Indian deal hits ZipTel’s share price for six, and raises some eyebrows
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ZipTel has been asked to explain itself after a revenue sharing deal saw its share price skyrocket this week.
The company went into a trading halt on Thursday, after the ASX queried the steep share price rise from 1.8c to 4.3c.
ZipTel (ASX:ZIP) has licensed its Zipt product to an India-focused company which will wrap it into a smart phone content messaging service, called Convo App.
Space Digital Media is already closely connected with Ziptel. Its shareholder register includes ZipTel’s own former brand ambassadors, Indian cricket legend Virat Kohli and Welsh soccer star Gareth Bale.
Zipt is an app that offers users a way to make international calls and send SMSs for free by compressing the data — think Pied Piper in the TV show Silicon Valley.
The 10-year deal will see Space Digital Media pay royalties of between 10 and 20 per cent of net revenue earned from sales.
Based on Convo App’s aspirational forecast revenue figures — £1.1 million in 2018 rising to £15.9 million by 2019 and £50.6 million in 2022 — this could be worth a cumulative £13.7 million ($22.67 million) to Ziptel.
ZipTel said in its statement that Convo App is targeting the 1 billion people living in India, Nigeria and South Africa.
The Zipt technology has been around since 2014 and its history is one of unfulfilled potential.
Investors jumped on board in 2014, excited about the prospect of delivering cheap broadband access to the billions of people living in Asia, particularly India.
They signed Australian cricketer Brett Lee, as well as Kohli and Bale, in 2015 to be their brand ambassadors, to grab the attention of the Indian market.
The stock began a steep climb on October 17, 2014 from 20c to peak exactly a year later at $1.33. On October 16, 2015 it began a precipitous fall from which it has never recovered.
While the company came through early on promises to sign up 10 million users, reaching that number between June 2015 and April 2016, it failed to monetise the app as revenue from Zipt remained flat at an average of $63,000 per month.
It tried a B2B strategy in November 2016, entering deals with the likes of Tata Communications, and outsourced the operations of its two main products in an effort to save cash.
A rights issue in June also failed, with 37 million shares of a total 59 million offered remaining on the table.