DataXoom — what is it?

As it is the case for all postings in this blog, my standard disclaimers apply for this posting.  However, since this posting discusses investments, I urge you to review the disclaimers laid out in the About section with extra diligence. Moreover, even if you have already reviewed these disclaimers in the past, you need to review them again, as they are subject to change without notice.  Do it now, and remember that whatever I say in this blog posting is simply my opinion — it is not science, it is not advice, and it is not an attempt to make you act in any way whatsoever.

…. And, if you find yourself enjoying this posting, consider supporting the blog through a donation. For your convenience, PayPal links are provided to the right and at the end of the posting.

Recently, on July 3rd, 2013, Mer Telemanagement Solutions announced that it had entered into a three and half years agreement with DataXoom to provide the company’s cloud and managed services MVNE solution. According to the announcement, the agreement provided for minimum total revenues of $1.1 million through its term.

Here it is, from the horse’s mouth, so to speak, i.e. from the company’s press release, as filed in a 6-K filing with the United States Securities and Exchange Commission:

DataXoom Selects MTS as Their MNVE Solution Provider

RA’ANANA, Israel – July 3, 2013 — MTS – Mer Telemanagement Solutions Ltd. (NASDAQ Capital Market: MTSL) , a global provider of Mobile Virtual Network Enabler (MVNE) services and Telecommunications Expense Management (TEM) solutions, today announced that it entered into a three and half years agreement with DataXoom, a large U. S. based MVNO, to provide its cloud and managed services MVNE solution. The agreement provides for minimum total revenues of $1.1 million through the term of the agreement.

The agreement is significant for MER Telemanagement in that it: (1) helps to offset the loss of a key contract with Simple Mobile (read about this here,) and (2) somewhat validates the sustainability of MER Telemanagement Solutions’ managed services offering for MVNE.

So far, so good.

Now, a somewhat bizarre Microsoft PowerPoint presentation has been posted on slideshare (here.)

The presentation, which appears to have been uploaded by a slideshare user with the handle robchamberlin, consists of 18 pages and is labeled 2012, but, no matter, as it seems to refer to things happening or having happened in 2013.

Likewise, the presentation is labeled Proprietary and Confidential, but apparently not so much that it can’t be uploaded to slideshare as an example of … well, frankly, I don’t know quite what, but something.

In the presentation, which seems to be a fund-rasing document uploaded to slideshare on Jul 25st, 2013, and seeking one million dollars (perhaps… frankly, I am not sure, since it is not entirely clear if the presentation is made for the purpose of fundraising, and, if so, if the amount indicated as the funding goal is some sort of jokey reference, since the one million dollars are referenced next to a picture of Dr. Evil from the Austin Myers movies,) the business model for DataXoom is described.

Additionally, the presentation contains a milestone slide from which we read:

  • First carrier agreement – Sprint – Q4 2012
    • Data-centric includes 3G, 4G LTE, 4G WiMax
  • MVNE agreement – MTS – Q2 2013
    • 3 year agreement with worldwide MVNE service provide MTS at a minimum commitment of $1.1M
  • Full connectivity – Sprint – Q2 2013
    • First device activated on DataXoom – May 2013
  • Second carrier agreement – Verizon – Q2 2012
    • Connectivity to be completed and launched by Q4 2013
  • First beta customer load – August 2013

Note: I think that the “Verizon – Q2 2012” snippet is a typo and should really be “Verizon – Q2 2013” or “Verizon – Q3 2013”

The presentation looks genuine, albeit not totally polished. And, of course, the fact that the presentation is proprietary and confidential, yet widely circulated is a little odd. In particular it is odd in view of the fact that the handle of the person uploading it on slideshare has a more than passing resemblance to the name of one of the co-founders of DataXoom.

If the presentation is genuine, it does raise the question as to how DataXoom, which from the presentation seems to be nascent, could possibly be characterized as a “large U. S. based MVNO.” In fact, I struggle to find DataXoom on Wikipedia’s list of MVNOs or in any FCC documents.

That being said, the arithmetic for the multitude of MVNOs shooting up these days is a bit fuzzy. While, clearly, the largest player is TracFone and its multitude of brands, including Simple Mobile (a current customer of MER Telemanagement Solutions,) with than 20 million subscribers, the next tiers are not exactly easy to pin down, with 25 thousand to 100 thousand subscribers sometimes being referred to as significant.

So perhaps the press release is not that crazy. Arguably, when you are talking about subscriber numbers of 100 thousand or less as being significant in a country with 326 million wireless subscriptions, you could be excused for considering even a handful of beta customers to be a large number. Personally, I disagree, but, then again, I have known to be a stickler for precision in investor communications.

Before I get chastised I hasten to say that it is possible, of course, that DataXoom somehow, somewhere is affiliated with an established, larger MVNO, and that this affiliate is the nexus for the adjective “large” in the company’s press release.

Regardless, running some arbitrary, simplified, and hugely crude calculations for the guaranteed $1.1 million over three and a half years, it looks like DataXoom will need to run an average of 50,000 subscribers per month, or so, before exceeding the guarantee limit, assuming a charge of $0.50 per subscriber per month.

Of course, after meeting the limit, the numbers are extremely grateful.

If, for instance, DataXoom manages to build an average of 100,000 subscriber customer base for the term of the contract, then, given the aforementioned $0.50 per subscriber, MER Telemanagement Solutions would collect an additional $1.1 million, and, naturally, these additional revenues would be characterized by high margins. Assuming, further, that the average subscriber number hits 250,000 and, in accordance with normal economic theory, the monthly per subscriber charge sinks to $0.35, then MER Telemanagement Solutions would collect an additional $2.6 million.

And so on… You see why the numbers are best characterized as grateful, I am sure…

For TracFone, which routinely adds more than half a million subscribers per quarter, this subscriber count is, of course, a mere rounding error. What it is for DataXoom is something that the investors in MER Telemangement Solutions are about to find out.

Anyway, for the reader’s convenience, I embed the slideshare presentation player linked to the DataXoom presentation:

Update

After the publishing of this posting, which received quite a lot of traffic, the slideshare presentation has been removed (something that I wrote about here.)

Donations, please….

If you have enjoyed this posting, you can express your appreciation through donation via PayPal right now.   For this type of posting a one-off donation of $20 is suggested.

Advertisements