Per HaveaHunch>The facts are that IDTC is growing at such a fast rate (telecom business grew at about 325% from last year to 685mm minutes for quarter, which is a 38% increase over the prior SEQUENTIAL quarter) that we are actually competing very successfully with the current business model. That level of growth is internet level growth, check out NSCP's or AOL's or Yahoo's growth patterns when they first started.
Remember what caused the earnings shortfall to begin with and brought the stock down from high 20s-30s was the continued margin erosion caused by having to buy minutes on spot and secondary market vs. our own network, which is being built out rapidly but not rapidly enough to meet growth in demand. In particular, we just couldn't get the nortel and alcatel switches fast enough for buildout (which is one of the reasons we are going with our own inhouse switch and hired the nortel exec to implement it).
And, remember, this is without really ADVERTISING the internet businesses, net2, EZSurf, and inclusion of all these co-branding deals for cards, Wells/MMs, nor inclusion of Realnetworks, NSCP, and other deals. These have not even begun to kick in, and the minutes / revenues from these deals will be large.
Right now they are booking minutes as fast as they can, but it doesn't make any sense to continue to let margins erode by pricing way below the market or even giving away product. Eventually, when network buildout catches up, I think you will see them go after domestic long distance, if nothing just like you said to get eyeballs and market/mindshare, ie., become a big 'name' player like the big three.
IDTC was built as a classic CLEC, which is taking advantage of the cost structure provided by the loophole re termination of call payments via internet, which was passed along to phone user in lower call pricing, but it rapidly grew into a mainline international carrier, by exploiting pockets of profitability where they existed, ie., calls to latin america and other places by pockets of population in US. The company has thus far been run profitably, this has been one of their main goals all along.
They have basically been burdened by this profitability motive. Many of their competitors, WCII and others, have NOT been run as profitable companies and have spent massively on buildout. Many of them trade at ten times the value we trade at. So be it, that's very shortsighted on market's part imo. The ipo, which imo will come soon, will give IDTC the revenue and above all, flexibility, to spend massive money on advertising, and possibly run a negative cash flow to do massive network buildout, and eventually advertise to get the customers which are right now on the books of ATT/WCOM/Sprint, and all we need to do is ADVERTISE a better deal to get them.
Eventually, you are probably right, corporate domestic long distance will be provided at near free/cost, in order to get other businesses, like etailing, international l.d., data transfer, add-ons, etc. That's why ATT went for TCI, for add-ons because they know their cash cow is almost gone. If you stand back and look closely, IDTC is like I've always said, really uniquely positioned, with the right product set at the right time in the right industry, and this will not be a secret for much longer.
Hang on to your shares.
special thanks to HHBB
cheers
btw, this may have not been an answer to your question but, it was worth the bandwidth...imho
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