The impending Vonex internet based telco float, backed by State One Stockbroking, will be fascinating to watch as the new ASX arrival muscles its way into big telco territory with its very own, in house, cloud based telephony technology. Every good float needs both a base load revenue story and a blue-sky pitch and Vonex certainly doesn’t disappoint in either department.
It is perhaps a sign of the changing technological times that cloud based PABX and internet telecommunications company Vonex, will list on the ASX by months end.
In the fast paced world of the modern telco, everyone is jamming everything into or via the cloud, however it is a little unusual for a new ASX listing to have built its own technology for doing so.
That is normally the domain of the mammoth telco’s as most of the small to mid tier players simply white label one of the very few tech solutions that are out there.
Those businesses that still receive and transfer incoming and even internal calls via the old fashioned “PABX” unit that has been hanging off the office wall for decades, either haven’t yet discovered the amazing world of cloud based telephony or they are just plain lazy as the benefits are quite extreme.
Instead of having a fixed number of lines coming into the business under the old PABX system, Vonex’s internet based telephony system allows for unlimited lines and telephone numbers to be created - and sometimes within just minutes.
Calls are placed over the internet instead of via costly telco fixed lines and the resultant savings are very material.
Importantly, calls can be made internally between international branch offices free of charge, perhaps eliminating one of the great cost burdens of running a multi-site, global business.
Vonex’s system also provides for call “chasing” which means that an executive can program in a list of telephones that will ring and for how long each one will ring before the next one takes over.
Callers will eventually find their target, regardless of whether he or she is in the office, on mobile or at the beach house.
Small businesses that are seeking to look like big businesses can advertise a landline number in any international jurisdiction and then simply use a local mobile phone to take the call.
According to Vonex, a typical 10 man small business would normally spend an average of $47,000 on line and toll charges over a 5 year period.
Vonex says it can more than halve that bill using the company’s internet telephony with the resultant bill over the same period coming in at just $18,000.
Initial set up and hardware costs of $11,000 can also be reduced down to just $3000 by using cloud based internet telephony.
Vonex already has a real business that is still undergoing extreme growth with the top line jumping from $3.74m in FY14 to over $7m last financial year. In the first half of this financial year the company’s EBITDA from both its retail and wholesale division activities was $644,000.
Vonex has a clever cloud based PABX offering that includes a white labelled product for those small to mid tier telcos that don’t have their own technology.
It also has a direct to business product aimed mostly at the small to medium enterprise owner.
Vonex’s in-house cloud PABX technology gives it a seat at a table normally reserved for the big players and it is therefore able to punch well above its weight in the market place.
The impending arrival of the NBN represents an exquisite piece of timing for Vonex who is seeking to pinch customers from the big telcos on a systematic basis as the NBN rolls out across the country.
Town by town, suburb by suburb and business by business, the old Telstra copper cabled network service will be shut down as the NBN rolls out.
Customers will have to choose to re-sign on the new NBN fibre network with their existing supplier – or perhaps take the opportunity to test the market for a new supplier - maybe even one that owns its own cloud based PABX software !
In addition to its cloud PABX system, Vonex also offers an internet and mobile phone service, allowing the telco tyro to mix it up with the big boys.
Telstra’s status as the 800 pound gorilla in the market is slowly eroding with the advent of the NBN that will charge all telcos exactly the same rate regardless of how big or small they might be.
Vonex’s cloud based PABX seems to be getting some market traction too with the number of active users doubling to 22,000 in the last three years alone.
The company also experienced some recent success with its wholesale product after ASX listed telco, Inabox chose Vonex to partner with to roll out its own service solution.
Vonex received up front set up and licensing fees for that deal in addition to a stream of ongoing maintenance and management fees. Most importantly however, Vonex now expects to surpass 50,000 users on its system within 36 months, partly courtesy of that deal, giving it cost efficiencies and synergies that come with scale.
Commenting on the deal, Inabox CEO Damian Kay said; “After an exhaustive search of the unified communications platforms both in Australia and internationally, inabox is pleased to have partnered with Vonex….”
Vonex already has over 400 channel partners on its books driving sales and says its top three generated AU$741,000 in new customer annualised sales revenue in the 2016-17 financial year.
The company is also able to recite a number of well known names already using its technology including Groupon, Auto Masters, Red Balloon, Menulog and Stockdale & Lego. Vonex’s network infrastructure is already active in Jakarta, Singapore, London, California, New York, Washington DC, Sydney and Perth.
If the Vonex float can replicate any part of ASX listed MNF Group’s success, it will have done well.
MNF is a full service, internet based telco, not unlike Vonex but with a market cap of over $400m. It currently trades at over 16 times its EBITDA guidance of $25m for this financial year.
The Sydney-based company listed on the ASX at 20c in 2006 and its share price went stratospheric this year when it touched AU$6.90 a share.
With the global telecommunications market tipped to grow at a compounded annual rate of 9.1% to US$140 billion in 2021, Vonex is aiming to surf the tsunami as it manoeuvres for a shot at the big league arising from rare opportunity created by Australia’s switch from redundant copper technology to the National Broadband Network.
Global management consulting firm McKinsey estimates that internet based voice telephony in the SME segment alone will grow by 20% per annum in coming years.
By 2020, the NBN is aiming to have 11.6 million premises on fibre optics and has targeted 5.7 million additional customers to be connected to the network over the next two years.
Vonex’s listing is being backed by 25 year old, Perth, mid-tier broking house, State One Stockbroking who will partially underwrite the $7m, 20c float to the value of $5.5m, pretty much guaranteeing its success.
Subscribers will also get a free option on a one for four basis with a 20c strike price within two years.
Every good ASX float needs a base load revenue story AND a blue-sky pitch and whilst Vonex clearly has its base load revenue story locked down, it also doesn’t disappoint in the blue-sky stakes.
The company has developed a world first product that has the potential to revolutionise the internet call and messaging world.
It solves the problem of multiple participants on a conference call or messaging group having different software preferences such as Skype, Google Hang-Outs, We Chat, Whats App , Viber and others.
Vonex’s “Oper8tor” APP allows the call initiator to simply blast out a call to multiple recipients across multiple platforms with each participant having the option of taking part in the call using whatever software platform they choose…..now that sounds like it could head skywards…..
