Telpacific Issue 25 million Shares to raise $5 million

Telpacific starts to sell 25,000,000  shares at $0.20 each to raise $5 million representing 23 percent of total equity. The remaining 77 percent will be retained by the current shareholders.

Tel.Pacific was founded in 1996 and was until recently both an ISP and a calling cards company. However earlier this year it completed the sale of its ISP business to gNode Networks (As part of the agreement gNode has retained the rights to the name and use of the domain name for a period of 12 months: so www.telpacific.com.au appears to visitors to be one entity selling both Internet access and phone cards.

Tel.Pacific COO Barry Chan said, with about 40,000 was not sufficiently large to compete with the major players so the company had decided to focus on its card business where it is number two or three. For its card business the company in the 2007 financial year (to end 30 June 2007), the company is forecasting revenues of $36.3 million and $3.9 million of EBITDA.Of the funds raised in the IPO, the company intends to use the majority ($3.25 million) for acquisitions. Tel.Pacific says that, “As the cost to entry into this market is relatively low, some smaller players have entered the market and established well in the ethnic markets. These players tend to focus their market in specific communities and use their specific networks to build distribution and sales.” $750,000 is allocated for marketing and development and $500,000 to open a New Zealand office.

According to its prospectus, “With an estimated market size of $230 million in Australia, the callingcards market has become highly competitive over recent years. A number of large and small industry participants have diversified into different ethnic and demographic niche markets. Competition driven innovation seen in the telecommunications industry as a whole has filtered down to the calling cards market. Demand has moved away from commodity-based telecommunications towards applications-based products, providing a strong market for prepaid calling card.”

Tel.Pacific’s focus (and that of most of its competitors) is remote stored value (RSV) cards that allow callers to make calls up to the value of the card by dialing a local call access number, or a 1800 number, and entering a PIN number. The value of this card is maintained in the network of the provider, rather than on the card as in the case of  payphone cards like Telstra’s.

According to Paul Budde Communication, the payphone card has seen a significant decline with revenue per annum in Australia dropping from $70 million to $20 million dollars from the late 1990s to mid 2000.

There are approximately 20 service providers in the RSV calling card market and,  according to Paul Budde Communication (quoted in the Tel.Pacific prospectus) the key players in order of importance, are: • Telstra (which owns approximately 95 percent of the payphone card market and approximately 20 percent of the RSV card market); • gotalk (Telecorp); • Hello (Tel.Pacific); and • World Telecom.

Tel.Pacific says it expects to sell 667 million call minutes during the 2007 financial year. Its IPO opens on 4 June 2007 and closes on 29 June 2007.

The Offer is expected to raise $5 million through the issue of 25 million Shares at $0.20 per Share. The proceeds of the Offer will be used to fund the acquisition of other businesses which complement the Company’s current operations, to expand the Company’s business into New Zealand, for marketing and development of the Company’s recently launched Recharge Central website and to pay the expenses of the Offer.








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