TEK DigiTel Follow up to COMDEX 99 in Las Vegas
Conference Call
Speakers
Rocco DiCarlo President
James Sturgess director of Marketing
Agenda
James Sturgess:
Pronto as Service Offering and Enabling Tool
Although Pronto initially appears to be service offering TEK is providing, it is more then that. It is a marketing vehicle designed by TEK to provide a partnership between ISPs and CLECs, two classes of service providers that want to provide Telephony services. The idea behind Pronto is to help drive the marketing of Internet Telephony services to small and medium size businesses.
The Rationale behind Providing a Link Between ISPs and CLECs
TEK had focused only on marketing our product to OEM and Licensing partners and on selling through ITSPs, ignoring ISPs as potential customers. However through ongoing market analysis, we have found that ISPs are interested in deploying Telephony services to their customers, the small and medium size businesses in their area, but are reluctant to become ITSPs. This jump would involve a large investment including purchasing and installing Gateways, routing infrastructure, gatekeepers and billing mechanisms. These cost are often too high despite the ISP’s interest in generating extra revenue. We also found that CLECs (competitive local exchange carriers) that deliver competitive, circuit switched, local phone services to local geographic areas and usually offer enhanced voice services i.e. unified messaging, also want to broaden their geographic area and enhance their offering. The market opportunity is to partner the CLECS who have the service with ISPs who have the customers. Pronto allows a CLEC to bundle our gateway router with long distance minutes and other phone services into a package they can sell to their customers that can provide access to their voice services any where in the world, not just in the local area. This increases their reach without straining their resources. The problem with this is that CLECs typically would not have local agents who could manage the customer relationships. ISPs can act as agents for the CLEC. The ISP will generate revenues as a pass through agent and the V-Server is the tool to provide the services.
The Pronto Package
Pronto removes the need for these companies to develop their own marketing program. Pronto is an entire packaging and naming scheme facilitating the arrangement between these two partners to provide Telephony voice services (www.prontoconnect.com)
The ultimate goal would be to see large numbers of CLECs providing their individual services partnered with many ISPs around the world.
Initial Orders
Our first Pronto customer is CentreCom, a CLEC out of LA. This partner offers a $99 monthly package which includes a V-Server iGATE, 500 min of international long distance, a North American 1-800 number, voice mail and a unified messaging "follow me" roaming service. These are services that ISPs anywhere in the world can offer their customer through CentreCom.
The @home Model and Cellular Model
We can compare the Pronto model to that of @home, where a central organization comes up with the mechanism and marketing for all the cable operators to deliver cable Internet to their customers. This means that each local cable provider did not have to reinvent how to deliver Internet to their customers. It is a cookie cutter method. Pronto is focused to bring this model to conventional ISPs. Pronto will drive V-server sales as well as providing TEK with a commission for a portion of each customer that we bring to the CLEC. This is the next best thing to becoming a telephone company. The packaging concept can also be compared to that of cellular phones, where the service and the phone go hand in hand, as in Cantel (service provider) selling a Nokia phone to new customers as part of their service arrangement.
COMDEX Response
In fact, we displayed Pronto at COMDEX in a similar display to those typically used to sell cellular services and phones to give them an idea of what it would look like in a store. We came away with a large number of leads and promising contacts. This was our opportunity to show service and equipment providers the evolution of the VoIP market.
Also at COMDEX, one of our other partners, Centrepoint, introduced their Talkswitch line of product that supports VoIP. They had a tremendous response to this PBX/IP box and they won PC Computing’s most valuable product award. Overall response was positive and we will be spending considerable efforts managing these leads.
Rocco DiCarlo, President:
Partnership Update
In addition to the Pronto offering we are continuing to focus on CLEC, ISP and ITSP reseller arrangements:
ePhone is scheduled to launch their service, which is based on our products, January 2000. They are currently in testing mode and the ramping up of their network
CentreCom has already launched their PC-to-Phone services 2-3 months ago. This will compete with Net2Phone. They will launch their Phone-to-Phone service that is based on our products, early in the new year. Currently they are a private company with an IPO planned for 2000, allowing them to secure significant investment to grow their business.
NexBell launched their basic service last month and is introducing our technology in the first quarter of next year enabling their customers to access their services through our technology.
Franklin Telecom is a licensing customer and will begin volume production early next year.
ACS Compro will be private labeling the iGATEs as Ezgates. Based out of Singapore, they are a large supplier of IP Telephony products and have been getting a good initial response to our products.
Teltone markets products to large enterprises, mainly Call Center applications. We will be co-developing products that integrate our technologies to provide to their existing and new clients. This is a breakthrough for us into the large enterprise marketplace.
In addition to the above partnerships, already announced, we have been receiving early initial orders from three ISPs preparing to launch our Pronto services. We have also had significant interest from Asia particularly Singapore, Taiwan, China and Japan. We are in the process of partnering with a number of key service providers in this area
We have completed an early agreement with a large CLEC carrier in Asia. We cannot disclose their name until the contract is final, but they are deploying a 40 unit wireless local loop and if successful they plan to deploy 10,000 nodes over the next 18 months.
Finally, we have ten other partners evaluating our technology; we expect all or most of these to be converted into reseller agreements.
The leads from ISP Con and COMDEX have not been counted in this discussion.
Capitalization Update
We currently have 14.6M shares issued and outstanding. A further 2M were issued as per the recent financing at $.50 with one year holding period. Each share has 4 warrants exercisable for one common share. The warrants are classes as D, E, F, G. Warrants D have been exercised at $.50, adding another 2M shares, so the new issued and outstanding amount is 18.6M shares, with 4M of those shares under a one-year restriction. Warrants E are exercisable at $.50 and can be exercised in mid January 2000, warrants F are exercisable at $.60 and can be exercised in April 2000, G are exercisable at $.55 and can be exercised in August 2000. Once everything is taken into account, warrants, options, preferred shares, our fully diluted total shares are 41 Million.
The current burn rate is $150,000 per month with $90,000 of that going to salaries. Cash on hand is $1.1M with another $350,000 in parts and in process product.
Year end Goals
We currently have firm orders for 900 units and we will ship 750 units total by year-end. Next year’s forecast is for 12,000 units. We are currently redesigning and reducing costs on parts, eliminating very popular hard to get and costly components. We’ve secured enough components to produce 5000 units in Q1, after which time the new model can be phased in. With the lower cost structure, we will be able to build as many units as the market demands.
Joe Crupi, formerly of Telogy and most recently, Texas Instruments, has just joined our Advisory Board, where we hope to attract industry leadership and expertise. We are also moving to a larger head office in Germantown, which will enable us to grow significantly.
Currently we have 22 employees, 5 in Toronto Sales and Marketing, 16 in Germantown and 1 in Taiwan, in anticipation of the large demand in Asia. Next year, shareholders can expect to see us conduct more market awareness campaigns and also, we expect to complete our filing for the SEC early in January to meet their deadlines for Reporting Company status.
James Sturgess
Product roll- out Schedule
We currently ship the V-Server iGATE in volume, and have shipped a number of the Dual Ethernet versions targeted at DSL and Cable modem customers. In 2000, we will have three marketing programs: