Vonex looks to shake up the telco space

By Megan Graham. Published at May 10, 2018, in Question and Answer

Finfeed recently tracked down Matt Fahey, CEO and MD of innovative telco service provider Vonex. Producing a broad range of telecommunications solutions, Vonex acts as a service provider selling mobile, internet, traditional fixed lines, hosted PBX and VoIP services, predominantly to the small to medium enterprise customers.

The company is also developing a highly-advanced mobile app, called Oper8tor, which allows users to connect to any social media friend through voice messaging and text, regardless of whether the contacts are using different applications.

FF: Can you describe in a nutshell what the team at Vonex does?

Matt: We were founded in 2009 and we’ve been producing software for the telecom space ever since. Our flagship product is our proprietary PBX software.

We’ve grown a wholesale business and we ‘white label’ our software.

We also deliver products to market via Vonex telecom — our target audience is businesses with typically 5 to 50 employees, which is sizeable market within Australia, and also one we believe is underserved by the major telcos.

With Vonex telecom, we don’t just sell our own proprietary software, but other telecommunications products such as mobile and NBN packages. We have between 22,000 and 23,000 users and our sales turnover is on target to reach $8 million this financial year.

We are also developing innovative products through our voice engineering department – our engineering and creative hub.

FF: For those who may not know, can you explain what is meant by Private Branch Exchange (PBX) and Voice Over Internet Protocol (VOIP)?

Matt: So traditionally, a business phone system’s main equipment is located on site — that’s the brain of the phone system, and it’s in every company’s communications room. That equipment connects to the copper network and controls the incoming and outgoing calls.

We developed software to emulate that main piece of equipment so that it’s no longer necessary to host on site. We install smart handsets which can communicate across the internet (VOIP), with the ‘centre’ or ‘brain’ located in the cloud. This essentially virtualises the phone system, but also leads to significant upfront and ongoing savings for businesses.

FF: What kind of effect will the NBN rollout have on Vonex?

Matt: All internet users (households and businesses) will be required to migrate over to the NBN over the next three to five years, so there’s an obvious land-grab for additional customers.

The NBN is a forced churn event, not an optional change, from the copper network. As it’s rolled out, existing internet services are being switched off which requires customers to engage with an NBN provider (and not necessarily their existing provider). As the NBN rollout moves from rural into metro areas, there’ll be an unusually high amount of customer activity within the next 3-year period in terms of people changing providers. Since all providers have access to the same network, opportunities exist for technology focused, nimble companies like Vonex, to compete with the larger players and grab a meaningful market share during the changeover.

That’s why we’re raising funds now to inject into the company, so we’re well positioned to capitalise on this forced churn event. Importantly, because it’s actually our technology it means we can deliver cost effective and quality products to our customers, while maintaining a high margin.

Another key factor in what we offer is reliability. It’s not physical network infrastructure anymore; we can deliver far greater reliability of products, which are feature rich and more cost effective.

FF: What is the main way Vonex makes money?

Matt: Our core business is selling Vonex telecom products and services through the direct business – which is what we refer to as the retail division. For example, providing standard phone lines, mobile, internet and obviously our hosted PBX.

Secondly, we have our wholesale division that provides services to carriers who require specific solutions which we can tailor specifically for them. We can provide our international network which exists to support the whole business. Post-listing, we are looking at key opportunities at a carrier level to expand our footprint through that side of the business, both domestically and internationally.

FF: What are you most looking to achieve in the near future?

Matt: We will serve two purposes; core business expansion, as we have a fantastic opportunity to capitalise on the NBN migration being forced on the Australian population... and there’s also our new Oper8tor product in the pipeline.

FF: Can you tell us the story of the new Oper8tor product and why it’s a big deal for the company?

Matt: The idea for Oper8tor came from a conversation I had with Angus Parker, the CTO of Vonex. I got fed up with all the invitations arriving on my mobile for different social media products. I asked, can’t we make them talk to each other?

And that’s exactly what Angus and the team has achieved. It’s called Oper8tor and It’s a mobile phone app you can download, then have a voice conversation with people anywhere, across different social media apps. It’s the first time it’s been done in the world.

The finished product will do cross-platform messaging, but most importantly, cross-platform voice calls. That includes Facebook, Google Hangouts, Skype, Viber, WhatsApp, WeChat, Line...

The app which is protected by a patent, is currently in the alpha stage. When we list, we’ll inject some of the capital raised to progress Oper8tor to a beta stage. We already have 70,000 people registered to use it once it is in beta stage. We’ll look to do a soft release at the end of this year.

FF: How is the company positioned financially?

Matt: We have been improving our financial position, growing our sales turnover of just over $3.7 million in 2014, to close to $4.6 million in 2015, $5.5 million in 2016 and just over $7 million in 2017.

We are not yet cash flow positive as there have been some extraordinary expenses at a corporate level, however they aren’t expected to be incurred on an ongoing basis post listing. We are close to break-even from a consolidated group position, and working towards being cash flow positive and we are hoping to raise $6 million minimum, $7 million maximum ($5.5 million of that is underwritten) — which we can inject into the retail and wholesale business for expansion. In particular, we hope to capitalise on an important time window with the continued rollout of the NBN.

FF: What kind of features can you offer?

Matt: Say we deploy the phone system into a business. Before us, they made calls back and forth, to remote workers, to other sites, internationally. Once we set them up, they have one phone system — all of the handsets connect to one central system.

This means the business can talk to staff even when located in a different country, via an extension number not an expensive phone call, as if they were in the next room, or a phone can be picked it up and taken offsite (basically, anywhere the handset can be plugged into the internet).

On top of just that, there are 132 advanced features, many of which cannot be achieved with traditional systems, which I could tell you about if we had more time!

FF: What else sets Vonex apart from its bigger telecom competitors?

Matt: For one thing, we can offer some hand-holding through the process of installation, which is difficult for larger carriers. Secondly, we offer a similar product at lower prices because we build the software — whereas large carriers typically have to pay independent software companies substantial license fees to deliver the same products.

Thirdly, we can deliver better features. You can get voicemail sent to your email, or features such as people’s mobile phones working with their desk phones, so their call will follow them out of the office.

I could be talking to you on a desk phone and transfer it onto my mobile phone with a push of a button — same with taking a call in the car, and ‘pushing’ it to a desk phone. Or having different numbers all going to the same handset. Those things make a difference to customers.

FF: Matt, thanks for your time.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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