Ziptel raises $5M to accelerate global launch of international calling app

Published at Nov 12, 2014, in Technology

Just weeks away from the global launch of its international calling app, Ziptel Limited (ASX: ZIP) has raised A$5M to accelerate its uptake by subscribers.

ZIP has developed a mobile-based telecommunications app called ZipT that places low-cost calls with clear voice signal regardless of network speed while conserving data use. ZipT works even in low bandwidth environments and does not require both ends of the call to have the app.

ZIP is using this technology to target the international calling market, which is predicted to grow to a value of $80BN by 2017.

The company is aiming to have 50,000 ZipT users when it launches the app and has secured a distribution agreement with AirLoyal, one of India’s largest digital mobile advertising firms, to deliver up to one million paid subscribers.

These developments come as ZIP’s AussieSim travel phone card business continues to generate quarter on quarter profits.

$5M capital raise to support ZipT global launch

The ZipT app is set for a global launch in December to markets in 120 nations, and to support its rollout, ZIP undertook a share placement that raised A$5M from Australian and international institutions.

The placement of 11,904,761 shares was completed at $0.42c a share. The successful raise has increased ZIP’s cash reserves to around $8M.

The company says it will use these new funds to aggressively market the ZiptT app in the lead up to the global launch, to ensure it has a large subscriber base at its inception.

The app’s website is promoting a ‘founding membership’ programme that aims to have 50,000 users sign up before the app’s launch in December.

In addition, ZIP has developed a marketing partnership with Mpire Media, a West Australian advertising and software group run by the $60M net worth tech entrepreneur Zhenya Tsventenko.

Mpire has been contracted to run a global marketing campaign for the ZipT app, with test campaigns set for the United States and Brazil to determine strategy for the overall marketing push once the app is launched.

ZIP aims to have one million ZipT customers within six months of its launch in December and up to 5 million in its first year.

ZipT dives into Indian phone market

To achieve these aims ZIP has secured a distribution agreement with AirLoyal, a leading Indian mobile advertising firm that will promote the app across India and South East Asia.

There are over 220 million mobile internet users in India and up to 180 million smart phones. Nearly 70% of users still operate in a 2G environment, which is the minimum requirement for ZipT’s communication technology.

The deal will see AirLoyal distribute ZipT across its user base and deliver up to one million paid subscribers, as well as continue to promote the app amongst India’s tech-savvy population.

ZIP’s Executive Director Keaton Wallace says the successful capital raise and the distribution deal with AirLoyal will ensure ZipT’s launch is strongly supported.

“Through our distribution deals with Mpire and AirLoyal, the funds raised will allow us to aggressively acquire an initial subscriber base for the ZipT, which will in turn lead to further organic growth in subscribers through word of mouth or virality,” he says.

“With the launch of the ZipT application next month, we are another step closer to realising our goal of bringing a superior mobile based calling application that operates all over the world under all network conditions including low bandwidth environments.”

Live demonstrations show ZIP’s technology advantage

ZIP has been holding live demonstrations of the technology for investors to show how it works and compare its abilities to other telecoms services.

The ZipT app encrypts and compresses the data of every call it makes into as little as 6 kilobytes per second (kps), far lower than the minimum of 50kps needed by Skype.

ZIP says this very low compression allows ZipT to send clear voice signal over any phone or internet connection, even in a low bandwidth environment. This means users in a 2G network can call a person in a 4G network and vice versa with no loss of voice quality, while using up to 80% less data than rival services like Skype and Viber.

This ability to provide a clear signal in any environment means ZipT can target the 1.9BN people around the world still using a 2G phone and internet network, as well as more advanced nations with 3G and 4G networks.

AussieSim sales continue to grow

Until ZipT is launched in December, ZIP’s main source of revenue remains AussieSim – a prepaid travel SIM card for the Australian, US, UK and European markets that works in 180 countries.

The pre-paid SIM card can be loaded into any phone whilst overseas and used to make calls, send texts or use the internet without incurring roaming fees from the customer’s regular service provider.

Over 18 months of commercial life, AussieSim has generated quarter on quarter profits. In June 2014 AussieSim sold 1,440 units – a 305% increase on the 356 cars sold in June of 2013.

AussieSim is sold in 160 stores in Australia and ZIP is aiming to increase that figure to over 1500 by the end of 2014.

Market analysts report on ZipT global launch

The ongoing success of AussieSim and the imminent global launch of ZIP’s ZipT app have drawn widespread market attention.

Australian stockbroker Patersons Securities has issued a research report on ZIP with analyst John Scholtz saying its launch into the international calling space could trigger a takeover offer.

He notes, “Comparable calling and text apps have recently sold for extraordinary amounts, the most prominent being WhatsApp which Facebook bought for $19BN or $42 per user.”

Scholtz says that ZipT’s Average Revenue Per User (ARPU) is conservatively rated at between $2 and $4. However, he writes that if ZIP can deliver on its subscriber targets that figure could rise.

On the downside, Scholtz says the AussieSim business faces challenges in the future due to the increasing digitisation of phone technology, and that its focus on a physical SIM card could be superseded by digital apps that perform the same function.

However, he says a successful launch of ZipT in December could mitigate any market loss suffered by AussieSim.

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