DIGITCOM'S pENNY STOCK HAS INCREASED sEVEN-FOLD OVER ONE MONTH
International arbitrage, the internet telephony opportunity that companies from IDTC to ITXC and Delta 3 are riding, is propelling companies willing to go out and invest in international termination infrastructure into the spotlight of individual and institutional investors.
A very high profile industry, it exsists in the fringe between highly regulated telco space and virtually unregulated ISP space., offering the chance for new players, like Digitcom (DGIV), to take advantage of the best of two worlds.
It seems like the time for the services of this Santa Monica, CA based Internet Telephony Service Provider (ITSP) has finally come, with the company's stock skyrocketing from $1 -13/16 on march 30 1998 to $7-3/32 on April 30 1998, almost a seven-fold increase.
The company is not terminating any traffic yet, but already has its contract from Louis International Telecommunications and equipment to provide long distance circuits and termination in the U.S. for the traffic originating in Europe.
Louis must start delivering to Digitcom $1 million or more worth of telephone traffic per month by mid June.
Digitcom will likely use a combination of tradional lease line connectivity and IP telephony to deliver and terminate this traffic.
"Depending on where this traffic originates and terminates, we will start putting POPs in place in various countries," says Roger Templeton, Digitcom's VP of communications.
To put POPs in plac, Digitcom will partner with either ISPs or small competetive telcos, here and overseas. Companies that Digitcom is looking to buy or partner with range from traditional telcos to ISPs, anybody capable of accomadating Internet telephony equipment and terminating real minutes.
Equipment going into the customer' premises will likely be one of Digitcom's products, Netcall. Some of the other products marketed by Digitcom include Faxport, VOXport and Mobile Callback.
Two of these contracts are already in place.
Digitcom became the first Internet telephony provider to start offering services in Russia, having been certified by the Central Science Research Telecommunication Institute to provide the service andstriking deals with two regional telcos. St. Petersburg Telephone and Rostov Electrosvyez.
The company also acquired an Indonesian ISP. Primeedia ArmoEkadata
Internet, for an undisclosed amount in a stock swap.
The company is also negotiating deals in Korea, China, Hong Kong and Japan and recently secured a deal in Australia.
"We are looking in the where the margins are the highest." says Templeton.
The arbitrage opportunity that Digitcom is pursuing doesn't necessarily mean the company will be in dire competition with incumbent telcos.
"Although many of these companies don't advertise it, they sometimesterminate traffic for some if the largest telcos as a private label provider." says Francois de Repentigny, an analyst with Frost & Sullivan.
Indeed, Templeton says Digitcom's goal is to market its brand directly to end customers. The company expects to provide private label services to telcos, too.
DIGITCOM'S BACKGROUND
DIGITCOM comes into IP telephony from a video conferencing background.
"This market didn't take off nearly as quickly as it was expected." says Templeton.
In fact, the company has changed its name to Digitcom from Digitcom Interactive Video Network.
The company was able to work out a deal with Dharma Group Corp, for a $60 million investment, staged over several years. This should help Digitcom's efforts to move up in the stock exchange world.
The company has been meeting with NASDAQ seeking to move from OTC board where it'straded now to NASDAQ exchange. To do that, it has to meet a number of requirements, two main one being that it needs to trade over $4 on the ask for 30 consecutive days, and that is has to either have $4million in tangible assets, or $50 million capitalization.
The company has launched a stock repurchase program in mid-February
comitting to repurchase up to 12 percent of its outstanding common stock, 1,500,000 shares.
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