Another pice of the puzzle falls into place. Once again, today's news is the culmination of an event that was reported many months ago, when Digitcom's technology was first approved for testing in Russia.
There are various items of significance in this announcement. To begin with,
successful culmination of field trials of Digitcom's IntraVoice CO(TM) Internet long distance telephone gateway done in conjunction with the St. Petersburg National International Telephone and Electrosvyaz (Rostov Region) telephone companies.
This means that Digitcom not only has the technology, but has been able to integrate it successfully into a complex and difficult international infrastructure. And it works!
''This clears the way for the launch of long distance telephone services using Internet Protocol networks between Russia's largest commercial centers,'' Internet telephony now links three of the major population centers in Russia. said Jimmy Chin, Digitcom CEO.
So Digitcom has linked three major population centers in one the most important countries in the world, at a time when it is undergoing enormous economic and political upheaval! The best time to introduce a cheaper way to communicate is when people don't have the money to pay for the costly traditional services! Oh, and don't be fooled, Russia might be in upheaval right now, but it remains a key to world peace -- 20,000 nuclear imply that, even if they are currently our "allies." If Digitcom can get this done in Russia at this time, does anyone think they can not get it done in Germany, in Korea, or in any of a number of places that are in much better shape?
Digitcom will share in revenue generated by IP network routing of inter-regional telephone traffic in joint venture with the Russian companies.
This is the key to Digitcom's revenues -- and is probably the most important part of this announcement. By entering into joint ventures, Digitcom does not have to market itself -- it has access to the existing customer base, and it doesn't need a large chunk of the revenues to make excellent profit margins, because their overhead is very low.
St. Petersburg National International Telephone and Electrosvyaz-Rostov together serve 7.8 Million customers within Russia.
Digitcom now has the potential to serve 7.8 million people without having spent a nickel in marketing to those people!
Russian domestic long distance revenues reached US $8.2 Billion in 1997, while international long distance calling generated $1.5 Billion.
This is a huge market, although the current economic situation has degraded these numbers greatly, I'm sure. I don't know if these 97 revs were in dollars, or in rubles and converted to dollars, which would make a big different. So for the sake of safety, let's err on the side of conservatism. Let's say 98 revs instead of 9.7B$ (8.2$ + 1.5$) are only 5B$. Further, let's say that these numbers were all in rubles, and with devaluation the equivalent dollar amount is just 20% of that, so that makes it 1B$. Now, if Digitcom gets 10% of that revenue, that is 100 million dollars in revenue. Too high? OK, say Digitcom gets 5 percent revenue. That is still 50 million dollars in revenue per year! With a 10% profit margin, that is 5 million in earnings per year, or 25 cents per share. And this is just the Russian pice of the puzzle, which might be one of the least profitable! And remember, this is erring on the side of being conservative!
''The economies of Internet voice traffic fit the domestic situation in Russia right now,'' Chin continued. ''Digitcom is happy to be the bridge bringing two regional telephone companies' customers together with economical long distance service.
There you go. Now is the time to be over there getting people wired up with cheap, effective technology. When the economy turns around, we profit both ways -- from the original service, and from the expanded services they will require.
And, extending our network to these important centers should give Digitcom's U.S. resident Russian customers an attractive alternative to the big carriers,'' Chin said.
That is an understatement! This might be their ONLY alternative, given the high cost of telephone service in Russia! |
