Good Morning Bull...
... and the rest of us DGIVAHOLICS!
After having reviewed all 3 PR's dealing with this matter, I came to the same conclusion as you...
It is important nOT in the immediate revenues, but in the revenues to come, IMO!!!
The best I can tell is that we have an international LD carrier (Teltek) trying to get something going between the U.S. and China.
The Company recently established network termination facilities in the United States.
It also seems that this is not an easy task and they may have been working on it for quite a while. Part of the quote attributed to Mr. Chin:
''Our appreciation goes out to Mr. Hsieh and Teltek for their long-term effort in opening a valuable telecommunications link with China. We are very fortunate to cement Digitcom's relationship with Teltek Communications with this JointVenture.''
It would seem likely that Teltek has some confidence that they can get their minutes in going from China to the U.S. However, China is probably not going to want to see that traffic going all one way. Mr. Chin had explained to me that often a requirement for doing business in some of the countries is to provide back some or all of the minutes that are "leaving" the country. I would not be surprised if that is the case here.
This is where Digitcom comes in... Teltek "needs" Digitcom to provide some of the reciprocal minutes. Apparently, Digitcom has some idea of how to acquire those minutes...
''Our joint venture means that Digitcom can now respond to the many requests for toll-quality long distance between the U.S. and China that have been made of us,'' said Chin.
For its efforts, Digitcom will get a 1 cent per minute "commission." Hmmmm... This is curious at first blush. When I talked to Mr. Chin, he described "small" deals as between $1-5M. Sam calculated only $480K in "revenues" for this agreement in the first year. This is certainly not the size deal that Digitcom has been courting. Besides, one could hardly consider this "commission" as "revenue" - it is more like an intricate sale of assets... stock being the asset. I believe no increase in the number of authorized shares would be required and yes, it would be dilution. But, as Sam points out... it gets cash flowing...
So, that can not be all that Digitcom gets from the deal...
In this connection, in consideration of Teltek and its affiliates obtaining the necessary licenses on behalf of the Joint Venture so that Digitcom may operate as an Internet Service Provider for
voice/data for the Venture in China,...
I believe this is the crux of the agreement for Digitcom. I can only think that it must be horribly difficult and time consuming to come to a point to be able to do business in mainland China. Teltek would be paving the way for Digitcom to operate as an ISP in China - and that would open the way for enhanced benefits to both parties.
I would think that both parties have their eyes trained to that goal and ultimately providing IP telephony service to mainland China.
So in conclusion, it appears that Digitcom will give up some stock and provide Teltek with U.S. to China minutes and in return will receive a current cash inflow, a partner with a vested interest in Digitcom doing well, and the possibility of becoming an ISP operator in China.
Lazarus |
