated sales. While I really don't want to get into the finer details of POSA, one thing worth mentioning is that if you can align yourself with the right partners and have the right connections to get into chain stores, this is a product than can help you increase your incremental revenues. To deploy the service you will require a fair amount of technical expertise but don't worry too much about this as most providers are usually more than happy to help in this area.

Also be very careful in this market as there are a lot of patent violation lawsuits on this technology currently being fought over in court. Research your providers and partners heavily to make sure they have the licences, patents and expertise before getting into this business.

International Mobile Phone Rentals:

This is fast becoming a big business here in the United States, with mobile phone rental agencies providing short and long term phones to students and business professionals traveling abroad. The demand for this product is created by the fact that most European countries work on the GSM network, a format not supported by too many US companies, making it almost impossible to use your existing phone outside of North America (some US companies like T-Mobile work on the GSM network but are far too expensive when used for making or receiving calls overseas).

The real challenge with this business is the distribution. In order to succeed you will need to either develop a partnership with a major retail chain like a Western Union or a partnership with travel agencies and even possibly some specific online entities (this last one you can do yourself if you have the e-business savvy).

International Mobile Phone Top-Up Cards:

I had never heard anything about this product until I walked into a Western Union one day and saw an advertisement on the wall to buy top up minutes for your friends and family in Mexico. While I am not sure about how the fulfilment process works (is it through POSA or IVR), it seems to make perfect sense as the Mexicans here are always sending money back home so why not top off their mobile phone minutes at the same time.

The major hurdle here at this point would be finding someone who provides this type of product here in the US. Nevertheless a very interesting product!

Honorary mention:

While the 4 products mentioned above are what I feel would fit the best into the prepaid phone card distribution channel there are a number of other products that can be considered as well like: prepaid gift cards, prepaid translation cards, prepaid Voip, and prepaid utility programs.

Phone Card Commercial - Week 20

A Middle Eastern Calling Card commercial

Ibasis Joins the Movement Towards Cleaner Phone Cards

Well the latest company to join in on the "clean" phone card movement and capitalize on the PR is Ibasis. They announced their new program called "TruePrompts" which will always announce the exact minutes you are going to be delivered.

Is it just me or does it seem kind of odd for a company to come up with a program which basically says we are delivering what we are supposed to deliver... why do you need to come up with a trademarked program to do this?

I guess the phone card business is trying to change it's image in order to gain back some of the customers that they lost due to their previous unscrupulous practices. Too little to late is my opinion!

View TruePrompt Press Release

Shopping for Phone Cards Online

With each passing year, the business of selling phone cards online seems to be getting larger and larger. It used to be that the average phone card user was not Internet or credit enabled but in today's easy credit market, it seems like things are changing. More and more companies are coming out with online stores offering cheap phone cards to the public. Their used to just be a handful of sites like:

blackstoneonline.com
sdicard.com
9278.com
phonecardsavers.com
nobelcom.com

Today we are seeing dozens more sites coming into the mix... companies like

speedypin.com
comfi.com
phonecardmania.com
phonecardsmile.com
and more...

For all of you phone card providers and distributors who aren't selling online today, you are missing out on a very nice revenue stream!

For more info on getting your online phone card sales business going feel free to contact me.

IDT Posts 4th Quarter Results and They Are Just As Bad as Before!

For anyone thinking that IDT will somehow turn their sliding stock price around, history is showing you that this company will not be doing that... who knows maybe they don't even want to turn it around?

The net 4th quarter loss went from 86.5 million in Q4 of 2006 to $112.4 million in Q4 of this year and it just keeps getting worse. Their sales are declining, their revenues are declining, their prepaid market share is declining (in their eyes only due to unfair practices by the competition), their cash on hand is declining and their number of employees are declining. The only good news that I could see is that their Net loss from operations is getting smaller, which means that they have done a better job in controlling their spending.

This company has been through a lot in recent years and should continue through harder times in the future until some of their fledgling business units, other than Telecom manage to get off the ground.

Phone Card Commercial - Week 19

Commercial for a Web based calling card called Calldirect.

Disney Mobile to Shut Down at the End of the Year

The Walt Disney Company announced recently that it would be suspending service on it's fledgling MVNO, Disney Mobile, effective December 31st, 2007. The brand, which was created in 2006 and was targeted towards parents of young children (safe phone that could be monitored and had GPS to track their children), just could not get up to speed fast enough in order to keep pace.

The company's lackluster sales and poor distribution are cited as the main reasons for the closure. They acknowledge that without an extensive brand building campaign they would not achieve the level of success needed to produce competitive numbers. They also claim that spending the money, while possible, would probably not be worth while in such a competitive marketplace.

The brand name and child friendly content was just not enough to compete with companies like Verizon and Sprint who were also heavily pushing kid friendly phones and were willing to spend the money to get the word out!

Truth be told it really does not look like their is much room for many MVNOs in the marketplace and the future does not look better, unless of course your company name is Virgin Mobile!

Disney Mobile runs over the Sprint network.

Phone Card Commercial - Week 18

Again not exactly a commercial but it is an interesting marketing bit put together for Blackstone and their POSA business... warning this piece is about 5 minutes long!

Jury Issues $156 million Dollar Judgement Against At&t Over Prepaid Calling Cards

A federal jury recently ruled in favor of Dallas based TGIP Inc. on their claim that At&t had used two of their patents that allowed the company to deliver point of sale activation for some of their prepaid calling cards. The lawsuit was originally filed back in March of 2006 and named At&t as well as Verizon, MCI and IDT. The later three companies settled out of court but At&t fought it all the way.

The $156 million dollar award was determined by a 4% royalty on At&ts 3.5 billion in calling card sales during the time frame in question.

While At&t is going to appeal the verdict, it seems as if this company has set the proper precedent in court to lay claim to most of the POSA technology in the market today. I guess it's the only company that actually managed to make money off POSA ;)

Ibasis and KPN Are Now One Company

Ibasis just recently announced that they have merged with Royal KPN N.V., the national carrier of the Netherlands, and that they will be taking over control of KPN's international carrier services unit in addition to receiving 55 million dollars in exchange for 40 million shares of Ibasis common stock (giving KPN a 51% stake in Ibasis).

This deal seems like an effort for KPN to outsource it's international termination infrastructure and maintenance to a more cost effective and efficient VOIP company without having to reinvent their existing TDM network.

This deal single handily moves Ibasis into the top three international carriers in the world and should lock up their position as the strongest VOIP carrier in the market today. Ibasis which has been around since 1996 is also a leading provider of prepaid calling cards here in the US.

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Where Have All of the Prepaid Phone Card Customers Gone?

In this article on the prepaid phone card business, the first in a series of postings regarding the overall business and it's forcasts, we look at some of the main reasons why the phone card market has been shrinking at such an alarming rate.

1) Prepaid Wireless

For years most immigrants, had no way of getting their own phone service due to poor credit so they resorted to using phone cards from payphones to make all of their calls. Now with prepaid cellular becoming so popular (close to 40 million subscribers today), these immigrants and credit challenged people now have more convenient options for making phone calls. To date international calling still remains expensive on these prepaid cell phones but with each passing year we see more and more companies starting to lower their rates to international locations to help increase their revenues and market share numbers.

2) VOIP

Thanks to companies like Vonage, Packet 8, Skype and others, who had no interest in being profitable, home phone service and international rates were brought down to insanely low amounts that consumers would have to be foolish not to try! The good news is that with many companies in this industry going belly up or running up against financial hardships, many consumers have lost faith in this brand of calling and are looking elsewhere for solutions. The problem here is that many are not looking to phone cards as the answer!

3) Cable Companies

While technically classified as VOIP, they deserve separate mention as unlike the other VOIP players, their strategy is to make money. Their pricing is a little higher but they offer good bundling packages that makes overall monthly expenses lower, at least for the first year. By marketing to their existing base they are having tremendous success in driving up their revenues and giving the traditional LD companies a major headache!

4) Traditional LD Providers

Traditional long distance providers like At&t, Verizon, Quest and others were extremely reluctant to give up their fat cat margins but faced with declining customer bases (mostly thanks to cable companies) they have been reluctantly coming around. Today you can find many providers with unlimited international calling plans and deep discounted bucket plans. One thing to note here is that they are not actively marketing or pushing these plans but instead using them as retention tools... no need to pillage a profitable base!

All in all prepaid wireless and wireless in general is probably having the biggest impact on the calling card market and most likely will continue to be the biggest influencer in the future.

Next week I will touch on the prepaid wireless business in a little more detail!