Today we received the final official unconditional approval from the Competition Commission for the Vox purchase of Storm.
From here, we wrap up retrenchment and redeployment processes and kick off integration processes and of course pay out monies owed for shares and options.
The long wait is over.
OK, so telecoms was fun... anyone for taking on Eskom? ;)
OK. I can finally say it. We've sold. And yes, it is to Vox.
Mixed feelings. A part of my soul will be forever attached to the Storm brand and I'm feeling a sense of loss. But I'd be kidding myself to say I joined up to grow old with Storm. I'm not a corporate man and I'm more suited to the chaos & stresses of Startup than the order and stresses of Corporate process and politics.
I have no idea where I will be in a few months time, but I'm quite comfortable with that.
One thing I can say is that I've learned that one can do a lot with a team of competent people who learn to trust each other and play to each others strengths. Stormers are a great bunch & I salute the lot of you for getting us to this point.
The press release from Vox:
Vox Telecom to buy Storm
It is official. Vox Telecom will buy Storm, one of its biggest rivals in the least-cost-routing and VoIP market.
Vox Telecom has announced its intention to buy Storm Telecom in a R360m deal. Storm Telecom provides telephony and internet services, including voice over IP (VoIP), least cost routing, international call-back, virtual private networks and internet access, hosting and security to medium and large-sized South African companies.
It has over 6,000 contracted customers and monthly annuity income of over R22 million.
Vox Telecom will integrate Storm’s telephony business into its subsidiary Orion Telecom, the data business into corporate ISP DataPro and the consumer ISP business into consumer ISP, @lantic Internet
“Storm is a major player in the voice and data markets, with a very strong VoIP platform and customer base,” says Vox Telecom CEO Douglas Reed.
“They also bring VoIP skills that are complementary to ours. The acquisition strengthens our stated strategy of establishing Vox Telecom as the preferred telecommunications alternative to the domestic incumbents. It will considerably improve our position in the VoIP telephony market and augment our corporate customer base profile and market share.”
“This is a very positive development for Storm’s customers as they will be able to still benefit from the current Storm services, but will have a further advantage from the economies of scale that the larger Vox Telecom group offers”, said Willem van Rensburg, CEO of Storm Telecom.
“There will be a seamless transition from a customer perspective, with the same products being supported by the merged entity, but they will also be able to take advantage of the other products and services available from Vox Telecom.”
“We continue to look for acquisitions that are strategic, accretive to earnings and allow us to improve our scale and strategic positioning in the South African telecommunications market”, says Vox Telecom Executive Chairman Tony van Marken. Storm is in our strike-zone and is an excellent fit with our existing businesses.”
Van Marken says the deal also offers “significant synergies once the businesses are integrated. Storm is a significant asset to add to the Group and will be a key contributor to future growth and earnings.”
The R360m purchase price is to be funded through a combination of debt and equity financing. The deal is still subject to approval by the Competition Commission and other regulatory bodies including the Reserve Bank and the JSE.
It is one of those immutable laws of business. If you charge too high a margin, even if 
you have a de facto monopoly, someone is going to find a way of stealing your market. Ask Telkom. The likes of Storm have made a good living out doing just that!
The likes of local entrepreneurs Yeigo and UK farmboys TruPhone have been beavering away to develop the ability to do VoIP over 3G or WiFi using one a bog standard cell phone. OK, so one of the new bog standard phones (with WiFi/3G etc), but you get my drift?
Now when the Google guys set their sights on that market, you'd better sit up and take note, I don't care who you are and how smart you are.
CrunchGear has an article on Google wooing the mobile phone manufacturers.
I finished reading "The Google Story" yesterday; you can't help being seriously impressed with these guys. They are aggressively innovative, irrepressibly keen to take on huge challenges and have a war chest that is rapidly making Microsoft's look commonplace!
If Google intends taking on the cellular industry with a free phone (and they have managed to make a serious amount of cash with the concept "free"!), the cellular industry and others who are challenging them better take a good hard look at the threat to their business plans.
I was honoured to be asked by Dave Duarte to give a brief presentation at the last 27 dinner in Cape Town. The guys from MissingLink have made a video of my 5+ minute rambling available on Youtube. Before (& if!) you watch the clip you should know that I showed the "VoIPTopia" clip which we created for the Broadband Summit in Feb, which I posted about here. (that is me... I've just stopped shaving so often)
The last time I watched myself on video was when I participated in a roleplay where I was a CEO of a company guilty of some disaster like a toxic chemical spill on the N1 being grilled by John Bishop (those of you younger than 40 may not recall the sharp, incisive, rather intimidating style of the man). I won a dare & a case of cider by holding up a mini "Hi Mom" banner at the start. Ah me, I must try and dig out the VHS clip and get it digitised. Would be a good for a laugh I'm sure.
Henk was most amused that my notes were in the form of a mindmap - there is no way I can speak from a prepared text:
that's me.
My first job in Storm, back in the late 90's was to add a Cellular LCR (Least Cost Routing) 
product to the International LCR product offering Storm launched with. We were finding that we were losing deals to the likes of Orion and Telepassport because we did not offer "savings on calls to cellular". TimWG's words to me were something of the order of "create a cellular product for us and just make sure you don't lose us any money".
None of us saw just how big the Cellular LCR market would be. None of us realised just how many more cellular phones than fixed line phones there would be by now.
Cellular LCR has always been a problem for the Mobile Network Operators. The GSM networks were traditionally designed quite "thin", with some base stations only being able to handle 8 or 16 simultaneous calls from phones "passing through". Installations of "SIM farms" or large Cellular Fixed Terminal CPE installations had the ability to "flatten" the networks in places. An installation at PriceWaterhouseCoopers succeeded in causing dropped calls for anyone traveling past their offices in Sandton for weeks after their LCR installation went live. The networks ended up spending many millions of capex to cater for LCR.
Much better money was being made in charging Telkom to terminate calls originating in Telkom's network to cell phones. But the fear of losing the LCR SIM business (and the traffic) to the other MNO network forced Vodacom and MTN to offer the likes of Storm attractive packages. Once the LCR market had tapered off however, we saw them beef up "off-net" call charges to try and make more margin. We had to become smarter about how we managed our base of SIMs.
Deregulation and the legalisation of VoIP has changed all of that. Anyone who is trying to sell you on the idea that traditional cellular LCR is here for many years and it is worth committing yourself to a long term contract is blowing smoke. The future is in aggregating traffic using either VoIP or once it is available a mix of CPS (Carrier PreSelect) and VoIP and passing traffic over interconnects. Renewing LCR SIMs from now on is risky business.
The way forward is with the new breed of Voice&Data Service Provider (the EC Act calls them Communication Service Providers), who are geared to make most use of the changes in technology and regulations. You just have to take a look at the M&A activity (traditional data guys buying voice guys, vice versa, and the likes of Vodacom starting their own ISP) to realise what Storm did years ago - the future is in IP. LCR will be around for a while yet, unless either DoC or ICASA force some unwise and rather radical changes to interconnect rates. The UK has one of the most competitive telecoms markets around, and cellular LCR is still alive with the likes of Westlake and True Communications.
Peter Walsh of DataRoom has written a good article on LCR on MyDigitalLife - worth a read if you're interested in a balanced outlook on this market.
According to Tim (Storm's joint CEO), it was while listening to a story on bipolar mania on
Cape Talk that Lindsay from Cape Talk called him to ask him if he'd be prepared to go on air with Mike Wills (no, I'm not mistaken - he really was on air - standing in for John Maytham). Tim deftly tossed the ball to the first person he thought of... me. So, while preparing to recount my lifelong experience with bipolar mania, I was somewhat flummoxed to have Mike Wills announce he wanted me to explain what "unbundling the local loop" was!
(ok, I jest - at least about the being flummoxed part - Tim would be quite adept at talking about mania's of any sort! ;) More of that I am sure when his own blog goes live (oops... there goes the cat!)
Here is a copy of the interview if you're interested.
And I sincerely trust, Mr Halse, that I'm more coherent here than I was in the Business Day article!
That's me. More or less unbundled.
ok, time to wind up business clock...
At the beginning of March I was asked to distil my thoughts on what trends are likely to emerge during 2007/2008 in the local Information & Communications Technology market. I’ve held back on posting until now while Storm's overworked Marketing team get the customer newsletter out to avoid stealing all their thunder. As usual, this is a mix of “duh, of course, like that's news?” type stuff and some “what are you smoking!?” ideas that may well be way off the mark! Here goes:
Obviously the desktop hardware technology “refresh” will get going as IT budgets are approved and laptop and desktops using Intel’s new super fast core 2 duo chip’s start hitting corporate desks in earnest; followed closely by the early adopters of Microsoft’s much awaited new operating system ‘Vista’. (The more cautious of us will wait for Service Patch 1 or even 2 to appear!)
On the bandwidth front - Broadband, now far from broad, will continue to drop in price, but I doubt as much as we have seen in the last 18 months. I can't even recall who started the argy-bargy, but at one stage MTN appeared to have created a new benchmark at around R0.20/MB. It was allegedly intended to be a limited duration half-price special, but showed what could be done. Sentech announced they planned providing more bang for buck; Vodacom then dropped their price (by 61% according to their ads) after being almost double everyone else’s price. iBurst also dropped their pricing, but remain more expensive than Sentech for equivalent packages (sub HSDPA theoretical speeds). The unlicensed players like Amobia and Uninet are still an order of magnitude cheaper but don’t have the coverage advantage. It is all a bit confusing for the man in the street, but ultimately these changes will make getting online and staying there permanently, more affordable. Offerings should start to differentiate on quality (reliability of throughput) and you should be able to get fixed IP addresses – currently not available to ADSL users. This will facilitate hooking up remote offices for voice and data over IP.
More telco’s will announce moves to converge their voice and data networks onto IP based New Generation Networks like British Telecom’s 21st Century Network project. This will make networks more intelligent and flexible, but will unfortunately not impact on customers for some time to come.
Video on Demand is growing overseas (where real broadband exists) – people are prepared to pay a premium over the likes of Mr Video et al to choose their viewing for the evening from their armchair. Don’t hold your breath here – we’re too spread out geographically to make it profitable just yet (maybe satellite will save us). And Telkom still dominates the local loop.
IPTV is being touted by vendors as the next big thing. Again, dependent 
on broadband, and ownership of content will be key! It will not be over the Internet, but over managed IP networks.
Music and video downloads, both legal and illegal, continue to grow. More cell phones with better mp3 players will eventually make people wonder why they have a CD player, but probably not this year! Apple’s iPhone will develop a cult following but will hardly make a dent in Nokia’s global market dominance.
Instant Messaging (IM) will continue to grow. Local mobile phone based instant messaging service, MXIT (Think MSN messenger on your phone) will find ways of “growing up” and becoming more respectable. IM will start making deeper inroads into corporate culture with IT managers needing to develop policies on IM usage.
WiMAX equipment will drop in price as the economies of scale kick in and more networks other than Sprint Nextel in the USA do mass roll-outs. It will continue to disappoint those who believed all the hype w.r.t. 70Mbps @ 70 miles @ 70mph. Some Meshed WiFi networks will appear here in SA, whether legal or not, and we’ll continue to see a LAN technology play in open spaces it was never intended for. Unlicensed Mobile Access, with VoWiFi phones following along behind, causing Mobile Networks to get edgy.
Spectrum is being fiercely fought over. It is a scarce resource and it is unlikely that anyone other than a few established players will get licenses. There will be many frustrated wannabes.
Municipal networks are coming to the fore, with the Cape Town tender awarded, but challenged, eThekweni ready to roll but caught up with legalities, and City of Joburg now out on tender. They are unlikely to have any real impact this year. They do not really have much of a sustainable advantage in the long run, as they will have to allow others access to infrastructure and will find that building a telco is not trivial.
The Mobile networks will announce HSUPA with great fanfare. Mobile broadband will then be about as broad as it gets for a while, but as up- and down-load speeds will be around 5Mbps, it will make quadplay (or fourplay?) possible – mobile/voice/internet/video.
Mobile interconnect prices are due to come down by 20 to 25% shortly. This should allow Telkom to drop the price of calls to mobile phones – whether they will pass on the full benefit or not will have to be seen. Mobile packages are unlikely to change as a result though. Least Cost Routing will become more and more marginal and the shift to Communication Service Providers using VoIP will be become more obvious.
Asterisk, the open source “IPPBX” will continue to make some serious inroads into the PBX market, with damage being done at a “higher level” in the market than originally proposed – medium to large corporates instead of SME’s. Watch the call centres here – they’re the weather vane of change.
Hosted IPPBX’s will start emerging as broadband improves and investors in some of the early VoIP entrants who committed large capex in these sorts of solutions seek to get ROI moving.
Social Networking using web based applications like MySpace, YouTube, Flickr, blogs, Second Life etc will become more widely known and used as people get used to being online 24*7. We’re seeing South African flavours of these appearing.
DSL and SSL VPN’s will become more popular as DSL prices drop and quality improves and mobile broadband grows. Business will seek help to set up and manage increasingly complex networks of devices.
As broadband improves in throughput, price and reliability, ASP services will become more popular, with companies seriously considering (but possibly not committing to just yet) such things as Getting Things Done, Gmail and Office packages from the likes of Google rather than Microsoft (from one evil empire to another!?).
VoIP will start emerging as more than just a cost saving exercise with some of the first real value adds starting to come through, with integration into calendars, address books, CRM’s and PBX’s.
There will be a lot of consolidation in the next few years, with bigger players buying smaller, more niche players to fulfill the need to have broader voice and data offering.
Oh, and Neotel will start taking on Telkom in the retail market and Infraco 
will make its clumsy and controversial way onto the stage…
(and if I look back on my 2006 predictions... if we see half of these during 2007, we'll be doing well! :( )
Dave Gale
March 2007
When it comes to VoIP, we've all got a bit fixated on the means to the end instead of the end itself, which is to make communications not just cheaper (a definite fixation here in SA), but easier and more productive. VoIP is a technology. Actually it is a protocol, which in turn is only a predetermined method of communications between devices.
This post is long overdue and I apologise to those who had given up hope of me ever providing a version of the animation we used at the SA Broadband Summit in Feb this year. Truth is, I've been busy and I couldn't get the HTML right first go. I've finally hacked it (helps to follow the programmer's instructions to the letter!)
Here it is, a maybe not so futuristic view of what (Vo)IP can enable for the knowledge worker. There is much it can do for the consumer, but that is another story. If it seems the narrative is a bit rushed, it is; MeshSmith, the animator, begged me to cut it as short as possible - after all I did give him an impossible deadline - which he made. Hit the play button below and adjust the sound for optimal listening pleasure! ;)
that's me. and no one yelled "fore!" dammit!
There are times when politicians say the damnedest things. Sometimes they
are actually intelligent things. Most of the time (as was observed by one wit in the chamber the other day) one could make use of the resulting hot air to help Eskom out of their energy crisis. And then there are times when comments are made that are breathtakingly and gob-smackingly straight from the other side of Lewis Carrol’s looking glass!
If the report in ICT World which came out on Friday is correct, our Minister of Telecommunications is either highly disingenious, badly informed or ignorant of her own affairs (and as I have yet to renew my subscription to the Parliamentary Monitoring Group, I cannot verify her words). In a parliamentary briefing last week she allegedly excused the poor progress that the country is making toward market reform in Telecoms, and the desired drop in the price of telecommunications on the private sector. Apparently we are “not coming to the party” on Self-Provisioning and VoIP among others.
This after ICASA, the industry and a good few telecoms lawyers interpreted her September 2004 statement as allowing VANS to self provide, which she then changed her mind on one day before the 1 February 2005 effective date.
ISPA have quite rightly called for clarification, and if the Vodacom fellow I was sitting next to on the plane to Joburg tonight is correct, she may have meant the Mobile Network Operators when she talked about Self Provisioning… but then, why didn’t she say so? And aren’t they still waiting for spectrum?
And VoIP? I thought things were rolling along very nicely thank you! At least they are in our neck of the woods. But VoIP and Broadband are tied at the hip in many respects and broadband is… well, not very broad and then when it looks that way, it suddenly shrinks again without notice. And the ADSL regulations that came out last year from ICASA were not very helpful and have no implementation schedule attached…
You could start with a Broadband Policy? Oh, you’re too busy working with the DPE to build the broadband network to solve all our problems?
And if you don’t mind me asking, what exactly were you expecting Ma’am? We’ve yet to see some real leadership, clear policy and directives coming out of DoC. If you keep making ambiguous statements and then retracting/correcting them with equally ambiguous statements… we’ll just have to “kyk noord en f** voort” neh?
aluta continua.
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