Ibasis Reports Q2 Earnings - Phone Card Status

Last week Ibasis released it's Q2 earnings statement and it looks like their revenue and gross profit increased which should make their stock holders happy. I won't bore you with all of the EBITA and overall financial breakdown (if you want to read about it go here).

As for their calling card business here is what Offer Gneezy, CEO had to say:

"Our retail business in which traffic comes directly to our network from retail consumers began to stabilize in Q2 with growth in minutes and relatively flat revenue. Gross profit declined as the result of the introduction of new calling cards which we believe will help to drive future growth. While there is continuing softness in the economy and other factors affecting the pre-paid calling market we expect modest growth in the balance of the year."

Looks like their calling card business is continuing to shrink just like everybody else. I think their Pingo business is doing ok and probably holding steady and it is most likely their distribution phone card business that is seeing the big decline. Here is Richard Tennant, CFO breakdown:

"Our retail business consists of our retail pre-paid calling card business and our Pingo e-commerce business. Revenue from our retail business for the second quarter was $20.9 million compared to $27.9 million in the second quarter of 2007 and $20.6 million in the first quarter of 2008. "

MVNO Landscape Shrinking! What Does The Future Hold?

The last few months have been a trying time for MVNO's in the US, with many companies like Emabrq, Movida and Sonopia closing it's doors and others like kajeet rapidly downsizing. Clearly one of the few MVNOs that managed to succeed (an I use that word loosely) is Virgin Mobile, but even they are having a tough time as of late adding subscribers.

If you look at the wireless industry in the US as a whole, it is clear why MVNOs are having a difficult time:

1) Post paid wireless companies like Sprint are now offering flat rate all you can eat plans. They are a bit expensive right now but that price will drop considerably over the coming years making prepaid services less necessary to help users manage their spending.

2) Rapidly changing handset technology and the coolness factor of phones is what usualy drives a customer to a particular brand or service. This has always been the achilles heel for MVNOs, as they generally have less variety and are usually forced in to lower cost phones to keep their entry costs low and appealing. The iPhone in particular is what is causing youth oriented MVNOs like Virgin Mobile USA a lot of problems.

3) Not owning the actual customer and just renting time from one of the big three will always be a major hurdle. Verizon or Sprint will never provide pricing to the MVNOs to allow them to compete with their own retail brands... they will let them get close but never ahead!

4) Data plans are gaining ground and traditional MVNOs have either not had a data type plan or did not have competitively priced plans in the past (most still don't even have the handsets to support it).

In the end I think we will see only a handful of well positioned players in the MVNO business who managed to overcome and address all of the above issues. I will even take it a step further and say that in 5 years we will not see any MVNOs left as those that managed to survive are bought out by the major players like Verizon, Sprint and T-Mobile who will have no choice but to gobble up these companies to grow their subscriber base in a completely saturated market.

Time Is Running Out On Good Deals For The Vegas Prepaid Press EXPO!

Just another reminder for those last minute people like myself, if you don't start booking your flights, rooms and expo tickets soon for the tppExpo'08 in Vegas (August 19th to 21st), you will end up paying top dollar!!!

Don't worry it's not too late to still get some good deals....

Prepaid Press Expo Discounts Still Available:

• $25 Exhibit Hall - Use coupon code TPPEXHP at checkout
• 10% Discount on Conference Passes - Use coupon code TPPCONF at check out
• $50 Savings on Regular Price for a 1 Day Conference Pass if you book by August 15th
• $76 Savings on Regular Price for a full 3 Day Conference Pass if you book by August 15th

Hotel Deals on the Vegas Strip:

• Room at the Mirage from $72 a night (right next store to the Expo hotel Ceasars Palace)
• Room at Harrah's Casino wich comes with a $200 flight voucher for your next trip and some food vouchers
• Rooms at the Conference Expo Caesars Palace - Not sure how many are left but probably not many

Airfare Deals (Lately Not Much Savings on flights):

• Hotwire
• Orbitz

Hope you find some good deals and see you all in Vegas!!!!

The S Phone Card From Locus - Commercial

This is the first phone card commercial I have ever seen for Locus Telecommunications.

We Are Pleased To Introduce Our New Search By Suject Menu

You spoke and we listened.... Introducing our new search articles by subject menu in the left hand navigation of the site. Previously we used to just allow you to search by month but many people gave feedback that they could not find older stories of interest easily so we decided to categorize every post in here and help out the readers with this new search function.

So if you are just interested in what is going on in the prepaid mobile industry just click on that subject and you will find all of the news going back to 2005 when I started this blog. Or maybe you want to no more about the last few years of IDT... So please enjoy and hopefully you will spend hours here catching up on things you might have missed.

Thanks for all of your feedback!

IDT CEO Jim Courter Forced to Step Down As John McCain Fundraiser

Jim Courter the CEO of IDT Corporation was forced to step down this week as one of 21 campaign fundraisers due to the FCCs finding this past week that his company was guilty in violating communications guidelines for improper payments to foreign officials in return for preferential rates.

The violation in question dates back a couple of years and stems from an alleged preferential rate that IDT procured from Telco Haiti in which IDT got a preferred termination rate of $0.0875 into Haiti when the government of Haiti's mandated inbound rate was no less than $0.23 per minute. In exchange for the lower rate IDT paid into an offshore bank account that allegedly belonged to former corrupt president Jean-Bertrand Aristide. Apparently $0.03 per minute of the $0.0875 went to Aristide and the rest to Telco Haiti (numbers form Portfolio.com).

The issue was outed in 2003 when former employee Michael Jewett, The Caribbean Sales Manager, brought suit against IDT for wrongful termination when he was fired for not wanting to go along with the deal.

The FCC finally acted last week after investigating the issue and fined IDT 1.3 million dollars for this violation. As a result of the news, McCain's camp quickly went into damage control mode and I imagine got Courter to step down. However, not before the press began having a field day with the issue! The issue got so much attention that it even made in into Comedy Central's Indecision 2008 web site. As the days go on more and more major press outlets like the NJ Star Ledger, Washington Post, and many more. A black eye for both McCain and for IDT!

SDI and Locus Join Forces to Gain Market Share in Texas

In a press release this week Locus announced that they have established a partnership with SDI to distribute "fair value" calling cards in the state of Texas. SDI who is located in NY has a strong presence in the Texas market and Locus, who is a Telecom provider from NJ, feels that together they should be able to gather a strong market presence.

The trend in prepaid lately has been delivering "clean cards" and together these two companies hope their new "clean card" will revolutionise the marketplace. "Competition in the market place, especially in Texas, is at its peak. Customers have lots of choices and very busy lifestyles. In order to differentiate ourselves we needed to create a unique partnership with a calling card company that is known for its reliability, competitive rates, clear connections and fair value in a calling card experience," states Sohel Kapadia, CEO of SDI.

The only details released are that the first card would be the Hot Dog card which would then be followed up by others.

Read the full press release here

CVT Peleador Calling Card Commercial

Here is another Spanish language phone card commercial by CVT Prepaid for the Peleador card.

Discounts for Prepaid Press Expo Expire Today!

I thought I would just post a friendly reminder for all of you who have not yet registered for the upcoming Prepaid Press Expo in Vegas (August 19th - 21st). Today is the last day to qualify for the free exhibit hall passes and the reduced rate full conference pass. Until 11:59 tonight the prices will be as follows:

• Exhibit Hall Pass Only = Free
• Full Conference Pass (gives access to seminars, show floor and the party) = $599 - 15% or 275 -15% for one day pass
• Toga Party Pass (gives access to party and show floor) = $99

After today the prices will go up to:

• Exhibit Hall Pass Only = $49 ($75 at the show)
• Full Conference Pass (gives access to seminars, show floor and the party) = $599 or $275 for one day pass
• Toga Party Pass (gives access to party and show floor) = $99 (stays the same)

So for all of you who were waiting or still trying to decide act now to save yourself some money and register online today!

Hispanic Institutes Study on US Prepaid Calling Cards

With all of the hooplah recently about the phone card business cheating it's customers, the Hispanic Institute recently conducted a study of over 45 different phone cards from various providers to see what the cards actually delivered and to verify the quality of the calls as well.The tests were performed between November 12 and December 8th of 2007 and the results reaffirmed what the press has been talking about. Most of the phone cards are failing to deliver the true number of advertised minutes.

Of the 45 cards tested, only 15 cards allowed the researchers to use the whole card balance and 6 fell to the opposite end of the spectrum giving 50% or less of the advertised minutes.

The Winners:

• IDT Boss-WSH Mexico - 100% of minutes delivered
• Telmex USA Companero Guatemala - 100% of minutes delivered
• GEO I Love NY Mexico - 100% of minutes delivered
• STI World Mexico - 100% of minutes delivered

The Loosers:

• Diamond Bingo Guatemala - 50% of minutes delivered
• GEO GEO Florida Guatemala - 50% of minutes delivered
• Lycatel Call Me Guatemala - 50% of minutes delivered
• RTG Cocktail Mexico - 20% of minutes delivered
• Touch-Tel USA La Salvadorena Mexico - 20% of minutes delivered
• Telmex Companero Mexico - 10% of minutes delivered

Granted this study also looked at things like call quality and PDD which on any given day can be different and affect the results, but for the most part this is the first published study that I am aware of that looks at this issue. Whatever the methodology used, this study emphasises one thing, the prepaid calling card industry needs to shape up!

The full report can be viewed at the Hispanic Institutes's web site

IDT Seems To Have Closure On Their Outstanding IRS Tax Issue

In a SEC filing last Monday, IDT disclosed that the IRS had sent a notice that they finalized their audit and have found that IDT owes about 76 million (not including interest). While this may sound like a lot of money, it is actually much less than IDT anticipated. In fact it was about 56 million less, with IDT having stated that they had established a reserve of about 132 million for this purpose.


What does all this mean you ask... Well it means that since IDT had already put aside this money they have just found themselves a nice cash reserve of about 50 million or so (remember they still have to calculate the interest). This is a huge win for the company and most likely should help their business out (50 million could help anybody out!).

FOX 13 Florida - News Coverage on The Florida Phone Card Settlement

Here is a news report from a local Fox affiliate in Florida about the recently announced settlement in Florida regarding prepaid phone cards.

TV News Report - Phone Card Regulations Proposed in California

Here is a TV news report from California discussing the problems with prepaid phone cards and the proposed bill regulating phone card companies (Proposed Bill AB2885).

June Poll Results: Who is Your Favorite Phone Card Provider

Now that our June poll is over I figured I would share the results with all of you. The question asked was "who is your favorite phone card provider" and in total we received 69 votes and here is how you ranked them:

STI 18 (26%)

Ibasis 3 (4%)

IDT 19 (27%)

Locus 6 (8%)

CVT Prepaid 23 (33%)

Just be aware that this survey was in no means scientific and users were allowed to vote more than once. Congratulations CVT for being the most popular with IDT coming in second and STI in finishing in third place.

Be sure to vote on the new July poll question: What is the next best type of product to be sold in the prepaid calling card channel?