Yesterday, Redknee announced its second major contract in two days, and the third in less than a month. See the post from June 6th.
The trend for Redknee continues to be international with the June contract located in the Middle East, Monday's multi-million dollar contract with a Tier1 operator in Europe, and then yesterday's announced contract in Pac-Asia. Investors should expect this trend to continue as operators in these regions look for mobile infrastructure and middleware solutions to support significant growing demand for mobile data services. In many parts of EMEA and Pac-Asia, wireless devices will be the dominant access point to the internet and related data. As operators expand billing to accomodate, Redknee should be among the vendors to benefit, and management at RKN appears to be executing well to capture market share.
Mobile infrastructure should continue to be a significant area of growth over the coming years as operators worldwide attempt to manage some of the emerging complexities associated with billing, provisioning, and capacity for 3.2 billion subscribers worldwide.
With that in mind, there are a handful of small-cap public Canadian companies to watch including (in alphabetical order):
Bridgewater Systems (BWC.TO)
Dragonwave (DWI.TO)
Redknee (RKN.TO)
Wi-Lan (WIN.TO)
Disclosure: I own shares of BWC. I do not own shares of DWI, RKN, or WIN.
7/6/09
Canada Day 2009 Week In Review - Guestlogix (GXI.V)
While I was relaxing on the dock, not many meaningful announcements were made during Canada Day week (surprise!).
On July 2, 2009 Guestlogix reported results for Q2, 2009 with sales of $4.6 million up 150% from Q2 2008 sales of $1.8 million. More significantly, it reported positive net income of $.03 million or 0.00 EPS. The company has 824 million passenger trips under contract with 563 million deployed and generating revenue. With recurring revenue averaging around 90%, contractual minimum guarantees, and a substantial install base, investors should consider future revenue streams to be more predictable than in previous reporting periods for this company. The company reported $1.5 million in monthly revenue for May, inferring a forward 12-month baseline of $18.0 million excluding new deployments or the expansion of its OnTouch merchandising platform. With monthly operating expenses in the $1.2 million range, 12-month EBITDA baseline could track to approximately $4.0 million, assuming that the Company continues to manage its expenses.
With the recent introduction of its OnTouch merchandising platform, and a couple of key pilots soon going into production, investors should start to see a steady increase in commission-based revenue on higher priced items sold onboard. As the company rolls these services out, associated revenue streams should begin to be reflected in accelerated EBITDA and net income margins during future reporting periods, even as total revenues increase. Investors could see GXI exit FY2009 with a baseline monthly revenue stream nearing $2.0 million.
Since tripling from its lows of early April during a 10-day period, the share price has more or less traded in a range near $0.90 on low volumes. Since reporting its first net income quarter last week, volumes have increased and the stock is beginning to nudge $1.00. The stock is trading at approximately 48x TTM EBITDA, and 13x FTM baseline EBITDA. As the Company deploys the remainder of its passenger trip backlog over the next 3 quarters and begins to roll-out merchandising services, the baseline EBITDA forecast should be positively impacted, decreasing the forward EBITDA multiple.
Guestlogix has attained a net income inflection point without the earnings benefit of some of its more powerful merchandising programs, which should be launched later this year. Investors should see accelerated earnings over the coming quarters as a result.
Disclosure: I do not own shares of GXI
On July 2, 2009 Guestlogix reported results for Q2, 2009 with sales of $4.6 million up 150% from Q2 2008 sales of $1.8 million. More significantly, it reported positive net income of $.03 million or 0.00 EPS. The company has 824 million passenger trips under contract with 563 million deployed and generating revenue. With recurring revenue averaging around 90%, contractual minimum guarantees, and a substantial install base, investors should consider future revenue streams to be more predictable than in previous reporting periods for this company. The company reported $1.5 million in monthly revenue for May, inferring a forward 12-month baseline of $18.0 million excluding new deployments or the expansion of its OnTouch merchandising platform. With monthly operating expenses in the $1.2 million range, 12-month EBITDA baseline could track to approximately $4.0 million, assuming that the Company continues to manage its expenses.
With the recent introduction of its OnTouch merchandising platform, and a couple of key pilots soon going into production, investors should start to see a steady increase in commission-based revenue on higher priced items sold onboard. As the company rolls these services out, associated revenue streams should begin to be reflected in accelerated EBITDA and net income margins during future reporting periods, even as total revenues increase. Investors could see GXI exit FY2009 with a baseline monthly revenue stream nearing $2.0 million.
Since tripling from its lows of early April during a 10-day period, the share price has more or less traded in a range near $0.90 on low volumes. Since reporting its first net income quarter last week, volumes have increased and the stock is beginning to nudge $1.00. The stock is trading at approximately 48x TTM EBITDA, and 13x FTM baseline EBITDA. As the Company deploys the remainder of its passenger trip backlog over the next 3 quarters and begins to roll-out merchandising services, the baseline EBITDA forecast should be positively impacted, decreasing the forward EBITDA multiple.
Guestlogix has attained a net income inflection point without the earnings benefit of some of its more powerful merchandising programs, which should be launched later this year. Investors should see accelerated earnings over the coming quarters as a result.
Disclosure: I do not own shares of GXI
6/23/09
British Airways Deploys with Guestlogix (GXI.V)
This morning Guestlogix announced that BA has begun to deploy its onboard retailing platform on 245 planes serving approximately 33 million passengers annually. Although terms were undisclosed, most multi-year agreements to date have ranged between three and five years, and this contract likely falls into that range with typical monthly minimum revenue guarantees.
BA should be considered a reference European account that can help to validate the solution to other major carriers in the region. In order to win this contract, GXI has worked hard over the past several months with BA to obtain PCI PED 2.0 certification for its handheld devices. This certification should help to align the solution to banks and credit card companies, which should help GXI to secure more potential European deals in coming months.
The 33 million passengers have been previously accounted for in the company's Q1 disclosure of 824 million passenger trips under contract. According Management, the company is currently generating revenue from the contract. Once switched on, GXI benefits immediately from all current inflight transactions by recognizing percentage-based fees. British Airways generates significantly more revenue per passenger than its North American counterparts, which typically generate about $0.5 per passenger in onboard transaction revenue. As a result, transaction revenue could exceed monthly minimum guarantees quickly.
Analysts are likely to have included the BA revenue streams in recent forecasts, so it is unlikely that estimates or targets would be adjusted upward as a result of this deployment. However, these revenue streams help to de-risk forecasts, and continue to provide evidence that execution continues on track.
Disclosure: I do not own shares of GXI or BA
BA should be considered a reference European account that can help to validate the solution to other major carriers in the region. In order to win this contract, GXI has worked hard over the past several months with BA to obtain PCI PED 2.0 certification for its handheld devices. This certification should help to align the solution to banks and credit card companies, which should help GXI to secure more potential European deals in coming months.
The 33 million passengers have been previously accounted for in the company's Q1 disclosure of 824 million passenger trips under contract. According Management, the company is currently generating revenue from the contract. Once switched on, GXI benefits immediately from all current inflight transactions by recognizing percentage-based fees. British Airways generates significantly more revenue per passenger than its North American counterparts, which typically generate about $0.5 per passenger in onboard transaction revenue. As a result, transaction revenue could exceed monthly minimum guarantees quickly.
Analysts are likely to have included the BA revenue streams in recent forecasts, so it is unlikely that estimates or targets would be adjusted upward as a result of this deployment. However, these revenue streams help to de-risk forecasts, and continue to provide evidence that execution continues on track.
Disclosure: I do not own shares of GXI or BA
6/22/09
CUPE is out of its collective mind.
While Torontonians struggle through this recession with many thousands losing their jobs and many other thousands having their incomes and benefits cut, CUPE leadership somehow believes that it is a good time to hold these same taxpayers hostage for hundreds of millions of dollars worth of employee perks.
In the end, there is little difference between entitlement bonuses that the union rails against and bankable sick days that it chooses to strike for. CUPE is hypocritical to the extreme to hold its fellow financially distressed citizens hostage for such purpose.
Citizens of Toronto should harden against these actions and urge City of Toronto negotiators to stand fast against CUPE. In fact, Torontonians should demand that for every week that this strike continues, that it removes a few basis points from its offered salary increase.
CUPE leadership has thown out all of the worn cliches like "bargaining in bad faith" in order to justify its actions. On the contrary, the wage increases seem reasonable, people can keep their jobs, and they can even keep their 18 sick days. Citizens just don't want the sick days turned into a pseudo-pension instrument at their expense.
City workers have been on strike in Windsor since mid-April. In one of the staunchest union towns in Canada, citizens are urging the City of Windsor to hold fast against the CUPE demands. If CUPE leadership was not so out of touch with reality, it would see this as a pretty good indication that people (families) everywhere, even in places with the greatest sympathies, are rising up against its bullying tactics.
Another question that should be posed is: who is the brainiac that negotiated these contracts in the first place?
In the end, there is little difference between entitlement bonuses that the union rails against and bankable sick days that it chooses to strike for. CUPE is hypocritical to the extreme to hold its fellow financially distressed citizens hostage for such purpose.
Citizens of Toronto should harden against these actions and urge City of Toronto negotiators to stand fast against CUPE. In fact, Torontonians should demand that for every week that this strike continues, that it removes a few basis points from its offered salary increase.
CUPE leadership has thown out all of the worn cliches like "bargaining in bad faith" in order to justify its actions. On the contrary, the wage increases seem reasonable, people can keep their jobs, and they can even keep their 18 sick days. Citizens just don't want the sick days turned into a pseudo-pension instrument at their expense.
City workers have been on strike in Windsor since mid-April. In one of the staunchest union towns in Canada, citizens are urging the City of Windsor to hold fast against the CUPE demands. If CUPE leadership was not so out of touch with reality, it would see this as a pretty good indication that people (families) everywhere, even in places with the greatest sympathies, are rising up against its bullying tactics.
Another question that should be posed is: who is the brainiac that negotiated these contracts in the first place?
6/16/09
Active Control Technologies (ACT.V) Contract Announcement
Earlier today, ACT announced that it has won a $1.4 million net new contract for two underground mines somewhere in the United States. According to management, this contract increases its current backlog, and will not be fully deployed until after its fiscal year-end (July 31). As a result, investors should expect revenue to be recognized during Q1, FY 2010.
Management believes that a small portion of the factored pipeline could turn into additional backlog before the end of its fiscal year, which is modest progress. The Company has clarified the definition of its factored pipeline as "written quotes". Management believes that "written quotes" total more than $20 million in potential contract value. However, it is difficult to understand how much of that total will actually translate into revenue during fiscal 2010.
As expected, the U.S. Federal Government has relaxed some of the guidelines for compliance to the MINER Act, allowing more time for mine operators to select vendors, and to substitute vendors later. As well, MSHA still has to approve the emergency communications and response plans submitted as of yesterday. As a result, investors should expect that a portion of quoted contracts may not be awarded for up to six months from now.
Due to the relaxation of various guidelines for compliance, competition for contracts is likely to intensify over the next few months. Although ACT appears to offer clear competitive differentiation in terms of throughput, breadth of offering, and MSHA certification, it has not yet developed local relationships (which can run generations deep). As a result, even with its technical superiority, investors should expect ACT to offer pricing discounts to win some business. As a result, gross margins may be impacted.
The value of the backlog has been clarified by management. The $6 million value cited earlier includes both contracted deployments, and future indicated deployments by current customers. As a result, prior to today's new contract announcement, the $5.2 million backlog (the company probably recognized approximately $0.8 million of the backlog since it last disclosed) was split approximately 50/50 between current and future indicated deployments. In essence, the current backlog was approximately $2.6 million prior to today. The new $1.4 million contract increases the current backlog to approximately $4.0 million. Without this understanding, expectations for near-term revenue recognition may have been too high.
For a more accurate reflection of near-term performance, investors should measure the current pipeline, and ignore/discount future indications by current clients. Analysts should continue to get clarification from Management on this measurement going forward.
The Company continues to find its footing as it begins to commercialize. The rubber is now hitting the road, and management must prove execution.
Disclosure: I own shares of ACT
Management believes that a small portion of the factored pipeline could turn into additional backlog before the end of its fiscal year, which is modest progress. The Company has clarified the definition of its factored pipeline as "written quotes". Management believes that "written quotes" total more than $20 million in potential contract value. However, it is difficult to understand how much of that total will actually translate into revenue during fiscal 2010.
As expected, the U.S. Federal Government has relaxed some of the guidelines for compliance to the MINER Act, allowing more time for mine operators to select vendors, and to substitute vendors later. As well, MSHA still has to approve the emergency communications and response plans submitted as of yesterday. As a result, investors should expect that a portion of quoted contracts may not be awarded for up to six months from now.
Due to the relaxation of various guidelines for compliance, competition for contracts is likely to intensify over the next few months. Although ACT appears to offer clear competitive differentiation in terms of throughput, breadth of offering, and MSHA certification, it has not yet developed local relationships (which can run generations deep). As a result, even with its technical superiority, investors should expect ACT to offer pricing discounts to win some business. As a result, gross margins may be impacted.
The value of the backlog has been clarified by management. The $6 million value cited earlier includes both contracted deployments, and future indicated deployments by current customers. As a result, prior to today's new contract announcement, the $5.2 million backlog (the company probably recognized approximately $0.8 million of the backlog since it last disclosed) was split approximately 50/50 between current and future indicated deployments. In essence, the current backlog was approximately $2.6 million prior to today. The new $1.4 million contract increases the current backlog to approximately $4.0 million. Without this understanding, expectations for near-term revenue recognition may have been too high.
For a more accurate reflection of near-term performance, investors should measure the current pipeline, and ignore/discount future indications by current clients. Analysts should continue to get clarification from Management on this measurement going forward.
The Company continues to find its footing as it begins to commercialize. The rubber is now hitting the road, and management must prove execution.
Disclosure: I own shares of ACT
6/15/09
Enstream: A Mobile Moneris or Dexit Revisited?
Yesterday, Telus (T), Bell, and Rogers (RCI) launched mobile payment solution branded Zoompass, which is developed and operated by Enstream, a new mobile payment solution platform, which also just happens to be a three-way joint venture among them. This post will attempt to contextualize Enstream (where the intellectual property resides) within the mobile ecosystem. Will it dominate? Will it survive? As with most things, its future is probably somewhere in the middle and it could morph into something entirely different.
I have attempted to sign up for the beta service. The sign up process appears to be fairly straightforward from the web, although the system hangs once I have logged into my new account from my Blackberry 8700. I still have not got to the point where I can use it.
Mobile Payments Will Have a Major Worldwide Economic Impact
An earlier blog post analyses the importance of billing systems in a race to become top dog for mobile applications. Mobile payment systems are a genus closely related to billing systems within the mobile ecosystem, although with probably more far-reaching economic implications, especially for emerging economic blocks such as BRIC and MENA. Mobile payments have the ability to accelerate the flow of funds, improve liquidity, and improve economic access for hundreds of millions, closing in on billions, of people worldwide (more on that later). Mobile payments systems are operating in countries as varied as Kenya, Korea, the Phillipines, and Britain, which has have helped to provide a glimpse into a potentially massive worldwide opportunity.
Is Enstream Relevant?
Leadership at Enstream appears to understands the global potential, and is already positioning itself within an inferred world market opportunity. The question is; can it get there from here? Possibly. But there is a lot of work to do and the JV is nowhere near to being a first mover in the industry. Even in Canada. The inter-relationships and possible connectedness among participants is extremely complex with carriers, software vendors, device manufacturers, distribution channels, retailers, banks, and payment networks all vying for bits of transaction value. Many of those bits are still to be defined, and Enstream has to stake out its claim quickly.
Consumer Feedback Is Negative
For now, the Zoompass solution offers some additional convenience for Canadian consumers, although many appear to be choking on the high fees currently advertised at $0.50 per transaction. Consumer feedback via the blogsphere and twitter has been decidely negative related to fees and the potential for competitive concentration. CEOs that have been in the market for a while have all commented that the fee structure, as it stands, is a likely impediment to adoption.
Commentary From the Ecosystem Itself is More Positive
Notwithstanding the fee structure, most of the commentary offered by CEOs already operating in the ecosystem has been balanced and considers what Enstream means to their companies, to Canadian consumers, and to the world.
Universally, CEOs believe that it is a positive development that Canadian carriers are getting serious about mobile payments. Most of the vendors in the Canadian market are under-capitalized start-ups that have struggled to convince carriers of the market potential in Canada. As one CEO put it, carriers are finally showing that they "get it". Some believe that Enstream could behave as a universal gateway to the major carriers for independent mobile payment applications, which may kickstart another wave of development in the vertical.
Zoompass connects mobile transactions to a co-branded prepaid, reloadable Mastercard - not subscriber accounts. Presumably, this hybrid card system offers users maximum flexibility for consumers to withdraw funds via ABMs, pay via POS, and to transact via SMS or NFC from a mobile handset. There are already several prepaid Mastercard programs deployed, with many others in the works, which all appear to operate within a similar framework. Many CEOs believe that the Enstream platform may be an opportunity to better connect current prepaid programs to mobile devices both electronically, and at the POS.
Others believe that this move by the carriers may spur on more aggressive competition from banks and payment networks, which could deliver competitive gateway infrastructures, and ultimately better choice and lower costs to consumers. Several financial institutions are currently at early stages of developing applications to connect mobile devices directly and securely to consumer bank accounts for mobile payments. However, unless projects are sped up, consumers may have to wait several quarters until serious choice becomes available.
Some Global Comparatives
Device manufacturers such as Nokia (NOK), RIM (RIMM), and Apple (APPL) have a broader world view on mobile payments. In March 2009, Nokia made a substantial strategic investment in Silicon Valley-based Obopay. Obopay operates with a similar model to Enstream, but with deployments in both the United States and India. The price point is $0.25 to send up to $1000 and nothing to receive funds. In the meantime, RIM is actively testing ideas and pursuing multiple opportunities in the space, and has recently announced a partnership with payment giant PayPal (EBAY) to deliver billing and payment solutions for its AppWorld venture. PayPal Mobile is considered by many to be competitive to the new Enstream venture.
Euronet (EEFT) is a significant electronic transaction processor with 421,000 prepaid wireless, long-distance, and gift card endpoints worldwide. In 2007, it acquired RIA, the third largest money transfer agent in the world, and then last year attempted but failed to buy MoneyGram, the second largest money transfer agent in the world behind Western Union. Euronet, through its electronic network, is beginning to deliver a mobile payment and remittance infrastructure that can be cash-based. And here is why.
Between 80% and 85% of all mobile subscribers in emerging economies do not have bank accounts (not to mention credit), nor do they have easy access to local banking infrastructure. Most emerging economies operate as cash-based societies. This is a main driver behind the proliferation of prepaid subscriptions in BRIC, MENA and Latin America. Euronet and others like it are attempting to deploy ways to digitize cash via local merchants without banking infrastructure. By comparison, the Enstream solution appears to need banking infrastucture.
____________________________________________________
Bottom Line: Ecosystem
The Enstream launch is seen as positive by participants in the ecosystem as long as it evolves to a platform for multiple mobile payment applications tha can be offered to Canadian consumers. Enstream states that it is looking for development partners. The question is how economic will it be for independent developers to participate. Without participation by third-parties, the concept may struggle.
Bottom Line: Consumers
Consumers appear mistrustful of the enterprise, which implies that there is a branding deficit shared by the three founding partners that could impede progress. Pricing has been described by consumers and others in the ecosystem as the most immediate concern and potential barrier to adoption. Objections and barriers have been erected quickly by consumers, which may require time, capital, and effort to overcome before traction can be gained.
Bottom Line: Market Share
As for worldwide expansion, by comparison to other more advanced solutions worldwide, Enstream is late to the game and its business model may not be easily translatable to other regions of the world. As a result, Enstream should be viewed as regional play limited to the Canadian marketplace, with potential to buy its way into other markets in the future.
Bottom Line: Investors
Investors should expect that the JV will contribute little to the performance of RCI, T, or BCE over the next few years, unless the business model is revamped to go viral, which is quite possible. From a cost perspective, Enstream could contribute to the accelerated extinction of "hard cards" on display in many convenience stores, saving millions of dollars in the channels.
I have attempted to sign up for the beta service. The sign up process appears to be fairly straightforward from the web, although the system hangs once I have logged into my new account from my Blackberry 8700. I still have not got to the point where I can use it.
Mobile Payments Will Have a Major Worldwide Economic Impact
An earlier blog post analyses the importance of billing systems in a race to become top dog for mobile applications. Mobile payment systems are a genus closely related to billing systems within the mobile ecosystem, although with probably more far-reaching economic implications, especially for emerging economic blocks such as BRIC and MENA. Mobile payments have the ability to accelerate the flow of funds, improve liquidity, and improve economic access for hundreds of millions, closing in on billions, of people worldwide (more on that later). Mobile payments systems are operating in countries as varied as Kenya, Korea, the Phillipines, and Britain, which has have helped to provide a glimpse into a potentially massive worldwide opportunity.
Is Enstream Relevant?
Leadership at Enstream appears to understands the global potential, and is already positioning itself within an inferred world market opportunity. The question is; can it get there from here? Possibly. But there is a lot of work to do and the JV is nowhere near to being a first mover in the industry. Even in Canada. The inter-relationships and possible connectedness among participants is extremely complex with carriers, software vendors, device manufacturers, distribution channels, retailers, banks, and payment networks all vying for bits of transaction value. Many of those bits are still to be defined, and Enstream has to stake out its claim quickly.
Consumer Feedback Is Negative
For now, the Zoompass solution offers some additional convenience for Canadian consumers, although many appear to be choking on the high fees currently advertised at $0.50 per transaction. Consumer feedback via the blogsphere and twitter has been decidely negative related to fees and the potential for competitive concentration. CEOs that have been in the market for a while have all commented that the fee structure, as it stands, is a likely impediment to adoption.
Commentary From the Ecosystem Itself is More Positive
Notwithstanding the fee structure, most of the commentary offered by CEOs already operating in the ecosystem has been balanced and considers what Enstream means to their companies, to Canadian consumers, and to the world.
Universally, CEOs believe that it is a positive development that Canadian carriers are getting serious about mobile payments. Most of the vendors in the Canadian market are under-capitalized start-ups that have struggled to convince carriers of the market potential in Canada. As one CEO put it, carriers are finally showing that they "get it". Some believe that Enstream could behave as a universal gateway to the major carriers for independent mobile payment applications, which may kickstart another wave of development in the vertical.
Zoompass connects mobile transactions to a co-branded prepaid, reloadable Mastercard - not subscriber accounts. Presumably, this hybrid card system offers users maximum flexibility for consumers to withdraw funds via ABMs, pay via POS, and to transact via SMS or NFC from a mobile handset. There are already several prepaid Mastercard programs deployed, with many others in the works, which all appear to operate within a similar framework. Many CEOs believe that the Enstream platform may be an opportunity to better connect current prepaid programs to mobile devices both electronically, and at the POS.
Others believe that this move by the carriers may spur on more aggressive competition from banks and payment networks, which could deliver competitive gateway infrastructures, and ultimately better choice and lower costs to consumers. Several financial institutions are currently at early stages of developing applications to connect mobile devices directly and securely to consumer bank accounts for mobile payments. However, unless projects are sped up, consumers may have to wait several quarters until serious choice becomes available.
Some Global Comparatives
Device manufacturers such as Nokia (NOK), RIM (RIMM), and Apple (APPL) have a broader world view on mobile payments. In March 2009, Nokia made a substantial strategic investment in Silicon Valley-based Obopay. Obopay operates with a similar model to Enstream, but with deployments in both the United States and India. The price point is $0.25 to send up to $1000 and nothing to receive funds. In the meantime, RIM is actively testing ideas and pursuing multiple opportunities in the space, and has recently announced a partnership with payment giant PayPal (EBAY) to deliver billing and payment solutions for its AppWorld venture. PayPal Mobile is considered by many to be competitive to the new Enstream venture.
Euronet (EEFT) is a significant electronic transaction processor with 421,000 prepaid wireless, long-distance, and gift card endpoints worldwide. In 2007, it acquired RIA, the third largest money transfer agent in the world, and then last year attempted but failed to buy MoneyGram, the second largest money transfer agent in the world behind Western Union. Euronet, through its electronic network, is beginning to deliver a mobile payment and remittance infrastructure that can be cash-based. And here is why.
Between 80% and 85% of all mobile subscribers in emerging economies do not have bank accounts (not to mention credit), nor do they have easy access to local banking infrastructure. Most emerging economies operate as cash-based societies. This is a main driver behind the proliferation of prepaid subscriptions in BRIC, MENA and Latin America. Euronet and others like it are attempting to deploy ways to digitize cash via local merchants without banking infrastructure. By comparison, the Enstream solution appears to need banking infrastucture.
____________________________________________________
Bottom Line: Ecosystem
The Enstream launch is seen as positive by participants in the ecosystem as long as it evolves to a platform for multiple mobile payment applications tha can be offered to Canadian consumers. Enstream states that it is looking for development partners. The question is how economic will it be for independent developers to participate. Without participation by third-parties, the concept may struggle.
Bottom Line: Consumers
Consumers appear mistrustful of the enterprise, which implies that there is a branding deficit shared by the three founding partners that could impede progress. Pricing has been described by consumers and others in the ecosystem as the most immediate concern and potential barrier to adoption. Objections and barriers have been erected quickly by consumers, which may require time, capital, and effort to overcome before traction can be gained.
Bottom Line: Market Share
As for worldwide expansion, by comparison to other more advanced solutions worldwide, Enstream is late to the game and its business model may not be easily translatable to other regions of the world. As a result, Enstream should be viewed as regional play limited to the Canadian marketplace, with potential to buy its way into other markets in the future.
Bottom Line: Investors
Investors should expect that the JV will contribute little to the performance of RCI, T, or BCE over the next few years, unless the business model is revamped to go viral, which is quite possible. From a cost perspective, Enstream could contribute to the accelerated extinction of "hard cards" on display in many convenience stores, saving millions of dollars in the channels.
In the end, we may see Enstream positioned as a Moneris-type of mobile payment infrastructure that would likely compete directly with Moneris itself, or some other bank-based mobile payments system in Canada. As for other threats, handset manufacturers could provide substitution through some as-of-yet developed applications. Notwithstanding, to be successful Enstream would need to become a neutral Canadian platform for competing applications from local providers to multinationals.
Bottom Line: Joint Venture
However, there is no guarantee the the founding partners can resist meddling, or poking each other in the eye, long enough to give the venture an opportunity to feel its way towards success. For every successful JV among Canadian institutions - whether banks or telcos - there have been dozens that have failed.
I do not own shares of any of the Companies mentioned in this post. As well, I have chosen to generalize the commentary as opposed to attribute direct quotes.
Subscribe to:
Posts (Atom)